TaxTMI 
TaxTMI 
2019 (4) TMI 2186
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....assessee has preferred the present appeal. 3. The solitary ground raised by the assessee relates to challenging the order of Ld. CIT (A) in reaching to the conclusion that the assessee has violated the provision of law u/s 269SS of the I.T. Act and hence is liable for penalty u/s 271D of the I.T. Act. 4. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. From the records, we notice that assessee company had shown cash loans taken from its directors Mr. Vijay Kumar Agrawal and Jay Kumar Gupta amounting to Rs. 13 lakhs. According to the AO, the same is in contravention of law provided u/s 269SS of the Act and it was held by the AO that since the cash loans taken are accepted by the company from its directors in contravention of law provided u/s 269SS, therefore under these circumstances, AO levied the penalty after giving opportunity to the assessee. The AO referred to the findings which are discussed in para no. 10 of assessment order in detail. Apart from above, AO also discussed the provisions of law u/s 271D and 269SS in para no. 7 of the penalty order dated 28.06.12. ....
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....n nature and no interest has been charged for the above transactions. On these facts, it is submitted that, the transaction between the assessee company and the Directors-cum-shareholders is not a loan or deposit and it is only a current account in nature and no interest is being charged for the above transaction. Therefore, the provisions of section 26955 are not applicable and consequently the provisions of section 271D r.w.s. 2738 of the IT Act are not applicable. 3. Without prejudice, it is further submitted that, the true reason for enacting section 26955 was to counter the device of tax evasion, which enabled taxpayers to explain away unaccounted cash 01- unaccounted deposits. The prime object of law is to secure justice to the people. In view of this, the Legislature took proper safeguard under section 2738 of the IT Act, which enumerates the cases where penalty is not to be imposed. In such remuneration, section 271D of the IT Act also finds a place. It is prescribed under section 273B of the IT Act that penalty is not to be imposed on the assessee if he proves that there existed a reasonable cause for not complying with the provisions. Reasonable cause me....
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....ipt. From the said statement, we notice that cash was brought in by the directors as and when required by the company for its business. 9. From the ledger account, we notice that there was a running account in the name of director. It is only a current account in nature and thus no interest has been charged on the transactions. Thus, the transactions between the assessee and the directors-cum-shareholders was not a loan or deposit and it was only a current account in nature and therefore, no interest is being charged for the above transaction. Even otherwise, it is pertinent to mention here that both of the directors are assessed to tax, their source of bringing cash into the Company and 'genuine requirement' of the cash by the Company for its business purpose are all on record and are not disputed by the Assessing Officer. 10. The true reason for enacting section 269SS of the Act was to counter the device of tax evasion, which enabled tax payers to explain away unaccounted cash or unaccounted deposits. The prime object of law is to secure justice to the people, therefore in view of this, the legislature took proper safeguard u/s 273B of the Act, which enumerates the cases, w....
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.... "....... The transaction of loan has found place in the books of account of the assessee as well as the lender of the loan. None of the authorities have reached the conclusion that the transaction of the loan was not genuine and it was a sham transaction to cover up the unaccounted money. It appears to us that the assessee felt need of money and thus he approached the moneylender for advancement of the money, the transaction is reflected in the promissory notes executed by the assessee in favour of the lender. When there is an immediate need of money the person cannot get such money from the nationalised bank to satisfy the immediate requirement....." 13. Apart from above, Hon'ble Madras High Court in the case of CIT Vrs. M/s Idhayam Publication, Tax Case (Appeal) No. 1315 of 2005 had held as under:- As per the Companies Act, under Companies (Acceptance of Deposit) Rules 1975, under Rule 2(b)(ix), deposit does not include any amount received from a Director or a share holder of a Private Limited Company. Therefore the transaction between the appellant and the Director cum Share holder is not a loan or deposit and it is only current account in nature and no interest....