TaxTMI 
TaxTMI 
2023 (1) TMI 622
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....ordinate Bench vide order dated 15.02.2009. Thereafter, the assessee carried the matter before the Hon'ble Rajasthan High Court in ITA No. 634/JP/2009. The Hon'ble Rajasthan High Court remanded back the matter to the Income Tax Appellate Tribunal for deciding it afresh on merits. The appeal of the assessee after the matter was set aside by the Hon'ble High Court was listed for hearing on various occasions since from 12.04.2018 to 10.08.2019 more than 6 opportunities were given to the assessee. Nobody appeared despite various notices issued through RPAD. Consequent to this fact, the coordinate Bench decided the appeal of the assessee on merits vide order dated 09.08.2019. Thereafter, the assessee again filed miscellaneous application in MA No. 11/JP/2021 and expressly demonstrated the reason behind non compliance and prayed that the purpose of this appeal as directed by the Hon'ble High Court which is to hear the contentions on its merits for which the reasons were stated in the affidavit filed, in support of MA filed. Considering the direction of the Hon'ble Jurisdictional High Court direction and filling of the detailed reasons by the assessee the MA was allowed and therefore, thi....
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....assessment year being same it would be too technical not to entertain one appeal of the assessee. Therefore, considering the ratio of judgement and the bench also noted that even the order of the ld. CIT(A) is a single order and there is no cross objection filed by the department to concede the issue raised by the ld. DR. Therefore, considering the decision of the Hon'ble Gujarat High Court, the appeal of the assessee is considered and decided by a single consolidated order even though there were two different orders of lower authorities on two separate defaults. 7. The ld. DR pointed out from the paper book filed by the assessee that in the case of M/s Lok Vikas House Funds Ltd. vs. Addl. CIT, Range-1, Jaipur in ITA No. 452/JP/1999 dated 07.12.2001 wherein the ld. AR Mr. A. K. Sharma quoted to the Bench that the company is under liquidation. Based on this observation bench raised a question to the ld. AR of the assessee to clarify the fact and file a detailed affidavit to this fact. The ld. AR of the assessee submitted that the company is not under winding up and petition filed earlier on 20.03.2001 has been withdrawn on 31.10.2008. Therefore, the company is not under liquidati....
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....order dated 31.07.1998. While levying the penalty, the ld. DCIT recorded his finding that the assessee has not produced the cashier, both the companies are two separate legal entities, transaction undertaken are contrary to the provision of section 269SS/T. The assessee has shown the balance outstanding under the head unsecured loan. Therefore, the penalty was levied considering this fact. 9. Aggrieved from the order of ld. DCIT, Range-1, Jaipur, the assessee has preferred an appeal before the ld. CIT(A). The relevant finding of ld. CIT(A) on the issue is as under:- "24 In view of the above detailed discussion on the subject, I have come to the conclusion that for levying penalty u/s 271D of the 1.T.Act for violation of the provisions contained in Sec. 269SS, Expl. (iii) under that section says, loan or deposit" means that "loan or deposit of money". In this case, it has amply been proved by the facts mentioned in the order that the transaction between the two sister concerns partake the character of loan or deposit. Therefore, penalty u/s 271D of the 1.T.Act had correctly been levied by the Addl. CIT, Range-1, Jaipur 25 As regards the penalty levied u/s 271E o....
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....ansaction of each day. 3. In regular course of business, the common cashier makes payment on behalf of both the companies since he is holding cash of both the companies. The payments are made without ascertaining the cash balance of each company. Accordingly, a situation arises where there is excess of payment over receipt in both the companies. Therefore, when the day book is written, to meet the deficit, it is balanced by the cashier by passing entries towards transfer of cash from one company to another of a suitable and appropriate amount. 4. In course of assessment proceedings, AO in the assessment order u/s 143(3) dt. 12.01.1998 observed that assessee has accepted cash loans and deposits from M/s Rajasthan Lok Vikas Finance Resources Ltd. of Rs.40,54,247/- and repaid loan of Rs.53,95,338/- in cash which is in violation of section 269SS and section 269T of the Act. Interest is also paid on the amount of deposit. He therefore, initiated penalty proceedings u/s 271D and 271E of the Act. 5. After initiating the penalty proceedings, the AO vide letter no.49 dt. 15.01.1998 referred the matter to Additional Commissioner of Income Tax for imposing the penal....
