TaxTMI 
TaxTMI 
2016 (1) TMI 1497
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....h of Rs. 10,00,000 received for the first time during the year from M/s. Laxmi Trading Company, Rs. 7,03,368/- was towards the repayment of Loan due by M/s. Laxmi Trading Company to the Appellant as on the 1st day of the year and it was only net amount of Rs. 2,96,632 of Cash Loan that was received by the Appellant and not Rs. 10,00,000 and hence, without prejudice to other Grounds of Appeal, section 271D was not attracted to Rs. 7,03,368. 2.Without prejudice to other Grounds of Appeal., the learned CIT(A) failed to appreciate the reasonable cause pleaded before him in the correct perspective and he erred in law and on facts in confirming the Penalty Order under Section 271D of the Act passed by the learned Addl. CIT to the tune of Rs. 48,60,000 which is unjustified and is based on surmises and conjecture without referring to the facts of the matter and without considering the plea of the Appellant. 3. The Appellant submits that the transaction is genuine and has not been doubted nor is there any allegation of any mala fide. The appellant prays that the violation has not caused any loss to the revenue and that penalty be deleted. 4. The Appellant craves leave to add, delet....
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....evi & Sons (1979) 118 ITR 507(SC).We have considered the prayer(s) of the assessee firm with respect to both the appeals along with the affidavit's filed by the assessee firm and the reasons/explanations submitted by the assessee firm and we hold that this delay in filing of the appeal need to be condoned in the interest of justice and the appeal be admitted and be heard on merits , as in our considered opinion the assessee was prevented in filing the appeal in time as provided under the Income Tax Act , 1961 due to bona-fide and sufficient cause shown and stated by the assessee firm in its affidavit as the accountant having resigned in June 2012 but did not hand over the files in time, as per cause shown by the assessee firm , leading to delay in filing of both these appeals and once the matter came to notice of the assesse firm on being enquired by chartered accountant, the assesee firm took immediate action to file the instant appeal's. ITA No. 1986/M/2013: 4. The brief facts of the case are that the assessee firm filed its return of income on 31-10-2005 wherein the income was declared at Rs. NIL. The case was selected for scrutiny and it was observed by the learned assessing....
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....irm has undertaken these cash transactions, otherwise there would have been penal consequences u/s. 138 of the Negotiable Instruments Act. The assessee firm submitted that this is merely a technical or venial breach of provisions of the Act , which resulted in infraction of law and it did not prejudice the interest of revenue as no tax avoidance or tax evasion was involved. The AO considered the replies of the assessee firm along with the Ledger A/c of M/s. Laxmi Trading Company and bank account statement and held that Section 269SS of the Act prohibits loan transactions exceeding Rs. 20,000/-. The AO held that the assessee firm is in the business of advancing loans for a number of years, his accounts are audited every year and service of professional Chartered Accountant are availed by the assessee firm and the plea of ignorance of law cannot be accepted. The assessee firm has received/repaid loans during the year from/to 78 parties and the total of such loans received during the year is Rs. 47,93,06,544/- and the total amount of loan repaid during the year is Rs. 20,87,10,785/- and total transactions raising and repayment of the loan is around Rs. 68 Crores during the previous y....
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....s Pvt. Ltd did not want any violation of Section 269SS of the Act in their books of accounts. Therefore as per AO , the said loan was routed through the books of the assessee firm where the cash loan was received and a cheque was issued to Anish Metals Pvt. Ltd. Further, since most of the transactions are with sister concerns , the assessee firm could have easily anticipated the same and could have easily planned the receipt of loans from M/s. Laxmi Trading Company by way of cheques. In order to ascertain the veracity of this claim of the assessee , the bank statement of the assessee firm was scrutinized by the AO. One fact which came to light of the AO was that the assessee firm was having transactions with M/s. Laxmi Trading Company both by way of cash and by way of cheques. Further, on careful scrutiny it was seen by the AO that M/s. Laxmi Trading Company was also having a bank account with Bank of Baroda, C.P. Tank Branch , where the bank account of the assessee firm was also located. This fact came to notice of the AO from the bank statement of the assessee firm with Bank of Baroda , CP Tank Branch, wherein the assessee firm received loans by way of three cheques totaling to ....
