LOVE SHOPPERS LIMITED,AHMEDABAD vs. ADD. CIT, RANGE -2(1), AHMEDABAD, AHMEDABAD

In response to the above show- cause notice, of the assessing officer, the assessee submitted it reply during the penalty proceedings before the assessing officer, which is reproduced below: "The assessee submits here that during the F.Y.2015-16 relevant to A.Y.2016-17, the company received the unsecured loan form one of its directors namely Shri Kamal Sonwani in cash on different dates totaling to Rs. 13,25,000/-. The same has been repaid in cash on different dates to the said director during the financial year 2015-16 itself. The above loan was availed in order to meet the monthly regular business expenses particularly salary expenses. Further, the same has been taken from its founder director, who is a closely related party. Accordingly, it is submitted that no penalty liable as it is transaction between closely related party. In support this contention, the reliance is placed on the decision of the jurisdictional Hon'ble Gujarat High Court in the case of CIT Vs. Shree Ambica Flour Mills 6 DTR 169 (Guj), Wherein Hon'ble court while considering similar issue of imposition of penalty u/s. 271D and 271E of the Act observed that the transactions between sister concerns are not covered by either provision of section 269SS or 269T of the Act. The Hon'ble High Court also taking into note the object behind bringing section 26SS and section 269T for curbing black money, held that when there is no such allegation then the violation of provisions under section 269SS and 269T are of venial nature and penalty cannot be imposed. The assessee has also submitted certain case laws in his support and has prayed that penalty should not be levied.”

However, the assessing officer rejected the contention of the assessee and held that the assessee has committed default within the meaning of section 269T of the Act by repaying an amount of Rs. 13,25,000/-, otherwise than by account payee cheque or account payee bank draft. Therefore, assessing officer imposed penalty under section 271E of the Act, to the tune of Rs. 13,25,000/-.

On appeal, the Ld. CIT(A), confirmed the action of the assessing officer. The ld CIT(A) observed that assessee -company has repaid loan of Rs. 13,25,000/-, to its directors, namely Shri Kamal Sonwani, in cash, otherwise than by an account payee cheque or account payee bank draft, in contravention to the provisions u/s 269T of the Income Tax Act. Therefore, the Ld. CIT(A) has confirmed the penalty u/s 271E of the Act.

Aggrieved by the order of the CIT(A) the assessee is in appeal before us.

Learned Counsel for the assessee submitted that during the penalty proceedings, as well as during the appellate proceedings, the assessee has explained the sufficient cause, stating that due to holiday, the banks were not working, therefore, the assessee-company repaid the amount in cash. Moreover it is a current account between company and its director therefore, the penalty should not be imposed.

On the other hand, Ld. Department Representative for the revenue, has submitted that nowadays there is a facility to pay the amount by RTGS or by way of banking transfer, therefore, the assessee could transfer the amount by way of banking channel. Therefore, the plea of the assessee that due to bank- holiday, that banks were not functioning, should not be accepted. The amount was paid in cash, which is not acceptable and penalty should be imposed on the assessee. Therefore, Ld. DR stated that penalty imposed by the assessing officer, should be upheld.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We find that in the assessee`s case under consideration, the loan was availed in order to meet with the monthly regular business expenses particularly salary expenses. Further, the same has been taken from its founder director, who is a closely related party. Accordingly, it was submitted by ld. Counsel that no penalty is leviable, as it is a transaction between closely related party. In support of this contention, the reliance was placed on the decision of the jurisdictional Hon'ble Gujarat High Court in the case of CIT Vs. Shree Ambica Flour Mills 6 DTR 169 (Guj), wherein Hon'ble court while considering similar issue of imposition of penalty u/s. 271D and 271E of the Act, observed that the transactions between sister concerns are not covered by either provisions of section 269SS or 269T of the Act. The Hon'ble High Court also taking into note the object behind bringing section 269SS and Section 269T for curbing black money, and held that when there is no such allegation then the violation of provisions under sections 269SS and 269T are of venial nature and penalty cannot be imposed. Further, the assessee- company has proved its bona fides by disclosing the loan transactions in the Tax Audit Report for the FY 2015- 16 and also in the audited financial statement for FY 2015-16. This fact can be verified from the copy of audited financial statement and Tax Audit Report for the FY 2015-16 furnished.

Therefore, we find that the deposits and the withdrawals of the money from the current account could not be considered as a loan or advance. Therefore, the transaction between the appellant and the director-cum- shareholder 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. Thus, since the said transaction does not fall within the meaning of loan or advance, there is no violation of provisions of section 269SS/269T of the Act. For that reliance is placed on the decision of Hon'ble High Court of Gujarat in the case of CIT vs. Shyam Corporation [(2013) 7 TMI 772), Hon'ble Income- tax Appellate Tnbunal, Ahmedabad in the case of M/s. Apple Weighinfra Ltd. vs. JCIT [(2021) 9 TMI 129] and Hon'ble Income-tax Appellate Tribunal, Indore Bench, Indore in the case of Rajesh Paradasanı vs ITO [(2007) 013 (II) ITCL 0066). It was held that levy of penalty u/s 271D, for violation of provisions of section 269SS of the Income Tax Act, is unwarranted as the loan was advanced by the Executive Directors to the company in cash to meet the urgent requirements of the company. Based on the facts and circumstances, we delete the penalty.