TaxTMI 
TaxTMI 
2023 (10) TMI 839
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....IT (Appeals) failed to appreciate that the sustenance of the levy of penalty u/s 271D of the Act was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that the order imposing penalty was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 4. The CIT (Appeals) failed to appreciate that the transaction between the company and the Director/share holder would be the outside the purview of the provisions of section 269SS of the Act, thereby vitiating the findings in para 6 & para 7 of the impugned order. 5. The CIT (Appeals) failed to appreciate that the decisions cited including the decision of the Jurisdictional High Court were completely overlooked while the decisions relied upon were applied out of context, thereby negating the stand taken in para 6 & para 7 of the impugned order to sustain the levy of penalty u/s 271 D of the Act. 6. The CIT (Appeals) failed to appreciate that the provisions of section 273B of the Act were completely missed while considering the necessity and compulsion for entering into the transaction with the Director/share holder and ought to have appreciate....
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....precedents and held that the claim of the appellant that it could not open bank account in those areas for the reason that, they have purchased lands from various sellers and once the sellers found that there are transactions in the said area, they will escalate the price and will not be willing to sell their land is a figment of imagination and is not a reasonable or acceptable cause. Therefore, rejected arguments of the assessee and levied penalty of Rs. 2,02,10,000/-, which is the sum equal to loan received, in violation of section 269SS of the Act. The relevant findings of the AO are as under: "7. The submission of the assessee are duly considered. At the first instance, it is pertinent to note that the assessee itself admitted that entire transactions were made in cash and withdrawals were made from the Savings Account of the Director of the company maintained with Centurion Bank of Punjab National Bank. During the penalty proceedings, the assessee admitted that no bank account was maintained in the name of the assessee company and the entire transactions were made from the Director's bank account. Further, the assessee submitted copy of bank account of the Director Shri....
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....11. This clearly shows that the assessee has not made any effort to conduct financial transactions in a transparent manner. Therefore, its hereby held that the assessee company has not taken any effort to conduct business without violating Provisions of Income tax Act such as 269SS and has not established any reasonable cause for the way it has conducted its business transactions in cash; which has lead to increase in the "Black Economy". 12. From the above facts, it clearly goes to prove beyond doubt that the assessee had acted in contravention to provisions of Sec.269SS of the IT Act. 13. In view of the above facts, the receipt of Rs. 2,02, 10,000/- made by the assessee is in contravention to Sec.269SS of the IT Act and it is held that a sum equal to the amount of transaction is leviable as penalty u/s. 271D of the Income Tax Act, 1961 in this case. Hence, a penalty of Rs. 2,02,10,000/- (Rupees two crores two lakhs and ten thousand only) is levied as penalty u/s. 271D of the Income-tax Act." 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the ld. CIT(A), the assessee has filed detailed written submission on the issue alo....
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....l High Court of Madras in the case of CIT vs Idhayam Publications Ltd [2006] 285 ITR 221 and the decision of Hon'ble Delhi High Court in the case of CIT vs M/s. Muthoot Financiers in ITA No. 336/2002 dated 03.02.2015. 8. The ld. DR, Shri. AR V Sreenivasan, Addl. CIT, supporting the order of the ld. CIT(A) submitted that facts brought on record by the Assessing Officer clearly shows that, there is a violation of provisions of section 269SS of the Act, which attracts penalty u/s. 271D of the Act. In fact, the assessee never disputed fact that loan is accepted in cash, but contended that said loan is not loan or deposit within the meaning of section 269SS of the Act, but only a current account transactions between the appellant and the Director. However, if you go through the ledger extract of loan amount in the books of account of the company, it is clear that it is a loan account transactions between Director and company. Therefore, the ld. Assessing Officer has rightly levied penalty u/s. 271D of the Act and their order should be upheld. In this regard, he relied upon the decision of Jurisdictional High Court of Madras in the case of Vasan Healthcare P Ltd vs ACIT [2019] 411 ITR 4....
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....text, in which said transactions has been entered into and further to ascertain whether said transactions falls within the ambit of provisions of section 269SS of the Act. Admittedly, the appellant has received loan from its director Shri. T. Mohan, for the purpose of purchase of lands in the name of the company. In fact, the appellant company has purchased lands in various survey numbers in Madhavan Kurichi and Manappadu village to the extent of 128 acres for a total consideration of Rs. 2,02,78,994/-. The source of said land purchased was loan received from Shri. T. Mohan, Director of the appellant company. The director of appellant company has explained source for loan given to appellant company and as per details filed by the assessee, amount has been drawn from savings bank account of Shri. T. Mohan, maintained with Centurion Bank of Punjab Ltd., on various dates and directly paid to sellers of the land. It is also an admitted fact that, the appellant company and the director has disclosed the transactions in their books of accounts for the relevant financial year. Therefore, from the above, it is undoubtedly clear that the transactions are genuine and the appellant is able to....
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....ansactions is not in doubt. Further, it is a case of loan between director and appellant company. Although, the appellant company and its director are two separate legal entities, but both cannot be considered as separate for the purpose of these transactions. If there are transactions between company and director, then said transactions inter-se cannot be considered as loan or deposit within the meaning of section 269SS & 269TT of the Act, and this principle is supported by the decision of Hon'ble Delhi High Court in the case of CIT vs M/s. Muthoot Financiers (Supra), where it has been held that no penalty can be imposed on assessee firm in respect of transactions inter-se between assessee and its partners, even though there is a violation of section 269SS & 269TT of the Act. If you apply above analogy to transactions between the director and the company, then in our considered view transactions inter-se between company and director cannot be treated as violation of section 269SS & 269TT of the Act. Further, even assuming for a moment, but not conceding cash loans received from director, which is in contravention of section 269SS of the Act, but still the appellant company can arg....