PEARL BEACH PROMOTERS PRIVATE LIMITED,CHENNAI vs. AO, CORPORATE WARD-5(1), CHENNAI

Aggrieved by confirmation of certain penalty u/s 271D & 271E for Assessment Year (AY) 2017-18 vide impugned orders dated 23- 10-2023, the assessee is in further appeal before us. The penalty levied u/s 271D is subject matter of whereas penalty levied u/s 271E is subject matter of .

The Ld. AR advanced arguments on legal grounds as well as on merits which have been controverted by Ld. Sr. DR. Having 2 heard rival submissions and upon perusal of case records, our adjudication would be as under. Penalty Proceedings 3.1 Facts leading to penalty are that Ld. AO framed an assessment u/s 143(3) on 30-12-2019 making certain disallowances in the hands of the assessee. During the course of assessment proceedings, it transpired that the assessee received cash loans from certain directors and related concerns. Certain loans were also repaid in cash. The assessee submitted that the cash was received from the directors to meet the urgent expenses at the project site when the company did not have funds to meet the expenditure. It was also submitted that the directors were having sufficient sources. However, rejecting the same. Ld. AO proposed penalty u/s 269SS and 269T and made reference to appropriate authority i.e., Ld. Jt. CIT, Corporate Range-5 for imposition of the penalties. 3.2 The Ld. JCIT initiated penalty on 26-05-2022 and issued notice to the assessee. It transpired that the assessee accepted cash of Rs.36.16 Lacs from directors and related concerns. The assessee assailed the same on the ground that loans were taken for immediate requirement for business needs and the same were genuine. The intention of the legislatures in enacting these provisions was to curb black money brought in the guise of the loans. The assessee also took a legal argument that proceedings u/s 271D would be barred by limitation in terms of decision of Hon’ble Delhi High Court in the case of Pr. CIT vs. Mahesh Wood 3 Products Pvt. Ltd. (82 Taxmann.com 39) holding that date of initiation of penalty would be the date on which the case was referred to the concerned authority. If that date is reckoned, the proceedings initiated after lapse of more than 2 ½ years would be time barred. The proceedings should be initiated within a reasonable period. 3.3 However, Ld. JCIT rejected the merits of the case by observing that when the loans were taken, the assessee had sufficient bank balance for its needs. The legal ground was rejected in terms of CBDT Circular No.9/DV/2-016 dated 26-04-2016 directing that time barring date for initiation of penalties u/s 271D & 271E would start from show-cause notice issued by JCIT. Accordingly, Ld. JCIT imposed penalty of Rs.36.16 Lacs vide its order dated 29-11-2022. Similar penalty was levied u/s 271E on same date. 3.4 During appellate proceedings, the assessee drew attention to various factual errors and assailed the penalty on multiple grounds by relying on various judicial decisions. One the argument was that the assessee was carrying on construction at remote sites where banking facilities were not available. The directors provided funds at the site for immediate needs for the labors payments and other expenses at the site. It was not possible at that time to go to the bank and withdraw the amounts for disbursements at the sites. The directors were able to provide the needed funds immediately at the sites. Simply because the assessee had sufficient bank balance, the same would not be the reason to impose impugned penalties.