TaxTMI 
TaxTMI 
2007 (7) TMI 216
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.... 27-09-1992 2,00,000 15-10-1992 2,00,000 5-11-1992 5,300 21-11-1992 1,00,000 5,05,300 3. It is submitted by learned counsel for the appellant that the aforesaid transactions are in violation of section 269SS of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), as the payment was made by cash and not by way of cheque or through bank draft. A show-cause notice was issued under section 274 read with section 271D of the Act to the respondent-assessee. In response to the aforesaid notice, the assessee appeared before the Assessing Officer and submitted his reply. The case of the respondent-assessee is that the payment was required to be made to the labourers at the site and for that reason, the amount was accepted in cash. It is submitted that there was no mens rea or mala fide intention in accepting the amount by cash and not by cheque or bank draft. The Assessing Officer, however, was not satisfied with the said explanation and by his order dated August 29, 1996, came to the conclusion that it was not genuine transaction and there is no reasonable cause for accepting the deposits in cash aggregating to Rs. 5,05,300. He a....
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....ounsel further submitted that, therefore, it is a clear case of violation of the said provisions and, therefore, the first authority was justified in imposing the penalty. 6. On the other hand, learned counsel Mr. Anjay Kothari submitted that whether the transaction was genuine or not is a question of fact and, therefore, the same cannot be challenged in this appeal, as the appeal is maintainable on the substantial question of law. It is further submitted by Mr. Anjay Kothari that there is neither question of law much less substantial question of law, which is attracted in this appeal. It is also pointed out that the respondent-assessee had accepted the loans from its sister concern and both of them are maintaining the regular books of account. 7. We have heard learned counsel for the parties. We have also gone through the orders of the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur, the Commissioner of Income-tax (Appeals) -I, Jodhpur, as well as the order of the Deputy Commissioner of Income-tax, Bikaner. It is true that as per the provisions of section 269SS of the Act, no person shall, after the 30th day of June, 1984, take or accept from any other person, any loan....
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....sister concerns. There was no evidence to show that money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee were owned by the same family group of people with a common managing partner with centralised accounts under the same roof. Transfer of funds had taken place in a whimsical manner. Therefore, it was rather difficult to say that the transactions were in the nature of deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished all that could be gathered was that funds had been transferred from and to the sister concerns as and when required and since the managing partner was common to all the sister concerns, the decision to transfer the funds from one concern to another concern or to repay the funds could be said to have been largely influenced by the same individual. In other words, the decision to give and the decision to take rested with either the same group of people or with the same individual. In such circumstances of the case, the transactions inter se between the sister ....
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....ired to be noted that section 269SS has to be read along with section 273B of the Act and at the time of awarding penalty, the authority is required to consider whether there was a reasonable cause for the said failure as envisaged under section 269SS of the Act. While examining the constitutional validity of section 269SS, the hon'ble Supreme Court in the case of Asst. Director of Inspection (Investigation) v. Kum. A. B. Shanthi [2002] 255 ITR 258 has observed as under (page 266 of 255 ITR): "It is important to note that another provision, namely, section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B in the Act. If there was a genuine and bona fide t....