M/S.NILON'S ENTERPRISES,,PUNE vs. JOINT COMMISSIONER OF INCOME TAX, RANGE -2,, PUNE
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Income Tax Appellate Tribunal, PUNE BENCH, ‘C’ PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER R.S. SYAL, VP : This appeal by the assessee is directed against the order passed by the ld. CIT(A) in National Faceless Appeal Centre, Delhi on 27-06-2022 confirming the penalty imposed by the Assessing Officer (AO) u/s.271D of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2016-17.
Briefly stated, the facts of the case are that the AO found the assessee to have indulged in receipt of loans/deposits through modes
2 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
other than banking channels as reflected in Sl.No.31(1) of Form
3CD, being, the Tax Audit Report of the assessee. On being called
upon to explain as to why penalty u/s.271D should not be imposed
for violating the provisions of section 269SS, the assessee tendered
explanation, which has been reproduced in the penalty order.
Thereafter, the AO observed that the assessee accepted loan or
deposit amounting to Rs.53,41,224/- from Mr. Deepak Sanghavi and
Rs.8,21,370/- from Ms. Ritu Sanghavi in violation of the provisions
of section 269SS. The assessee’s explanation was rejected and the
penalty was imposed. The ld. CIT(A) echoed the penalty order.
Aggrieved thereby, the assessee is in appeal before the Tribunal.
Having heard the rival submissions and gone through the
relevant material on record, it is seen that the trigger of penalty was
made because of the alleged qualification in the tax audit report. A
copy of the report has been placed on record, which indicates that the
qualification has been made in a sweeping manner. Notwithstanding
that, the assessee filed written submissions before the AO during
penalty proceedings and also the first appellate proceedings,
explaining the nature of transactions with complete details, which
have not been controverted by the authorities. In any case, the
question of imposition or otherwise of the penalty needs to be
3 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
determined on the basis of actual facts and not how the auditor
viewed it in his report.
The AO imposed penalty u/s.271D for violation of section
269SS. The latter section, in turn, provides that no person shall take
or accept from any other person any loan or deposit equal to or in
excess of Rs.20,000/- otherwise than by an account payee cheque or
account payee bank draft etc. Section 271D provides that if a person
taken or accepts any loan or deposit in contravention of section
269SS, he shall be liable to pay penalty equal to amount of loan or
deposit so taken or accepted. Thus, it is evident that penalty
u/s.271D is leviable where loan or deposit is accepted by the assessee
in excess of the specified amount otherwise than by an account
payee cheque or bank draft etc. provided under section 269SS of the
Act. With this understanding of the legal position, we proceed to
examine the factual matrix of the case.
The first amount is Rs.8,21,370/- stated to have been taken by
the assessee from Ms. Ritu Sanghavi, on which an equal amount of
penalty was imposed and confirmed. Copy of account of Ms. Ritu
Sanghavi is available on record. The first three items during the year
are not relevant. Fourth item dated 30-09-2015, which has been
debited by the assessee, is a sum of Rs.8.00 lakh with the narration
4 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
that it was the amount of self-assessment tax paid on behalf of Mrs.
Ritu Deepak Sanghavi. The next item is dated 31-10-2015 which is
again payment of self-assessment tax of Rs.21,370/- on her behalf.
The next entry is dated 07-12-2015, by which the sum of
Rs.8,21,370/- has been transferred to her husband’s account, namely,
Mr. Deepak Sanghavi. It is clear that the first two transactions of
Rs.8.00 lakh and Rs.21,370/- are the payments made by the assessee
on behalf of Ms. Ritu Sanghavi and these cannot be called as `taking
or accepting any loan’ from Ms. Ritu Sanghavi. Since section 269SS
is attracted when a person takes or accepts any loan or deposit in a
mode otherwise than the banking channel etc,. it has no application
in the instant case of the assessee when no loan was taken or
accepted by the assessee from Ms. Ritu Sanghavi. The credit amount
is a transfer entry from her account to that of her husband, which
again does not call for imposition of any penalty.
The second amount is Rs.53,41,224/- w.r.t. Mr. Deepak
Sanghavi. The AO did not provide any breakup of this amount. The
assessee has placed on record the extract of the account of Mr.
Deepak Sanghavi and also the detail of the items totaling to
Rs.53,41,224/- as under :
5 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
Sr.No. Particulars Date of Amount transaction as per Books 1 30-11-2015 13,51,507 2 30-11-2015 4,09,625 3 30-11-2015 10,52,682 3 30-11-2015 6,25,500 4 30-11-2015 6,008 Deepak Sanghavi 5 30-11-2015 3,60,000 6 30-11-2015 40,000 7 30-11-2015 3,73,968 8 07-12-2015 8,21,370 9 31-03-2016 3,00,564 53,41,224
On an examination of the account of Mr. Deepak Sanghavi in
the books of the assessee with reference to the above tabulation, it
can be seen that the first amount of Rs.13,51,507/- is debited to his
account. The assessee paid this amount on his behalf and debited his
account. Similar is the position regarding the second and third
amounts of Rs.4,09,625/- and Rs.10,52,682/-, which have been
debited to the account of Mr. Deepak Sanghavi. These amounts are
in the nature of payments made by the assessee on behalf of Mr.
Deepak Sanghavi. Thus, the provisions of section 269SS are not
attracted, which apply only on taking or accepting loan and deposit.
The next amount is Rs.6,25,500/- dated 30-11-2015 which is rent
credited by the assessee to the account of Mr. Deepak Sanghavi. The
next is a minor amount of Rs.6,008/- having transfer entry. These
6 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
two amounts, though have been credited to the account of Mr.
Deepak Sanghavi, but do not represent any loan or deposit taken or
accepted by the assessee. Rather these are the items of crediting his
account with rent etc., which do not violate section 269SS. The next
two items of Rs.3,60,000/- and Rs.40,000/- are again debit entries
representing certain amounts paid by the assessee on behalf of Mr.
Deepak Sanghavi. These can also not be considered as taking or
accepting any loan. The next item is Rs.3,73,968/-, which is credited
to the account of Mr. Deepak Sanghavi towards his salary for the
month of November. This also cannot be characterized as an item of
taking or accepting any loan attracting the mischief of section 269SS.
The next amount is Rs.8,21,370/-, which was transferred from the
account of Ms. Ritu Deepak Sanvhavi as discussed above. This also
does not attract the provisions of section 269SS. The last amount is
Rs.3,00,564/- which is again a debit entry towards provision made
for interest on loan from Mr. Deepak Sanghavi. This entry arose by
means of debiting interest account and crediting the account of Mr.
Deepak Sanghavi towards interest payable to him. This also cannot
be considered as violating the provisions of section 269SS of the Act.
We, therefore, hold that the assessee did not take or accept any
loan either from Ms. Ritu Sanghavi or Mr. Deepak Sanghavi in
7 ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
violation of provisions of section 269SS of the Act, which could have
magnetized penalty u/s.271D of the Act. The impugned order is,
therefore, overturned to this extent.
In the result, the appeal is allowed.
Order pronounced in the Open Court on 26th September, 2023.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 26th September, 2023 सतीश आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The respondent 2. 3. The Pr.CIT concerned 4. DR, ITAT, ‘C’ Bench, Pune गाड� फाईल / Guard file. 5.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA No.640/PUN/2022 Nilons Enterprises Pvt. Ltd.,
Date 1. Draft dictated on 25-09-2023 Sr.PS 2. Draft placed before author 26-09-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *
