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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI N.V. VASUDEVAN, JM &DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned twoappeals filed by the Assessee, pertaining to A.Y 2010-11,are directed against the orderspassed by the ld. Commissioner of Income Tax(Appeals)-2, Kolkata,which in turn arise out of penalty orders passed by the Assessing Officerunder sections271E & 271Dof the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
Since these two appeals relate to the same assessee, same assessment year and identical issues are involved, therefore, these have clubbed and heard together and a consolidated order is being passed for the sake of brevity and convenience. 3. The assessee’s appeal in for A.Y.2010-11, is taken as the lead case. The grounds of appeal
raised by the assessee in the lead case reads as under:
1. For that the ld.CIT(A) ought to have quashed the order of penalty u/s 271E passed by the ld. AO as it was barred by limitation as per the provision of sec. 275(1)(c).
M/s Eastern Track Udyog Pvt. Ltd. 1691/Kol/2016 Assessment Years: 2010-11 2. For that on the facts and in the circumstances of the case, the ld.CIT(A) was not justified in confirming the action of the AO in imposing the penalty u/s 271E of Rs.16,00,000/- by invoking the provision of sec.269T. 3. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal
.”
4. The brief facts qua the issue are that in the assessee’s case under consideration, the assessment was completed u/s 143(3) on 23.03.2013. During the assessment proceedings, the AO noted that assessee company had taken cash loan on different dates i.e. on 05.05.2009 at Rs.2,00,000/- and on 22.05.2009 at Rs.14,00,000/-, from M/s Eden Vinimay Pvt. Ltd. The said loan was repaid in cash to M/s Eden Vinimay Pvt. Ltd. on 11.11.2009. Based on this information, the AO initiated the penalty proceedings u/s 271E and 271D of the Income Tax Act, 1961. During the penalty proceedings, the assessee company submitted that M/s. Eden Vinimay Pvt. Ltd. is a sister concern of the assessee company and cash transaction between two business concerns i.e. the assessee and M/s Eden Vinimay Pvt. Ltd.,under the same group having common directors, have been done in a current account maintained in the assessee company. The assessee company explained that there is running current account in the books of the assessee company with its sister concern and the transaction is not in the nature of repayment of loan or deposit. The AO rejected the contention of the assessee and held that both the sister concerns do not have any regular business transactions of trading amongst themselves. Therefore, the theory of current account does not have any basis. The AO also noted from audit report (Form 3CD) Annexure ‘C’, wherein it was mentioned that Rs.94,74,006/- repaid to M/s Eden Vinimay (P) Ltd as loan. Therefore, the ld. AO observed that sections 269SS and 269T of the Act squarely applicable to the assessee. The sections 269SS and 269T of the Act, clearly used the words ‘any loan or deposit’, therefore, he held that the transaction between sister concerns constitute a loan and therefore, falls within the ambit of section 269SS/269T of Act. Hence, considering the above facts, the AO imposed penalty u/s 269T& 271E at Rs.16,00,000/- respectively. Page | 2 M/s Eastern Track Udyog Pvt. Ltd. 1691/Kol/2016 Assessment Years: 2010-11 5. Aggrieved by the penalty order passed by the AO, the assessee filed an appeal before the CIT(A) who has confirmed the penalty levied by the AO u/s 269T & 271E of the Act. The ld. CIT(A) observed that the assessee had failed to explain the reason of taking cash loan and repayment of loan in cash and therefore, he held that there is a violation of provisions of sections 269SS & 269Tof the Act and therefore he confirmed the penalty u/s 271E& 271D of the I.T. Act.
6. Not being satisfied with the order passed by the ld. CTI(A), the assessee is in appeal before us.The ld. Counsel for the assessee has submitted before us that there is a current account between two sister concerns and all transactions are done in the said current account for the purpose of business. The ld. Counsel furthersubmitted that there was no dispute about the fact that the instant cash transactions of the assessee were with the sister concerns and these transactions were between the family, due to business exigency. The Counsel for the assessee submitted that family transactions between the two independent assesses based on an act of casualness, especially in a case where the disclosure thereof was contained in the compilation of accounts and which had no tax effect, the penalty should not be imposed. Therefore, there is a reasonable cause for not levying penalty in the instant case. The ld. Counsel for the assessee has submitted the ledger copy of the current account between the assessee and its sister concern. Apart from this, the ld. Counsel for the assessee has relied on the judgment of ITAT, Kolkata Bench in the case of Anant Himatsingka vs. ACIT, ITA Nos.331& 332/Kol/2010, dated 25.11.2011 wherein it was heldthat transaction was done among relatives that assessee Shri Anant Himatsingka is son in law of Shri R. K. Gupta from whom he has received cash loan but this is not a cash loan rather this is a financial support to assessee. Hon'ble Gujarat High Court in the case of CIT Vs. Natvarlal Purshottamdas Parekh (2008) 303 ITR 5 (Guj) has noted the fact and given finding that amounts, which are mere book entries and transactions on behalf of family members does not violate the provisions of section 269SS and 269T and penalty cannot be imposed for violation Page | 3 M/s Eastern Track Udyog Pvt. Ltd. 1691/Kol/2016 Assessment Years: 2010-11 of section 269SS & 269T of the Act i.e. penalties u/s. 271D and 271E of the Act. The assessee would not violate the provisions of sections 269SS and 269T of the Act if the assessee receives amounts from the family members and repays to different family members. Even otherwise similarly, transactions among sister concerns was held to be out of the purview of section 269SS in view of the decision of Hon'ble Madras High Court in the case CIT Vs. Idhayam Publications Ltd. (2006) 285 ITR 221 (Mad), wherein Hon'ble High Court has confirmed the findings of Tribunal as the Tribunal found that M, the proprietor of sister concern was one of the directors of the company and there was a running account in his name and it does not attract provisions of section 269SS of the Act. Hon'ble High Court also dismissed the appeal of revenue by holding that the transaction between the assessee and the director cum shareholder was not that of loan or deposit and it was only a current account in nature and no interest was being charged in the above transaction. The ld Counsel for the assessee also relied on the judgment of Hon`ble ITAT Kolkata in the case of M/s Desishu Nurshing Home (P) Ltd, in ITA No.925/Kol/2004 for A.Y. 1996-97 wherein it was held that the legislative intention behind the insertion of Section 269SS and 269T of the Act is to unearth the unaccounted money. Provisions of section 269SS are not applicable to any transaction which is done in an open manner, is genuine and in which no unaccounted money is involved.( 80 ITD 484 -Hyd).
The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
Having heard the rival submissions and perused the materials available on record, we are of the view that the transaction between sister concerns do not constitute a loan if they are done in an open manner, genuine and in which no unaccounted money is involved. The legislative intention behind the insertion of sections 269SS and 269T of the Act, is to unearth the unaccounted money. Besides, in the assessee`s case under consideration Page | 4