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2018 (5) TMI 1635
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....penalty under section 271D. Similarly, it has repaid alleged loan/deposits in cash and alleged to have violated section 269T. The ld.AO has imposed penalty of Rs. 51,16,065/- under section 271E of the Act. Thus, short controversy involved in both appeals relates to, whether the assessee is able to establish reasonable cause for accepting alleged loans or deposits in cash and making repayment of such loans/deposits in cash for absolving it from vigor of penalty imposable under section 271D and 271E of the Act. 4. Brief facts of the case are that on perusal of the audit report in form no.3CD for the F.Y.2008-09, it revealed to the AO that at clause (3) of item no.24, the assessee had shown loans/deposits received by it which fall within the ambit of section 269SS, as sum accepted or taken otherwise by crossedcheques. The list of such amounts is as under: AkhsarShroff : Rs.69,60,700/- Amit K. Shah : Rs.11,00,000/- ArunlalChimanlal : Rs.20,00,000/- Royal Dyechemlndst. : Rs.27,35,000/- GokulFinance : Rs.7,75,000/- Kirtipal K. Shah - : Rs.6,95,000/- Bhartiben K. Shah- : Rs.9,50,000/- NirajK.Shah : Rs.13,00,0....
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.... * ITO Vs. Vishal Fabrics P.Ltd., ITA No.448/A/2007; * Leela Ship Recycling P.Ltd., ITA No.2011/Ahd/2015; * H.Ajitbhai & Co., Vs. ACIT, 45 ITD 262 (Ahd) He contended that where no time limit has been prescribed in the Income Tax Act, for taking action by the authorities, then Hon'ble Courts have contemplated a reasonable time period of four years. In the present case, four years would expire on 31.3.2014 i.e. four years from 31.3.2010 when the assessment year 2009-10 ended. Penalty order has been passed on 8.12.2014 which is time barred. In his second fold of contentions, he appraised us reasonable cause available with the assessee within the meaning of section 273B of the Act for accepting alleged amount in cash as well as payment in cash. For buttressing this contentions, he took us through written submissions filed before the ld.CIT(A) whose copy is available at page nos.180 to 214 of the paper book. He contended that these submissions have been extracted by the ld.CIT(A) while dealing penalty imposed under section 271D of the Act. The ld.counsel for the assessee has sub-divided his contentions on the second fold of submissions i.e. reasonable cause. He ....
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....ed into serious financial crisis coupled with following consequences: * Bank of Baroda and Bharat Overseas bank stopped various facilities and tried to recover advances from LC payment received by the company; * GIIC had sanctioned loan of Rs. 1.5 crore of which a sum of Rs. 75 lacs was released but on account of the above explained set back, it refused to issue further sanctioned loan amount; * Some of the NBFCs filed liquidation proceedings before Hon 'ble the Gujarat High Court; * Various suits were filed by NBFCs and some of the creditors before City Civil Courts and Metropolitan Magistrate Courts; * Concentration of stock on hand eroded and the same became almost worthless since reactive dyes have a short span of life after which it starts decomposing. o On account of the above, assessee suffered heavy losses and, in due course, it became financially sick. Hon'ble the Gujarat High Court ordered for provisional liquidation and hence, liquidator took inventory of stock and assets of the appellant and sealed its factory. At the time of further hearing, secured creditors of the appellant objected liquidation of the appe....
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....h credibility in the market. Further, appellant was exporting goods on a credit period of 2-3 months but still, such dues were never received on due dates. o All such incidents made the situation very grave. On one hand, Nationalized banks, Private banks, and other such players in the organized sector refused to extend a helping hand to the appellant whereas on the other hand, appellant had tremendous pressure to ensure that the cheque drawn by it got honored so as to establish its credibility in the market. o Hence, management of the appellant was left out with no option but to bring in funds on their own or from shroffs, relatives, etc, so as to honor various legitimate demands. It was in such a scenario, directors, relatives of directors and shroffs pumped in funds in appellant company from time to time so as to honor various cheques drawn by the appellant towards its legitimate dues. Following details/evidences have been placed on record: Details of funds pumped in by various persons - Pgs.62-70 of P/B; Bank statements of the assessee - Pgs.71-110 of P/B; Statements showing details of funds received from concerned persons, details of....
