SHRI JANARDHANAM BALAJI,,THIRUVALLUR vs. ITO, THIRUVALLUR

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

These are appeals filed by the assessee directed against

orders dated 29.09.2016 and 18.10.2016 of ld. Commissioner of

Income Tax (Appeals)-7, Chennai confirming levy of penalty u/s.271E

and 271D of the Income Tax Act, 1961 (in short ‘’the Act’’).

ITA Nos.3011 & 3077/Mds/16 :- 2 -:

filed return of income for the impugned assessment year disclosing

income of Rs.5,53,851/-. During the course of assessment

proceedings, ld. Assessing Officer noted that assessee was maintaining

a book called Sundry debtors ledger. As per ld. Assessing Officer such

ledger account reflected cash payments and cash receipts from various

parties. He listed out such cash payments and cash receipts as

under:-

Date Particulars Vch Vch. No Debit Credit type 2.4.2011 Cash in hand Receipt 12 70,000 Cash in hand Receipt 6.4.2011 29 1,80,000 7.4.2011 Cash in hand Receipt 35 4,50,000 8.4.2011 Cash in hand Receipt 37 3,10,000 14.5.2011 Cash in hand Receipt 178 70,000 26.5.2001 Cash in hand Receipt 215 1,60,000 2.10.2011 Cash in hand Receipt 578 2,00,000 20.12.2011 Cash in hand Payment 1631 1,00,000 22.12.2011 Cash in hand Payment 1646 1,00,000 24.12.2011 Cash in hand Payment 1663 1,00,000 27.12.2011 Cash in hand Payment 1683 1,00,000 03.01.2012 Cash in hand Payment 1730 1,00,000 10.1.2012 Cash in hand Payment 1775 1,00,000 18.01.2012 Cash in hand Payment 1829 1,00,000 25.1.2012 Cash in hand Payment 1872 1,00,000 29.1.2012 Cash in hand Payment 1892 1,00,000 15.02.2012 Cash in hand Payment 2004 50,000 18.3.2012 Cash in hand Payment 2216 50,000 24.03.2012 Cash in hand Payment 2261 50,000 25.03.2012 Cash in hand Payment 2270 1,00,000 26.03.2012 Cash in hand Payment 2279 50,000 27.03.2012 Cash in hand Payment 2287 90,000 28.03.2012 Cash in hand Payment 2298 50,000 29.03.2012 Cash in hand Payment 2307 50,000 30.03.2012 Cash in hand Payment 2316 50,000 Total 14,40,000 14,40,000

ITA Nos.3011 & 3077/Mds/16 :- 3 -:

When the assessment was completed, no disallowance was made by

the ld. Assessing Officer for any of the above receipts or payments but

there were certain other disallowances for want of deduction of tax at

source and on business promotion expenses. However, ld. Assessing

Officer made a mention in the assessment order that conditions

stipulated in Sec. 269SS and 269T in the transactions were violated in

the table listed above, thereby attracting penal proceedings u/s. 271D

and 271E of the Act.

cause why penalty should not be levied u/s.271D and 271E of the Act

for accepting loans and repaying them in cash beyond the limits

prescribed u/s.269SS and 269T of the Act. In reply to the above

notices, assessee submitted as under:-

" ... I wish to inform you that my nature of business is operating PETROL BUNK. To enhance the customer service, sometimes, we accept the security deposits/j advance from our customers. Fur the customers who regularly deal with us on 'credit basis, we maintain separate ledger accounts for them (like a general trading concern). Other than the above said customers, the. business entities like transporters, small corporate,. premium customers, cab operators who will be sending only their workers/ assistance for filing the fuel, will

ITA Nos.3011 & 3077/Mds/16 :- 4 -:

choose to make payment, it in advance to reduce the cash handling by the workers and in some occasions to fix the fuel rate in case of increasing trend. However, each payment /receipt will not exceed the stipulated' limit of Rs.20,OOO/-.. We will consolidate two/ three days transactions and enter in' the books of account under Single entry In the account "Sundry Debtors", lf the advance / security deposit has not been utilized for more that 6 to 9 months, we tend to return the money to avoid dispute future. As said above, the repayment entry also made in the books of accounts consolidated for two / three days. However, each payment / receipt will be less than Rs.20,OOO/- per person. Hence, I wish to bring to . your notice that I have not violated the provisions of f section 269SS/ 269T.

As reading in the books of account was made on consolidated basis, prima facie it appears that I have violated the provisions. However, I have not violated the provisions of section 269SS/269T, , All these transaction have also been explained orally to the Assessing Officer during the scrutiny proceedings

Kindly consider the above submissions and drop the penalty proceedings’’.

