AI Drafter 
TaxTMI 
TaxTMI 
2011 (2) TMI 1615
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.... these appeals, they are heard together and disposed off by this consolidated order for the sake of convenience. 3. Briefly stated the facts are as follows: The Assessee is a private limited company. For the asst. year concerned, return of income was filed on 30/10/2005 declaring a total income of Rs. 8,24,709/-. Assessment was completed vide order dated 27/12/2007. The AO took the view that there is a violation of Section 269SSand Section 269T of the Act and accordingly, referred the proceedings to the Addl. CIT Under Section 271D and 271E for the purpose of ascertaining whether the Assessee was liable for penalty. The Assessee company was served notice dated 19/3/2008 regarding the penalty proceedings Under Section 27....
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....a sum of Rs. 17,35,392/- Under Section 271D of the Act and a sum of Rs. 17,30,000/- u/s 271E of the Act. 6. Aggrieved by the imposition of the penalty, the Assessee carried the matter in appeal before the first appellate authority. 7. It was submitted before the first appellate authority that the transactions are between two identifiable persons and totally genuine and bonafide. The transactions have been accepted by the AO and no additions have been made on this count in the order passed Under Section 143(3) of the Act. The extract of relevant cash book was enclosed to show that cash was taken from the Managing Director due to the exigencies of the business. Most of the times, cash was taken to deposit in Bank to enable clearance of ....
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....y is deposit or not? A loan always presupposes the existence of relationship of a lender/borrower and a debtor. It also invariably entails an element of interest. Often it also, if the amounts are very high or the stake is difficult, it is given after making an agreement stipulating thereon terms and conditions of repayment and in case of failure to repay on fixed date, payments of damages thereon. If such is examined here, nothing of this sort is found. Even the cash paid back to the director is not at regular intervals or no interest has been paid. Thus, I find even if the Director Sri Suresh Bhandari and the Appellant companies are separate legal personality in the eye of law, they are de facto same personality, the Director being 98; sh....
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....uent penalties levied deserve to be deleted. 10. The revenue, being aggrieved, is in appeal before us. 11. The learned DR submitted that the CIT(A) is not justified in holding that the transactions are current account transactions between Sri Suresh Bhandari and the Assessee company and such transactions are not in the nature of loan or repayments of loan, without appreciating the provisions of Section 269SS of the I T Act. It was submitted that the CIT(A) has failed to recognize that the lender and loanee were two distinct entities under the I T Act, 1961 even though the lender is a Director of the Assessee company and loanee is the Assessee company itself. 12. The learned AR, referring to the ledger extracts of Sri Suresh Bhandar....
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....owed to give false explanation for the unaccounted money. These views were also echoed by Karnataka High Court in the case of Chamundi Granites Pvt. Ltd. v. CIT 239 ITR 694. The crux of the decision is that the law is enacted to ensure prevention of evasion of tax and avoiding of fictitious entries in the books of accounts. 13.2 In the instant case, the transactions are between two identifiable persons and totally genuine and bonafide. The transactions have been accepted by the AO and no additions have been made on this count in the order passed Under Section 143(3) of the Act. Therefore, all entries are genuine and no fictitious entries are involved. 13.3 We have perused the ledger account of the Managing Director that is appearing i....