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....that there was a reasonable cause for the failure. Therefore, the first issue is whether the transaction with M/s Rajasthan Lok Vikas Finance Resources Ltd. is of the nature of loan or deposit and if yes whether there is a reasonable cause for entering cash transaction. 3. From the ledger account of M/s Rajasthan Lok Vikas Finance Resources Ltd. (copy enclosed) it can be noted that there is both receipt and payment of amount wherein the funds have been transferred in a whimsical manner. It is not a case that amount has been deposited or loaned for a fixed period or repayable on demand. Both the companies are of same group having common management. Therefore, such transaction are not loan or deposit but only current account transaction. The meaning of term deposit and loan has been explained at Pg 5735 of Chaturvedi & Pithisaria's Income Tax Law, 4th Edition, Volume 5 which is as follows:- "Deposit" and "loan"-These two are not identical in meaning. It is true that both in the case of a loan and in the case of a deposit there is a relationship of a debtor and a creditor between the party giving money and the party receiving money. But in the case of a deposit, ....
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.... There are transfer of funds from and to the sister concerns. There is 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 are owned by the same family group of people with a common managing partner with centralised accounts under the same roof. Transfer of funds has taken place in a whimsical manner. Therefore, it is rather difficult to say that the transactions are 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 before us all that can be gathered is that funds have been transferred from and to the sister concerns as and when required and since the managing partner is 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 o....
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....visions in relation to an internal financial adjustment among the firms. 18. Therefore, this Court is of the view that the acts and omissions attributed to the appellant do not constitute violation of ss. 269SS and 269T, and if for any reason, such contravention is noticed, it stands condoned under s. 273B and thereby, the proceedings initiated under ss. 271D and 271E of the Act are declared as untenable. Ridhi Sidhi Infraprojects Pvt. Ltd. Vs. JCIT ITA No.49/JU/2013 order dt. 18.03.2013 (Jodhpur) (Trib.) (Case Laws Compilation PB 36-57) The relevant Para 6, 8 & 9 of the order reads as under:- 6. Any loan is a type of debt, which entails the redistribution of financial assets over a time between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money, the 'principal' amount, from the lender and is obliged to repay an equal amount with a cost referred to as the 'interest' at a later time. Usually, the money is paid back in regular installments or partial repayments. In some places, the meaning of 'loan' is supplied by in the shape of agreement, which may be express or implied to repay the principal amount with ....
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....ge of shares. They have stated that only when the assessee company has 10% beneficial interest in the other concern only then the transacting parties can be treated as sister concerns. Although the term 'sister concern' is not defined in the Act anywhere, but in common parlance, if two concerns have interest in each other, these are called as sister concerns. As per the provisions of sec. 40(a)(ii) of the Act where an assessee is an AOP, any payment of expenditure made to its member may be called for disallowance if it is excessive or unreasonable. Accordingly, the AOP and the assessee company have to be treated as 'sister-concerns'. Apart from this, registered offices of both are situated in the same premises, namely, Ujjawal Apartments, Udaipur. The main Director, namely, Shri Mahendra Tak holds 80% shares in the company alongwith his wife and son; and he is also the main member of AOP holding 64.25% share in the profits along with wife and son. Thus Shri Mahendra Tak controls and manages the activities of both the concerns in such a manner that the transactions between the assessee and its AOP can surely be treated as a transaction between the two sister concerns. The A.O. has n....
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....69SS which can be said to have been committed by the assessee company. Accordingly, in view of our foregoing discussion 'on any count' penalty u/ 271D cannot be imposed on the assessee-company. As a result, we delete the entire penalty of Rs. 3.25 crores and allow the appeal of the assessee-company. 4. Without prejudice to above, even if it is held that it is a case of acceptance of loan or deposit and repayment thereof, there is a reasonable cause for acceptance and repayment thereof as explained supra and therefore, in view of section 273B of the Act penalty is not leviable. In this connection reliance is placed on the following cases:- Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) The Hon'ble Supreme Court at Para 5 of the order held as under:- 5. Under the Act penalty may be imposed for failure to register as a dealer : s. 9(1), r/w s. 25(1) (a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi- criminal proceeding, and penalty will not ordinarily be imp....