During the penalty proceeding before ld. Assistant Commissioner of

Income Tax (in short ‘’ld. ACIT’’) vouchers were produced by the

assessee and these were examined. As per ld. ACIT assessee was

repeatedly getting the advances from very same persons and none of

ITA Nos.3011 & 3077/Mds/16 :- 5 -:

the advances were settled against sale of any fuel. As per ld. ACIT,

each of the advance was repaid in cash by the assessee. Ld. ACIT

selected five persons from the vouchers produced by the assessee and

culled out the following data.

Date V. No Received from Amount Amount Date Received repaid

02.4.2011 12 Ranjitham 16300 16300 20.12.2011 06.4.2011 29 Ranjitham 15500 15500 22.12.2011 07.04.2011 35 Ranjitham 16500 16500 27.12.2011 08.04.2011 37 Ranjitham 15800 15800 25.01.2012 14.05.2011 178 Ranjitham 13200 13200 25.03.2012 26.05.2011 215 Ranjitham 12900 12900 26.03.2012 02.10.2011 578 Ranjitham 14600 14600 28.03.2012 02.04.2011 12 Radha Export 11900 11900 27.12.2011 06.04.2011 29 Radha Export 17000 17000 20.12.2011 07.04.2011 35 Radha Export 14100 14100 22.12.2011 08.04.2011 37 Radha Export 14200 14200 25.01.2012 14.05.2011 178 Radha Export 16800 16800 25.03.2012 26.05.2011 215 Radha Export 15100 15100 25.03.2012 02.10.2011 578 Radha Export 13100 13100 27.03.2012 06.04.2011 29 Baskaran Travels 10800 10800 24.12.2011 07.04.2011 35 Baskaran Travels 16800 16800 03.01.2012 08.04.2011 37 Baskaran Travels 19100 19100 29.01.2012 26.05.2011 215 Baskaran Travels 17100 17100 27.03.2012 02.10.2011 578 Baskaran Travels 13500 13500 30.03.2012 06.04.2011 29 Sekaran 17300 17300 22.12.2011 07.04.2011 Sekaran 35 18200 18200 03.01.2012 08.04.2011 Sekaran 37 13600 13600 29.01.2012 26.05.2011 Sekaran 215 11700 11700 26.03.2012 02.10.2011 Sekaran 578 18700 18700 29.03.2012 06.04.2011 29 Aisu Catering 11900 11900 24.12.2011 07.04.2011 35 Aisu Catering 14300 14300 03.01.2012 08.04.2011 37 Aisu Catering 15300 15300 29.01.2012 26.05.2011 215 Aisu Catering 5200 5200 27.03.2012 02.10.2011 578 Aisu Catering 15800 15800 29.03.2012

ITA Nos.3011 & 3077/Mds/16 :- 6 -:

As per ld. ACIT it was not practicable to receive and repay identical

amounts. According to him, vouchers produced by the assessee were

prepared as an after thought so as to artificially keep the transactions

below the sum of Rupees twenty thousand. Further, as per ld. ACIT,

assessee if it had actually received money in tranches from very

same person it would have opened separate ledger account for each

such person and not categorized all of them under the head sundry

debtors. Since assessee had received loans aggregating to

�14,40,000/- and repaid the same amount, all in cash, during the

currency of the previous year, ld ACIT came to a conclusion that there

were violation of both sections 269SS and 269T of the Act. He levied

penalty both u/sec. 271D and 271E of the Act at a sum of

Rs.14,40,000/- each.

Commissioner of Income Tax (Appeals) against penalty levied u/s.

271D as well as 271E of the Act. Contention of the assessee before ld.

Commissioner of Income Tax (Appeals) was that each of the amount

received as well as repaid were below Rupees twenty thousand and

hence Sections 269SS and 269T of the Act were not attracted.

However, ld. Commissioner of Income Tax (Appeals) was not

ITA Nos.3011 & 3077/Mds/16 :- 7 -:

impressed by any of the arguments raised by the assessee. He upheld

the order of the ld. ACIT citing the following reasons.

ITA Nos.3011 & 3077/Mds/16 :- 8 -:

opinion, do not come within the purview of 'bonafide reason', "business exigencies', or due to 'genuine hardship' which prompted him to undertake the transactions in such a manner. Hence, the judicial decisions relied upon by the appellant do not give him any comfort at all.

penalty orders, submitted that penalty proceedings were initiated by

the ld. Assessing Officer during the course of assessment proceedings

and this was specifically noted by the ld. Assessing Officer in the

assessment order. Relying on the judgment of Hon’ble Calcutta High

Court in the case of CIT vs. Narayani & Sons (P) Ltd (2016) 141 DTR

315, ld. Authorised Representative submitted that time limit for

passing the penalty orders u/s. 271D and 271E of the Act started

when proceedings were initiated by the ld. Assessing Officer.

