AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1314
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....nsaction of accepting deposits in violation of sec. 269SS is found to be bonafide one, then the penalty u/s 271D of the Act should not be levied. In this regard, the assessee had placed reliance on the decision rendered by Mumbai G bench of ITAT in the case of Zodiac Developers P Ltd (ITA No.31/Mum/2011 dated 10.10.2014), wherein the Bench has, inter alia, observed that if the Assessing Officer has not doubted the genuineness of the transaction and if no addition is made u/s 68 of the Act, penalty cannot be imposed u/s 271D of the Act. The Division Bench was of the view that the decision so rendered by G bench in the case of Zodiac Developers P Ltd (supra) is directly contrary to the decision rendered by Hon'ble Apex Court in the case of Kum. A.B.Shanti (255 ITR 258), wherein it was observed that existence of genuine or bonafide transaction is not sufficient to attract relief u/s 273B of the Act and it has to be established that on account of some bonafide reasons the assessee could not get loan/deposit by account payee cheque or account payee bank draft. The Division Bench has expressed the view that the provisions of sec. 271D & 271E come into play only in respect of genuine tran....
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....the issue relating to levy of penalty u/s 271D of the Act. 6. Since the Learned representative for the assessee consented to the proposition that apart from the bona fides of the transaction, assessee is also required to prove the existence of reasonable cause to come within the immunity provided in sec. 273B of the Act, we do not dwell upon any further with the reservations expressed by the Division Bench in the reference note. This was expressed before the parties, who thereafter have made submissions on merits. 7. We shall first discuss the facts relating to the issue before us. The assessee is a private limited company and is managed by two directors, viz., Shri Moin A.S.Batliwala and Smt. Sherbanoo A.S.Batliwala. During the year under consideration, the assessee had received cash loan of Rs. 1.00 lakh on 01-10-2007 and another cash loan of Rs. 1.00 lakh on 05-12-2007 from its director Smt. Sherbanoo A.S. Batliwala. Thus the assessee had received aggregate amount of Rs. 2.00 lakhs as loans by way of cash in violation of provisions of sec. 269SS of the Act. Hence the Addl. Commissioner of Income tax initiated penalty proceedings u/s 271D of the Act. Before the Addl CIT, the as....
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....ayee cheque or account payee bank draft." 10. The Ld CIT(A) took the view that the assessee has not satisfied the second condition and observed that without satisfying both the conditions specified by the Hon'ble Supreme Court, it cannot be concluded that the assessee has any "reasonable cause" for its failure to accept the said amount in compliance with section 269SS of the Act. Accordingly the Ld CIT(A) confirmed the penalty with the following observations:- "There is nothing on record to show that there were bona fide reasons for not accepting the said amounts through account payee cheques or account payee bank draft. And, unless that is established, the shelter of section 273B is not available." In this regard, the Ld CIT(A) also took support of the decision rendered by Hon'ble Delhi High Court in the case of M/s Samora Hotels P Ltd (211 Taxman 189). Aggrieved, the present appeal came to be filed by the assessee before the Tribunal. 11. The Ld A.R submitted that the assessee has received the cash loans of Rs. 2.00 lakhs from one of its directors. Since they were bonafide transactions, the AO did not make any addition u/s 68 of the Act. He submitted that the provisions of....
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....s of the assessee company. He submitted that the transactions made through current account of the directors cannot be considered as Loan or advance for the purpose of section 269SS of the Act. 14. With regard to the funds received from the director in the instant case, the Ld A.R offered following explanations:- (A) Cash was received on 01-10-2007 for payment of Custom Duty/Freight etc., for import of furniture items from Indo-Afrique United Traders (HK) Ltd, 301, Kam On Building, 176, Queens Road Central, Hongkong. As communication was received from the exporter that consignment is delayed, the above said fund was returned back by way of cheque on 03-10-2007. (B) Actual goods dispatched by the said Indo-Afrique United Traders (HK) Ltd on 11.12.2007 vide their invoice No.0201. As Mrs. Sherbanoo A.S. Batliwala, director/shareholder was to go out of Mumbai for a month, she arranged fund of Rs. 1,00,000/- on 05-12-2007 for payment of Custom Duty/Freight etc., on arrival of goods. The Ld A.R submitted that the assessee has thus explained that the impugned loans were taken on account of urgent business requirements and the same constitutes reasonable cause within the meaning of ....
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....of the assessee company, as the expression "any other person" in sec. 269SS does not exclude directors or members of company which has received or accepted loans or deposits. The Ld D.R further submitted that it is not only necessary to show that the transactions of loans or deposits are bonafide, but it is also required to be shown that there was reasonable cause in taking or accepting loans or deposits in violations of provisions of sec. 269SS of the Act, as held by Hon'ble Supreme Court in the case of ADI Vs. Ku. A.B. Shanthi (2002)(255 ITR 258). The Ld D.R further submitted that a perusal of the ledger account copy of Smt. Sherbanoo A.S. Batliwala submitted by the assessee would show that the same is not a "Current Account", since during the year under consideration, there was no other transaction other than the impugned loan transactions. Hence there is no substance in the contentions of the assessee that the impugned transactions are current account transactions. 17. We have heard rival contentions and perused the record. We have noticed that the assessee has received loans by way of cash from its director named Sherbanoo A.S Batliwala of Rs. 1.00 lakh each on two occasions.....
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....e Company are not excluded from the ambit of the provisions of sec. 269SS of the Act. 20. Now the question that boils down is whether the assessee has, in the instant case, demonstrated that there was reasonable cause for taking loan of Rs. 1.00 lakh each on two occasions in violation of provisions of sec. 269SS of the Act? For the sake of convenience, and at the cost of repetition, we extract below the explanation furnished by the assessee :- (A) Cash was received on 01-10-2007 for payment of Custom Duty/Freight etc., for import of furniture items from Indo-Afrique United Traders (HK) Ltd, 301, Kam On Building, 176, Queens Road Central, Hongkong. As communication was received from the exporter that consignment is delayed, the above said fund was returned back by way of cheque on 03-10-2007. (B) Actual goods dispatched by the said Indo-Afrique United Traders (HK) Ltd on 11.12.2007 vide their invoice No.0201. As Mrs. Sherbanoo A.S. Batliwala, director/shareholder was to go out of Mumbai for a month, she arranged fund of Rs. 1,00,000/- on 05-12-2007 for payment of Custom Duty/Freight etc., on arrival of goods. As rightly pointed out by Ld D.R, the assessee has not substantiat....