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....sonable cause for the said failure, which clearly indicate that these provisions give a discretion to authorities to impose the penalty or not to impose the penalty , provided reasonable cause is shown by the taxpayer as stipulated u/s 273B of the Act. Such discretion has to be exercised with wisdom and in a just and fair manner by the authorities having regard to the entire relevant facts and materials existing on records. The assessee firm submitted that on perusal of the books of M/s. Laxmi Trading Company which are furnished in the course of the assessment proceedings clearly reveals that these represent's transactions in current accounts which represent flow of funds between two concerns as and when the funds were needed. Hence, entries in the current account of these two concerns cannot be regarded as 'loans' or 'deposits' as contemplated in Section 269SS of the Act. Therefore, no penalty is leviable u/s.271D of the Act. The assessee firm submitted that on the dates on which cash loan was taken, the bank balance was quite insufficient to pay to the payees in question. For the purpose, a copy of bank statements of the assessee firm from April to September, 2004 was furnished i....
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....(A) held that the onus is on the assessee to prove that it had not taken loan of Rs. 10,00,000/- in cash but there was cash loan of Rs. 2,96,632/- only obtained by the assessee firm and M/s. Laxmi Trading Company returned the money to the assessee firm in violation of provisions of Section 269T of the Act to the extent of Rs. 7,03,368/-. Nothing has been brought on record to show that there was repayment of loan of Rs. 7,03,368/- in violation of provisions of Section 269T of the Act by M/s. Laxmi Trading Company. The CIT(A) held that mere genuineness of the transaction or transaction being with sister concern does not mitigate the rigour's of Section 269SS of the Act. The CIT(A) held that penalty u/s. 271D of the Act is exigible in such cases. Hence, there is no need for Revenue to prove mens rea on the part of assessee firm before levying penalty u/s.271D of the Act. Thus, the CIT(A) confirmed vide orders dated 27- 03-2012 the penalty of Rs. 48,60,000/- levied by the AO u/s 271D of the Act for violation of Section 269SS of the Act. 6. Aggrieved by the orders dated 27.03.2012 of the CIT(A) , the assessee firm is in appeal before the Tribunal. The assessee firm reiterated its submi....
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....and cash. The accounts of the assessee firm were audited by a qualified chartered accountant who has given a report in form no 3CD highlighting the violations of Section 269T of the Act which is placed at paper book, page 10. The assessee firm has during the previous year received loan in cash of Rs. 48.6 Lakhs. Out of this amount of Rs. 48.6 Lakhs, Rs. 7,03,368/- was stated to have been received as return of amount against opening debit balance receivable by the assesse firm from M/s. Laxmi Trading Company, for which, the assessee firm has placed on record a copy of Ledger A/c of the assessee firm in the books of Laxmi Trading Company before us which is placed at Pg. 2 of the Paper Book filed before us. We are of the considered opinion that no penalty can be levied as far as return of amount of Rs. 7,03,368/- being opening debit balance receivable from M/s. Laxmi Trading Company, having been received during the previous year as the same is not hit by provisions of Section 269SS/269T of the Act. The reliance is also placed on the decision of Hyderabad Tribunal in the case of DCIT v. Ankush Rao Ingle (2010) 39 SOT 263(Hyd.) in this regard . In our considered view, in any case if th....
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....f loan of Rs. 41,56,632/-in cash by the assessee firm from M/s Laxmi Trading Company during the previous year is in violation of provisions of Section 269SS of the Act. The assessee firm has made bald statement with respect to business exigency/expediency without showing the urgency in the matter and the explanation offered does not , in our considered view, constitute reasonable cause as stipulated under Section 273B of the Act . On the other hand, assessee firm has received cash loan from M/s. Laxmi Trading Company who is also stated to be maintaining bank account with Bank of Baroda, C.P. Tank Branch where the assessee firm is also maintaining bank account with the same branch of the same bank and the assessee firm has not shown reasonable cause as stipulated under Section 273B of the Act as to what prevented the assessee firm to receive the said loan by cross account payee cheque or draft/pay order from M/s Laxmi Trading Company . The said cash loans are stated to be utilized mainly by the assessee firm for advancing money to sister concerns for which no reasonable cause is shown as to why the assessee firm itself raised the money in cash and then disbursed the amount to sister....
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....2 held : "It is not in dispute that taxation laws must also pass the test of article 14. That has been laid down by this Court in Moopil Nair v. State of Kerala [1961] 3 SCR 77. But as observed by this Court in East India Tobacco Co. v. State of Andhra Pradesh [1963] 1 SCR 404, 409 in deciding whether the taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some person or objects and not others; it is only whom within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. It is well settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably." (p. 275) The above dictum applies in full force as regards the present case. The object sought to be achieved was to syndicate the evil practice of making of false entries in the account books and later giving explanati....