According to him, it was not necessary that ld. ACIT himself should

initiate the penalty proceedings. As per the Ld. Authorised

Representative, penalty proceedings could be initiated by the ld.

Assessing Officer and completed by the ld. ACIT. Hence according to

ITA Nos.3011 & 3077/Mds/16 :- 9 -:

him, orders u/section 271D and 271E of the Act were barred by

limitation.

the nature of the trade of the assessee, it was not possible to receive

advances in cash. According to him, each of the person from whom

money was accepted were customers of the assessee and the

transactions were considered as genuine by the lower authorities.

According to him, if the loan transactions were disbelieved an addition

ought have been made u/s.68 of the Act. When loan and repayment

of such loan were believed, then the transactions were genuine and

Sections 271D and 271E of the Act could not be applied. Thus,

according to him, penalty levied under both the sections had to

cancelled.

supported the orders of the authorities below.

material on record. In so far as question of limitation is concerned,

what we find is that ld. Assessing Officer in the assessment order had

mentioned as under in relation to the operation of the debtors

ledgers.

ITA Nos.3011 & 3077/Mds/16 :- 10 -:

‘’The mode of transactions in the above ledger a/c. are in cash in excess of �20,000/-. In the absences of proper explanation. It is inferred that the above transactions are in the nature of loan creditor. The assessee received money exceeding �20,000/- as loan in cash aggregating to �14,40,000/- and repaid the entire loan exceeding �20,000/- in cash in the year itself. Hence, the conditions stipulated in Section 269SS and 269T are violated which attracts the penal provisions under section 271D and 271E’’.

He had only made an observation that conditions stipulated in Sec.

269SS and 269T of the Act were violated and this would attract penal

provision of Sec. 271D and 271E of the Act. In our opinion, this was

only a benign observation and cannot be treated as initiation of the

penalty proceedings. There is no dispute that notices issued to the

assessee by the ld. ACIT, Kancheepuram u/s. 274 r.w.s. 271D and

271E of the Act were dated 31.8.2015. The penalty orders were also

passed by ld. ACIT, Kancheepuram. Such penalty orders were passed

on 29.02.2016 and was therefore well within the time limits.

vouchers produced by the assessee in support of the transactions, the

aggregate amount of loan taken from one person clearly exceeded the

sum of �20,000/-. Both Sections 269SS and 269T are reproduced

hereunder:-

ITA Nos.3011 & 3077/Mds/16 :- 11 -:

Section 269SS ‘’No person shall after the 30th day of June, 1984, take or accept from any other person(hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,-- (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid(whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or (c) the amount or the aggregate amount referred to in clause(a) together with the amount or the aggregate amount referred to in clause(b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,- -(a) Government ;(b) any banking company, post office savings bank or co-operative bank ;(c) any corporation established by a Central, State or Provincial Act ;(d) any Government company as defined in section 617 of the Companies Act, 1956(1 of 1956) ;(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and that person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act’’.

ITA Nos.3011 & 3077/Mds/16 :- 12 -:

Section 269T

No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit or paid the specified advance, “or by use of electronic clearing system through a bank account” (a) the amount of the loan or deposit or specified advance together with the interest, if any, payable thereon, or (b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits or, (c) the aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such specified advances, is twenty thousand rupees or more : Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid : Provided further that nothing contained in this section shall apply to repayment of any loan or deposit or specified advance taken or accepted from—(i) Government ;(ii) any banking company, post office savings bank or co-operative bank ;(iii) any corporation established by a Central, State or

ITA Nos.3011 & 3077/Mds/16 :- 13 -:

Provincial Act ;(iv) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;(v) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette’’.

It is very clear from the above sections that what is to be considered

is the aggregate amount. No doubt by virtue of Section 273B of the

Act, if an assessee could prove that the failure to abide by Sec.

269SS and 269T of the Act was for a reasonable cause then levy of

penalty u/s.271D and 271E of the Act, could be excused. However,

here in the case before us, first explanation of the assessee was that

the amounts received were advances from its customers, so that

employees of such customers who came for fueling of vehicles need

not make payments in cash. Or in other words, as per the assessee it

was to reduce cash handling by the workers of transporters, cab

drivers etc. However, ld. ACIT has clearly demonstrated that no such

adjustment against cost of fuel was ever done against the advance, on

the other hand but such amounts were repaid by the assessee in

cash.

Representative that if the loans were disbelieved Sec. 68 of the Act

ITA Nos.3011 & 3077/Mds/16 :- 14 -:

alone could have been applied, ld. Assessing Officer having accepted the loans the line of argument is irrelevant.

Order pronounced on Friday, the 7th day of April, 2017 at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन)) (अ�ाहम पी. जॉज�) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated: 7th April, 2017 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF