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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax-20, Mumbai [in short CIT(A)], in appeal No. CIT(A)-20/Addl. CIT, Range-9(2)/IT-153/2013-14, order dated 05.08.2014. The Assessment was framed by the Income Tax Officer, Ward-9(3)(3), Mumbai (in short ‘ITO/ AO’) for the A.Y. 2010-11 vide order dated 31.12.2012 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The order under section 271D read with section 274 read with section 273B of the IT Act passed by the Addl. Commissioner of income Tax, Range 9(3), Mumbai vide order dated 30.08.2013.
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the Addl. CIT in levy of penalty for violation of the provisions of section 269SS of the Act for advancing loan in cash in excess of ₹ 20,000 and i.e. amounting to ₹ 15,40,000/- under section 271D of the Act. For this assessee has raised the following three grounds: -
“1. On the facts and in the circumstances of the case and in law, the CIT(A)-20, Mumbai erred in confirming the imposition of penalty of ₹ 15,40,000/- under section 271D of the Income tax Act, 1961.
On the facts and in the circumstances of the case and in law, the CIT(A)-20, Mumbai ought to have considered the facts in proper perspective and hold that no penalty shall be imposed under section 271D read with section. 273B Since your appellant was prevented by the reasonable cause for the failure to comply the provisions of section 269SS of the Income Tax Act, 1961.
3. On the facts & Circumstances of the case. Your appellant humbly pray that order passed by CIT(A)-20, Mumbai be set aside And / OR delete the penalty imposed by Addl. CIT under section 271D, since imposition of penalty is not justifiable on the facts and is unwarranted & is bad in law ab initio."
Briefly stated facts are that the assessee company is engaged in the business of builder and property developers. The AO during the course of assessment proceedings noted that the assessee has cash loan of ₹ 15.40 lakhs during the financial year relevant to this assessment year from one of the directors of the assessee company namely Shri Ramesh Advani. The cash loan taken by the assessee on various dates in total amounting to ₹ 15.40 lakhs is as under: -
Sr. Date Amount as Amount Amount as per loan No. per cash deposited confirmation ₹ book (Rs.) in Bank New Loan Narration (Rs.) 1. 06.04.2009 50,000 50,000 - 2. 24.04.2009 2,00,000 2,00,000 - 3. 25.04.2009 1,00,000 Nil 4. 27.04.2009 2,00,000 Bank 5. 28.05.2009 2,70,000 2,70,000 6. 28.05.2009 3,00,000 3,00,000 7. 20.06.2009 6,20,000 6,20,000 11,22,000 Share application money, Journal 8. 30.01.2010 5,00,000 Bank 9. 31.03.2010 1,30,000 Share application money, Journal Total 15,40,000 14,40,000 19,52,000 43,62,000 4. Before AO, during the course of assessment proceedings the assessee claimed that this is assessee’s share application money but could not prove that this is actual share application money received from director. Accordingly, the AO referred the matter to Addl. CIT, Range- 9(3), Mumbai, who initiated the penalty proceedings under section 271D of the Act for violation of the provision 269SS of the Act on account of cash loan received in excess of limit prescribed i.e. in excess of amounting to ₹ 20,000/-. The Addl. CIT, Range 9(3), Mumbai levied the penalty by negating the arguments of the assessee that this is share application money and not cash loan. According to Addl. CIT this was cash loan and assessee is unable to prove the reasonable cause for acceptance of this cash loan. Aggrieved, assessee preferred the appeal before CIT(A), who also on identical findings confirmed the penalty levied by the Addl. CIT. Aggrieved, now assessee is in appeal before us.
We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, this cash receipt is in excess of ₹ 20,000/- and this is loan not share application money. But this cash loan is received from one of the directors Shri. Ramesh Advani by the assessee company. These facts are admitted and there is no doubt about it. Whether the cash loan received from director attract penalty under section 271D of the Act for violation of the provisions of section 269SS or not? We find that the assessee has relied on the case law of Hon’ble Madras High Court in the case of CIT vs. Idhayam Publications Ltd. (2006) 285 ITR 221 (Madras), wherein Hon’ble Madras High Court held that the amount received by private company from its director is neither loan nor deposit.
We find from the facts of the case that there is a current account maintained by the director Shri Ramesh Advani, who is giving loan and the company is further returning the same. The details of current account maintained by the assessee company during the year is reproduced in above Para 3. In view of the decision of Hon’ble Madras High Court in the case of Idhayam Publications Ltd. (supra), we are of the view that the current account maintained by the director in assessee company ledger account constitute neither loan nor deposit for the purpose of section 269SS of the Act. Hon'ble Madras High Court in the case of Idhayam Publications Ltd. (supra) held as under: -
“ 4. We heard the arguments of the learned counsel for the revenue. We have perused the materials available in record. Admittedly Mr. S.V.S. Manian was one of the Directors. Therefore, the order of the lower authority clearly shows that there was a running current account in the books of account of the assessee in the name of Mr. S.V.S. Manian. Mr. S.V.S. Manian used to pay the money in the current account and used to withdraw the money also from the current account. The revenue should establish that what was received by the assessee is a loan or deposit within the meaning of section 269SS. The deposit and the withdrawal of the money from the current account could not be considered as a loan or advance. Further it was also found that the assessee filed a letter dated 29-9- 1997 and in that letter he explained that the amount received from Mr. S.V.S. Manian had been shown as "unsecured loan from directors" in the balance sheet. 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 shareholder of a Private Limited Company. Therefore, the transaction between the appellant and the Director-cum- Shareholder is not a loan or deposit and it is only current account in nature and no interest being charged for the above transaction.
5. In the foregoing conclusions, we are of the view that, since the said transaction does not fall within the meaning of loan or advance, there is no violation of section 269SS of the Income-tax Act. We find no error in the order of the Tribunal (Sic Tribunal) the same requires no interference. Hence, no substantial question of law arises for consideration of this Court."
Respectfully following the case law of Madras High Court in the case of Idhayam Publications Ltd. (supra) and the facts in this case that the director has maintained a current account with the assessee company and the transactions of cash cannot be considered as loans or deposit for the purposes of section 269SS of the Act. Hence, we delete the penalty and allow the appeal of the assessee.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 25-09-2018.