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....posable 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. 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." As we have already held vide detailed reasons in the preceding para's above that the assessee firm is not able to show the reasonable cause as is referred to in Section 273B of the Act for taking the loan Rs. 41,56,632/- in cash from M/s Lakshmi Trading Company in violation of Section 269SS of the Act read with Section 271D of the Act, thus, in our considered view the penalty imposed by the authorities below need to be confirmed to the extent of Rs. 41,56,632/- , while the penalt....
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....lso having noted that the assessee firm has withdrawn Rs. 5 lacs in cash on 23.7.2004 from the bank account vide cheque , which the assessee firm instead of withdrawing the cash from its bank account could have transferred the amount vide cheque from the same bank to M/s Laxmi Trading Company as the assessee firm repaid the loan on 23-07-2004 itself in cash and both the assessee firm and M/s Laxmi Trading Company are maintaining bank accounts with the same branch of the same bank. The assessee firm repaid thereafter to M/s Laxmi Trading Company, loans vide cheque on 09.08.2004 and 01.09.2004. 11.Aggrieved by the penalty orders dated 27-06-2008 passed u/s 271E of the Act, the assessee firm filed the first appeal before the CIT(A) and reiterated the same submissions as was made before the authorities below. The assessee firm submitted that cash loan of Rs. 5 lacs was repaid to M/s Laxmi Trading Company to meet urgent need to complete the business transaction. The assessee firm submitted that it was ignorant of provisions of law in this respect and therefore mistake occurred due to bonafide belief on the part of the assessee firm that loan can be repaid in cash. The assessee firm sub....
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....aining bank account with the same branch of the same bank and the assessee firm could have issued cheque and transferred the money to M/s Laxmi Trading Company through transfer with in the same bank instantly from one bank account to another in the same branch of the same bank. The contention of the assessee firm that to avoid bouncing of cheque , it repaid loan in cash was also rejected by the CIT(A) as the assessee firm has withdrawn cash of Rs. 5,00,000/- on 23-07- 2004 i.e. the same day when the loan was repaid in cash. Thus, the CIT(A) confirmed the penalty levied by the AO u/s 271E of the Act, vide orders dated 23-12-2011. 13. Aggrieved by the orders dated 23-12-2011 passed by the CIT(A), the assessee firm is in appeal before the Tribunal . 14. The assessee firm reiterated the submissions as made before authorities below . The assessee firm submitted that there is urgency, business necessity and commercial exigency. The asssessee firm submitted that the mistake being technical and venial breach of provisions of Section 269T of the Act, is a bonafide mistake whereby the assessee firm was not aware that repayment of loan of Rs. 20000 or more in cash to M/s. Laxmi Trading Comp....
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....very clear which prohibits repaying cash of Rs. 20,000/- or more loan in cash and no reasonable cause has been shown by the assessee firm. The assessee firm has made bald statement with respect to business exigency/expediency without showing the urgency in the matter and the explanation offered does not , in our considered view, constitute reasonable cause as stipulated under Section 273B of the Act . On the other hand, the assessee firm has repaid in cash loan to M/s. Laxmi Trading Company who is also stated to be maintaining bank account with Bank of Baroda, C.P. Tank Branch where the assessee firm is also maintaining bank account in the same branch whereby these transactions could have easily been carried out through transfer from the bank account of the assessee firm to the bank account of M/s Laxmi Trading Company by transfer within same branch of the same bank and more so there was sufficient balance in the bank account of the assessee firm on 23-07-2004 as the assessee firm withdrew Rs. 5,00,000/- on 23-07-2004 and the re-payment of loan of Rs. 5,00,000/- in cash also having been made on 23-07-2004, no reason / explanation as to what prevented the assessee firm from paying t....
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....ry Officer [1968] 68 ITR 272 held : "It is not in dispute that taxation laws must also pass the test of article 14. That has been laid down by this Court in Moopil Nair v. State of Kerala [1961] 3 SCR 77. But as observed by this Court in East India Tobacco Co. v. State of Andhra Pradesh [1963] 1 SCR 404, 409 in deciding whether the taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some person or objects and not others; it is only whom within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. It is well settled that a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably." (p. 275) The above dictum applies in full force as regards the present case. The object sought to be achieved was to syndicate the evil practice of making of false entries in the account books....