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....e 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 s. 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power." 12. Considering the aforesaid aspect of the matter and considering the fact that the appellate authority as well as the Tribunal has ultimately found that the respondent-assessee has given reasonable explanation for receiving such payment in cash and there was no mens rea on the part of the assessee. This aspect has also been examined by the Gauhati High Court in the case of CIT vs. Bhagwati Prasad Bajoria (HUF) (2003) 183 CTR (Gau) 484. While relying upon the decision of the hon'ble Supreme Court, the Gauhati High Court has observed in paragraph 7 of its judgment as under: " Keeping in view the object of introducing s. 269SS the Legislature has given discretion to the as....
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....d any substantial question of law in the present appeal and the same stands dismissed with no order as to costs. CIT Vs. Balaji Traders (2008) 303 ITR 312 (Mad) (HC) (Case Laws Compilation PB 26-29) The Hon'ble High Court at Para 10 to 13 of the order held as under:- 10. This Court in CIT vs. Kundrathur Finance & Chit Co. (supra), following the decision of apex Court in Asst. Director of Inspection (Investigation) vs. Kum. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC), held that if there was genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. 11. In the instant case, the CIT(A) and the Appellate Tribunal found that (i) there was business exigency forcing the assessee to take cash loans for the purpose of honouring the commitment, viz., issuance of cheque on a particular date ; (ii) the creditors were genuine persons and the transactions were never doubted by the authorities below; and (iii) there was no revenue loss to the State exchequer, and....
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.... Ld. CIT(A) be directed to be deleted." 11. In addition to above written submission, the ld. AR of the assessee vehemently argued that there is no intention of the assessee company to contravene the provisions of section 269SS/T. The assessee is engaged in the business of finance and all the transaction to and from M/s Rajasthan Lok Vikas Finance Resources Ltd are duly recorded and there is no finding of the lower authorities that the assessee is involved in accounting of any unaccounted transactions which the ultimate purpose of provision invoking this penalty provisions. The purpose of these provisions is to curtail the transactions of unaccounted cash. The cash introduced or repaid is already explained and recorded in the respective cash book was with the common cashier and it is an obvious reason for accounting such transaction. There is no intention to contravene the provision of the Act. The ld. AO and ld. DCIT has not recorded any controverting finding that the cash transactions are unaccounted or were with the motive to manipulate the book result in that aspect of the fact and thus, the reasonableness of the transaction incurred needs to be examined. The identity and gen....
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.... merits. Based on the arguments and decision of the Hon'ble Gujarat High Court in the case of Dalppatbhai Damjibhai Vs. CIT 205 ITR 144 (Guj) this appeal is considered as maintainable on this aspect. In view of these the appeal is decided with consolidated order for two separate defaults by the assessee. The Bench further noted that the levy of penalty is confirmed by the lower authority on account of the cash transaction undertaken for day to day cash adjustment of receipt of cash and payment in cash between two companies i.e., assessee and M/s Rajasthan Lok Vikas Finance Resources Ltd. Both the companies are regularly assessed to tax. There is no dispute by the parties that the transactions between them are not genuine and unrecorded transaction in either of the assessee company. The source of cash already explained and there is no adverse observation on these aspects of cash recorded as paid and received from each other. The revenue has not controverted to the factual position that both the companies were operating from same premises and source of cash were out of the disclosed sources. As the cashier was operating for both the company used the cash of the either company and pas....
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....equired to be noted that s. 269SS has to be read along with s. 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 s. 269SS of the Act. While examining the constitutional validity of s. 269SS, the hon'ble Supreme Court in the case of Asstt. Director of Inspection (Inv.) vs. Kum. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC) has observed as under : "It is important to note that another provision, namely, s. 273B was also incorporated which provides that notwithstanding any thing contained in the provisions of s. 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 s. 273B in the Act, there was a genuine and bona fide transaction and if for ....