C I T vs. M/S SONA PAPER BOARDS LTD.

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 594 of 2008 Date of Decision: November 27, 2008. The Commissioner of Income Tax-I, ---Appellant Chandigarh.

Versus

M/s Sona Paper Boards Ltd.. --Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE L.N. MITTAL Present: Ms. Urvashi Dhugga, standing counsel for appellant. *** ADARSH KUMAR GOEL.J (ORAL) This appeal has been preferred by the Revenue under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chandigarh Bench 'A' passed in I.T.A. No.569/CHANDI/2006 dated 28.2.2008 for the Assessment Year 2002-03, proposing following substantial question of law for consideration:- “ Whether on the facts and circumstances of the case and in law, the ITAT was right in holding that acceptance of loan by way of transfer/adjustment entries does not violate the provisions of section 269SS and therefore does not attract penalty u/s 271-D of the Income Tax Act?” The assessing office has imposed penalty under Section 271-D for alleged violation of Section 269-SS on the ground that the assessee -2- accepted loans by adjustment entries. The CIT(A) deleted the penalty by holding that the transaction was genuine and no violation of Section 269-SS was involved. The said view has been upheld by the Tribunal in following terms:- “ We, therefore, conclude on this aspect by holding that a 'loan' or 'deposit' created by a mere constructive receipt by way of book adjustment or account adjustment cannot by itself bring the transaction within the purview of Section 269SS of the Act. In the instant case, in so far as item Nos. 2 & 3 amounting to Rs. 4,68,000/- are concerned, our attention has been drawn to pages 48, 51, 57 & 59 of the paper Book wherein are placed the relevant statement of account of the parties. For instance, in the case of Vinod Kumar (i.e. Item No.3) it is observed that the assessee has credited the account of the said person by a sum of Rs.3, 28,000/- for the amount paid by the said person on behalf of assessee to Sh. Shanti Lal Sethia, whose account is placed at page 48 of the Paper Book. The assessee had borrowed sums from Sh. Shanti Lal Sethia, whose account has been debited by a sum of Rs.3,28,000/- being amount repaid by Sh. Vinod Kumar albeit on behalf of assessee. Such transaction of constructive receipt from Sh. Vinod Kumar has been considered as violative of Section 269SS. We have held that such transactions do not fall within the ambit of Section 269SS of the Act. Therefore, the penalty exigible thereon has been rightly deleted by the CIT (Appeals). Staying further on this point, we have also noticed from the account of Sh. Shanti Lal Sethia placed at page 48 that the assessee had earlier received sums from this creditor by way of the mode prescribed under Section 269SS of the Act. It is also noticed, that the genuineness and the bonafides of the transaction has not been doubted by -3- the Revenue. Therefore, to the extent acceptance of the loans amounting to Rs.4,68,000/- is concerned, the CIT (Appeals) is right in concluding that there is no violation of the provisions of Section 269SS of the Act and hence penalty is deleted to that extent.” The Tribunal relied upon the judgement of Hon'ble Supreme A.B. Shanthi, 255 ITR 258. , to the effect:- “ If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power.”

We have heard learned counsel for the appellant. From the findings recorded by the Tribunal, it is clear that no evasion of tax was involved in the transaction question. The amount was received through the Bank. There was no passing of cash amount. In these circumstance, the matter was clearly covered by the judgement of Hon'ble lucky