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.... (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: ***** ***** Section 269T 269T. Mode of repayment of certain loans or deposits.-No branch of a banking company or a co-operative bank and no other company or cooperative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if- (a ) the amount of the loan or deposit together with the interest, if any, payable thereon, or (b ) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits, is twenty thousand rupees or more: ***** ***** S....
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....zing various fact situation, wherein reasonable cause demonstrated by the assessee were accepted. In other words, how different facts situations have been taken as "reasonable cause" by the Hon'ble Supreme Court, High Courts and ITAT. 14. First decision referred by the ld.counsel for the assessee is of Hon'ble Punjab and Haryana High Court in the case of CIT Vs. Sunil Kumar Geol, 315 ITR 163. In this case, the assessee has taken loan in cash on seven occasions, during the financial year 1990-91 (Asstt.Year 1991-92). The ld.AO has initiated penalty proceedings under section 271D of the Income Tax Act. The assessee contended that on account of his bona fide needs, he has taken loans, but his contention was rejected by the AO and penalty was imposed. Appeal to the ld.CIT(A) did not bring any relief to the assessee. However, on further appeal, the Tribunal has deleted the penalty. Revenue took the matter to the Hon'ble High Court and contended that imposition of penalty under section 271D is mandatory, if an assessee has violated section 269SS of the Act is concerned. The Hon'ble High Court has rejected the appeal of the Revenue and observed that during the course of penalty proceed....
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....the transaction between the appellant and the Director cum Share holder is not a loan or deposit and it is only current account in nature and no interest being charged for the above transaction. 5. In the foregoing conclusions, we are of the view that, since the said transaction does not fall within the meaning of loan or advance, there is no violation of Section 269SS of the Income Tax Act. We find no error in the order of the Tribunal the same requires no interference. Hence, no substantial question of law arises for consideration of this Court. Accordingly, we dismiss the above tax case. 16. The Hon'ble High Court was of the view that if directors are having running account in the books of accounts of the assessee-company, then the transactions between the directors of the company would not be considered as of loan and deposits. In the present case also there were three directors who have advanced money to the assessee-company and they have been repaid in cash. Thus, qua these transactions, this decision of the Hon'ble Madras High Court is directly applicable. 17. Next decision referred by the ld.counsel for the assessee is ITAT, Mumbai Bench in the case of Zodiac....
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....hould be deposited in the name of one of the promoters/directors who was not a guarantor to the bank. In this background cash was deposited in account of Mrs.Rupali R. Shah on whose violation penalty under section 271D was imposed. This penalty was deleted by the Tribunal and observation of the ld.Third Member in this background is worth to read. It reads as under: "10. Section 269SS of the Act put an interdict against taking or accepting certain loans and deposits in cash. Testing the provisions on the touchstone of Heydon's rule, it transpires that prior to the insertion of Section 269SS of the Act, it was open to the assessee to explain the cash found in the course of searches representing loans taken from the deposits made by various persons. 11. The mischief or the defect for which the law did not provide remedy was that unaccounted income so brought into the books in the form of loans and deposits was easy to explain. Because there was no restriction on the cash deposits, it was not difficult to get confirmatory letters from such persons in support of their explanation. 12. To curb this mischief, Section 269SS of the Act was enacted, by which pr....
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....the process of revival, the assessee took the cash loans from TSL. Genuineness of the loan was not doubted. The circumstances under which the loan was taken were not disputed. The assessee felt that, the delay may defeat the purpose. As such, to comply with the Court orders and to furnish the deposits as per the direction of AAIFR to TSL, the assessee took the loan. The purpose was not tax evasion. There was no animus to defile the provision of law. It was to revive a sick company in which the assessee was interested. The assessee proved the bona fide beyond the shadow of doubt. Once the bona fide is proved, what remains is only procedural default, which is of a venial nature. "De minimis non curat lex" (law takes no notice of trivialities) is the well known tenet, of law. The procedure should be the maid and not the mistress of, the legal justice. 16. Taking into consideration the entire conspectus of the case I am of the opinion that there existed a reasonable cause for accepting the cash loans. As such, the assessee may be exonerated from the rigour of Section 271D of the Act. In my opinion, the learned AM was correct in deleting the penalty. As such, I concur with his ....