TaxTMI 
TaxTMI 
2024 (2) TMI 788
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.... wherein the grounds of appeal raised by the assessee are as follows: "1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the levying penalty of Rs. 24,00,000/- u/s 271D of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order and hence the case may please be set aside and restored back to the CIT(A)or AO. 3. It is therefore prayed that the above addition may please be deleted as learned members of the Tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal." 4. Succinct facts qua the issue are that assessee before us is a Private Limited Company. While passing assessment order in the case of assessee, it was noticed by the Assessing Officer that the assessee had passed entries in its books relating to unsecured loan of Rs. 24,00,0....
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....d the provisions of section 269SS of the Act. Therefore, it is clear that the assessee has violated the provisions of section 269SS of the Act, by accepting loan of Rs. 24,00,000/- in cash from the director of the company and liable to be penalized u/s 271D of the Act. In view of the above, the penalty proceeding u/s 271D was initiated by the Assessing Officer on 27.12.2017 for violating the provisions of section 269SS of the Act which is duly served upon the assessee-company. The assessee did not reply, therefore Assessing Officer imposed a penalty of Rs. 24,00,000/-, under section 271D of the Act. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before NFAC/Ld.CIT(A), who has dismissed the appeal of assessee, observing as follows: "Thus, from the assessment order, it is amply clear that the appellant has contravened the provisions of section 269SS of the Act and further, it has failed to respond/give any explanation as to why penalty u/s 271D should not be levied.in view of these facts, in my considered view, the penalty order passed by the AO does not require any interference and deserves to be confirmed. appeal is, thus, ....
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.... the purpose of assessee-company`s business. Thus, these all transactions are for company`s business purposes and therefore not liable for penalty under section 271D of the Act, and for that I rely on the Judgment of Coordinate Bench of ITAT Chennai in the case of Thamira Green Farm (P.) Ltd, [2023] 155 taxmann.com 320 (Chennai - Trib.), wherein it was held that where assessee-company had taken loan from its director in cash for purpose of purchase of lands in name of company, since said transactions between assessee-company and director was in nature of current account transactions, which did not come under purview of loan and deposit as per section 269SS, penalty levied under section 271D was to be deleted. The detailed findings of the Coordinate Bench are as follows: "11. Having said so, let us come back, whether explanation offered by the appellant is bona fide and reasonable or not. According to the appellant, there is a business exigency in accepting cash loan from director because the company does not have any bank account at the given point of time in a place, where the lands has been purchased. Further, the sellers of the land were insisting for payment in cash. A....
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....and this principle is supported by the decision of Hon'ble Delhi High Court in the case of 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 argue that it is a capital account transactions between director and company. Further, loan transactions between director and company can always be considered as equity capital. If these transactions are considered as equity capital, then it is outside the scope of section 269SS of the Act. In the present case, since it is solitary transaction of loan from one director, it can always be considered as a share capital received from the director. Therefor....
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....se, it was not a case of loan from public, but amount received from director to meet the business exigencies. Therefore, the case laws relied upon by the ld. DR is not applicable to the facts of the present case. 17. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that transactions between appellant company and director are in the nature of current account transactions, which does not come under the purview of loan and deposit as per section 269SS of the Act. Therefore, we are of the considered view that the Assessing Officer is erred in levying penalty u/s. 271D of the Act. The ld. CIT(A), without appreciating relevant facts simply sustained penalty levied by the Assessing Officer. Thus, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete penalty levied u/s. 271D of the Act. 18. In the result, appeal filed by the assessee is allowed." 11. From the above judgment of the Coordinate Bench of ITAT Chennai in the case of Thamira Green Farm (P.) Ltd (supra), it is vivid that transaction done during the business exigency does not attract the penalty under section 271D of th....