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TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1635
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.... 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.13,00,000/- AkhaniFinance : Rs.9,84,000/- Total : Rs.1,74,99,700/- 5. Similarly....
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....d 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 pointed out that out of nine persons from whom alleged loans have been accepted by the assessee, three are directors viz. (i) Kirtipal K. Shah, (ii) Bhartiben K. Shah, and (iii) Niraj K. Sh....
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....tioned 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 appellant and upon assurance given by the Managing Director as to paying off dues of creditors in installments, Hon'ble the Gujarat High Court ordered de-liquidation of the appellant company. Copies of orders passed by Hon'ble Gujarat High Court as well as variou....
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....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 deposit of the same in bank account and details of cheque honored consequent to such cash deposits - Pgs.111-119 of P/B. Since such funds were received by assessee in violation of the provisions of S.269SS, AO levied penalty of Rs. 1,74,99,700/- u/s 27 ID of the Act. Assessee most respectfully submits that,....
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....perative 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: ***** ***** Section 271D (1) If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. Section 271E 271E. (1) If a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he sha....
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....n 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 proceedings, the assessee has produced his cash book depicting loan taken by him. The transaction of the assessee was not doubted. It is found to be genuine. Hon'ble High Court further observed that these transactions were between family and due to business exigency, there was no mala fide intention at the end of the assessee for evading taxes. The Tribunal has made reference to background in which sections 269SS and 269T were introduced in the Act. Thus, acc....
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....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 Developers P.Ltd. Vs. ADCIT, ITA No.31/Mum/2011 order dated 10.10.2014. In this case also assessee has accepted cash loan of Rs. 19.90 lakhs. The AO has initiated penalty under section 271D and imposed penalty of Rs. 19.90 lakhs which has been confirmed by the ld.CIT(A). The Tribunal has deleted the penalty. The Tribunal put reliance upon the decision of Hon'ble Jharkhand High Court in the case of OMEC Engineers Vs. CIT, 294 ITR 599. The Hon'ble High Court observed tha....
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....h. 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 prohibition was laid against taking or accepting certain loans and deposits in cash. It debars persons from taking or accepting, after 30th June, 1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 (raised to Rs. 20,000 w.e.f. 1st April, 1989) or more. The true reason for enacting Section 269SS of the Act was to counter the device....
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....d. 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 order." 20. Next decision referred by the ld.counsel for the assessee is of Hon'ble Gujarat High Court in the case of JCIT Vs. B.D. Patel & Co., Tax Appeal No.1226 of 2009 and in the case of CIT Vs. Shreenathji Corpn., 56 taxmann.com 439 (Guj). In the case of B.D.Patel (supra), the Hon'ble High Court has accepted business exigency and genuineness of the transaction as reasonable cause. It upheld order of the ITAT and deleted penalty under section 271D. Similarly, in the case of Shreenathji Corpn. (supra), the Hon'ble Co....