TaxTMI 
TaxTMI 
2018 (3) TMI 375
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....tal during the year and had incurred fees for increase in authorized capital to the tune of Rs. 22,000/-. This sum was disallowed by the ld AO in the assessment as the same is capital in nature. Apart from this, the ld AO observed that there was a reduction in loans during the year when compared to the earlier year by a sum of Rs. 6,76,500/-. This in the opinion of the ld AO, was repaid by the assessee otherwise than by way of account payee cheque or draft and accordingly sought to initiate penalty proceedings u/s 271E of the Act for violation of provisions of section 269T of the Act. The assessee replied before the ld AO that it had brought forward loan of Rs. 6,76,500/- from the following persons on 1.4.2007 which was squared off during the relevant previous year :- a) Prakash Electronics System Ltd - Rs. 6,00,000/- Converted into equity b) Shri Rajesh Bhutoria - Rs. 70,875/- - Repaid on 3.4.07 c) Shri G.P.Bhutoria - Rs. 5,625/- - Repaid on 18.1.08 4. The loan received from Prakash Electronics System Ltd amounting to Rs. 6,00,000/- was squared off by way of allotment of 6000 equity shares of Rs. 10 each with a premium of Rs. 90 per share in the asses....
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....ny reasonable cause for failure to observe the provision contained u/s 269T of the Act and therefore would not get the benefit u/s 273B of the Act. With these observations, the ld AO levied penalty of Rs. 6,70,875/- u/s 271E of the Act in respect of loan of Prakash Electronics System Ltd ( Rs. 6,00,000/-) and Shri Rajesh Bhutoria (Rs 70,875/-). 6. Before the ld CITA, the assessee submitted the circumstances which forced it to utilize the amounts raised through share capital and advance from property for investment in co-ownership property to the tune of Rs. 9.8 lacs during the year. If the payment towards the said property was not made by the fund at the time of allotment, the assessee could have lost its right in acquiring of the same. The said property was mortgaged with the Haryana Financial Corporation, Chandigarh at a reasonable security against sanction of loan to Perfect Gold India Ltd, Jaipur. The amount which it had raised, was necessary to pay for the salvage of the investment in the property and it could not be repaid by account payee cheque to the loan creditors as alleged by the ld AO in his order. It was further submitted that the conclusion of the ld AO in his ord....
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....essee has not brought any material on record to prove that it contained u/s 269T. It therefore does not get any benefit u/s 273B of the Act", and his such conclusions are based on his surmises and conjunctures and are grossly unjustified, erroneous and unsustainable, and are contrary to the facts and material on record and provision of law. 4. Because that the ratio of the judgment as relied upon by the ld. Commissioner of Income Tax( Appeals) is his order are distinguishable on facts and on point of law and as such not applicable. 5.Because that the Ld. Commissioner of Income Tax(Appeals) was erred in law as well as in facts in holding that, the conduct of the company is not genuine and bonafide and as such the levy of penalty u/s 271E to the extent of Rs. 6,70,875/- is confirmed, and his such conclusions are based on his surmises and conjunctures and are grossly unjustified, erroneous and unsustainable, and are contrary to the facts and material on record and provision of law. 6. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. 9. We have heard the rival submissions. We find that the entire gamu....
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....corporate debt restructuring exercise carried out by various banks and financial institutions, to give leeway to the borrowers / defaulters, to convert their existing loans advanced to the said borrowers into equity capital. This is done as a normal routine business practice in the market as part of business revival plans carried out by the lenders and Board of Industrial & Financial Reconstruction (BIFR) having jurisdiction over sick industrial companies registered under Sick Industrial Companies Provisions Act, 1985. In respect of External Commercial Borrowings (ECB) availed by an Indian company from a parent company in abroad, it is quite usual to convert the said loan into equity as part of restructuring exercise and increase in stake of the parent company in the Indian company. Even in such a scenario, the ECB loan gets converted into equity. Can it be said that the same is in violation of provisions of section 269T of the Act i.e repayment otherwise than by way of an account payee cheque or account payee draft ? The answer is an emphatic 'no'. In the instant case, the loan has been borrowed from Prakash Electronics System Ltd in the earlier year and the same has been converte....