TaxTMI 
TaxTMI 
2012 (2) TMI 751
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....re that assessment in this case was completed u/s 143(3) of the Income-tax Act, 1961 (hereafter referred to as the Act) vide order dated 14.03.2001, determining income of Rs. 36,35,000/- as against nil income returned by the assessee. Inter alia, an amount of Rs. 36,35,000/- was added u/s 68 of the Act on account of unexplained unsecured credits. On appeal, the ld. CIT(A) upheld the addition. On further appeal, the ITAT restored the issue back to the file of the AO for fresh decision in accordance with law. In terms of the directions of the ITAT, the AO, vide his order dated 30.12.2009 again added an amount of Rs.18,31,900/- u/s 68 of the Act while in respect of remaining amount of Rs. 17,95,200/-,the AO concluded that this amount was not a trade creditor but a loan creditor through the journal entries in the assessee's books on account of payment made by Shri Rajeev Bali to four parties on behalf of the assessee. Since the payments were made otherwise than by account payee cheque or draft, the AO treated the company in default in terms of provisions of section 269SS of the Act and accordingly, referred the matter to the Addl. CIT for initiating penalty proceedings u/s 271D of ....
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....y the decision of the jurisdictional High Court in the case of CIT Vs. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Delhi) wherein the Court upheld the Tribunal's view that the provisions of section 269 SS were not attracted to a transaction where loan or debt is acknowledged through the journal entries in the book of accounts. 8.2 Further, that provision of section 269SS are not applicable with respect to book entries have also been clearly spelled out in a detailed order by the Hon'ble members of ITAT Pune Bench in the case of Sun Flower Builders (P) Ltd. Vs. DCIT (1997) 61 ITD (PN) 227, wherein they held that; "The bare reading of Section 269SS clearly shows that the words 'take or accept' has been used with reference to the words 'loan or deposit' respectively. The reason is obvious. In the case of loan, it is the borrower who goes to the lender for obtaining the loan and in the case, of deposit, it is the depositor who goes to the person with whom he wants to deposit the money. This is the reason that the legislature has used the work 'take' with reference to the word 'loan' and used the word 'accept' with reference ....
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.... ITR 120 (Bom) Siemens India Ltd. Vs. I.T.O. Therefore, following the above, the penalty imposed under section 271D stands deleted." 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR while carrying us through the penalty order supported the findings of the Addl. CIT while the ld. AR on behalf of the assessee relied upon the order of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case. Indisputably, Shri Rajeev Bali, the managing director of the assessee company had made payments to the following four parties for repairs to machinery, interior work, etc for the company: [In Rs.] 1. M/s Interior Works - 3,28,700/-(for aluminium sections, glass etc.) 2. M/s V.H. Engineers - 3,86,500/-(false ceiling/air conditioning work) 3. M/s Procon Turnkey Projects - 7,80,000/-(supply of fixed assets) 4. M/s Trans Marketing (P) Ltd. -3,00,000/-(repair of machinery) Total: 17,95,200 5.1 The genuineness of the aforesaid payments is nowhere in doubt. The assessee company through the journal entries in their books of account acknowledged the said debt ....
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....the adjustment mala fide. There is nothing on record to show that the aforesaid transactions were attached with certain conditions or stipulation as to period of repayment, rate of interest, manner of repayment, etc. so as to treat the said transactions as loans or deposits. The Revenue have not placed before us any material suggesting that the transactions were actually in the nature of loans or deposits. In these circumstances, we are of the view that the transactions being not in the nature of loans or deposits, the provisions of section 269SS of the Act are not attracted. The meaning of "deposit " and " loan " has been explained on page 8454 of the Chaturvedi and Pithisaria's Income- tax Law. Fifth Edition, Volume 5, as under: " '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, the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money - the benefit normally b....
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....and the parties referred to above. Hon'ble Gauhati High Court in the case of CIT v Bhagwati Prasad Bajoria (HUF), 263 ITR 487 (Gauhati) held that when there is an immediate need of money and to satisfy the immediate requirements, the person approaches the money-lender or his friend or relative, who could lend money to him to satisfy his immediate requirement, in those circumstances it cannot be said that the taxpayer has entered into a transaction to avoid the payment of tax or to defraud the Revenue. It was further held that the element of mensrea being not borne out from the nature and the manner in which the transaction was carried out, there was no justification in imposing the penalty u/s 271D of the Act. 5.4 In the case of M/s Sunflower Builders Pvt. Ltd. Vs. DCIT, 61 ITD 227(Pune), ACIT Vs. Gujrat Ambuja proteins Ltd., 89 TTJ 324 (Ahd.),ACIT Vs. Ruchika Chemicals & Industries Pvt. Ltd.,88 TTJ 85(Del), and Jagvijay Auto Finance Pvt. Ltd. vs. ACIT,52 ITD504(Jaipur), the ITAT have consistently held that the acknowledgement of debt by the assessee-company by passing a journal entry in its books of account would not come within the ambit of the words 'loan or deposit&#....