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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’: NEW DELHI
Before: SHRI C.M.GARG & SHRI O.P. KANT
ORDER PER O.P. KANT, A.M.:
This appeal of the Revenue is directed against the order dated 13.12.2013 of the ld. CIT(Appeals)-IX, New Delhi deleting the penalty u/s 271E of the Act, raising grounds as follows : “1. Whether on the facts and circumstances of the case & in law, the ld. CIT(A) erred in deleting the penalty u/s 271E imposed by the Addl. CIT on the violation of section 269T as the assessee repaid the loans of Rs. 2,50,000/- and Rs. 49,00,000/- other than the account payee cheque? 2. Whether on the facts and circumstances of the case, the ld. CIT(A) erred in holding that transaction with the Director of Company cannot be held as a loan or deposit as no such limitation is given in the Section 269SS/269T? 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in holding that there were was a reasonable cause for the above violation ?
Mahajan Industries P. Ltd. 4. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 5. That the grounds of appeal are without prejudiced to each other.
6. That the appellant craves leave to add, alter, amend or forgo any grounds of appeal either before or at the time of hearing of the appeal.”
2. The facts in brief as culled out from the orders of the lower authorities are that the assessee company has been alleged to make repayment in respect of two transactions of loans/deposits by otherwise than account payee cheque. In first transaction, the Director of the Company, Shri Rakesh Mahajan made an advance payment of Rs. 2.5 lakhs to the assessee company on 30th March, 2009, which was credited as advance in current account of Rakesh Mahajan, maintained in the books of the assessee company. On 31st March, 2009, the assessee company sold furniture of equivalent amount to sh Rakesh Mahajan and the advance of Rs. 2.5 lakhs was adjusted by way of passing a journal entry. In second transaction, the Assessing Officer observed an entry in the ledger account of Sh Rakesh Mohan , maintained in the books of the assessee company , according to which, assessee company returned the loan payment of Rs. 49.00 lakhs to Shri Rakesh Mohan on behalf of M/s. Tina Organics Pvt. Ltd., on 15- 05-2008. The Additional Commissioner of Income-tax Act, who levied the penalty, was of the view that return of loan in both the transactions was otherwise than by account payee cheque i.e. through journal entry, which was a violation of provision of 269T of the Act and therefore, he levied penalty u/s 271E of the Act. On appeal, the ld. CIT(A) held that there was no repayment of loan or deposit otherwise than by account payee cheque and thus provision of 269T were not attracted, accordingly, relying on various decisions/judgments cited in his order, he deleted the penalty levied u/s 271E in respect of both the transactions. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us.
3. The grounds No. 1 to 3 of the appeal are related to levy of penalty, u/s 271E of the Act and thus heard together.
Mahajan Industries P. Ltd. 4. 1 The ld. Senior Departmental Representative ( Sr DR), relying on the order of the Addl. CIT submitted that the assessee was liable for penalty on loans repaid to Shri Rakesh Mhajan & M/s Tina Organic of Rs. 2.5 lakhs & Rs. 49.00 lakhs respectively through passing journal entries in books of account, which being a clear violation of provisions of section 269T of the Act. He referred to page no. 4 of the assessee’s paper book and submitted that the fact of payment of loan to Shri Rakesh Mahajan on behalf of M/s Tina Organics was clearly mentioned in entry dated 15.5.2008 of the said ledger account of Shri Rakesh Mahajan in the books of account of the assessee. He also relied on judgment of Bombay High Court in the case of TRIUMPH International reported in 345 ITR 270 , where in it is held that where loan/deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of s. 269T of the Act, however s. 273B provides that no penalty under s. 271E shall be imposed for contravention of s. 269T if reasonable cause for such contravention is shown. 4.2 On the other hand, the ld. Authorized Representative ( AR) submitted that the first transaction stated to be of loan, was actually purchase of furniture by Shri Rakesh Mahajan from the assessee company. The ld. AR submitted that an advance payment of Rs. 2.5 lakhs was paid by Shri Rakesh Mahajan on 30th March, 2009 for purchase of furniture, which was inadvertently entered in current account, however, on sale of furniture on 31st March, 2009 that entry was closed by way of a journal entry & thus there was no repayment of loan by the assessee. Similarly in respect of the second transaction, it was submitted that the assessee had not taken any loan from M/s Tina Organics and loan taken from Shri Rakesh Mahajan was only paid to him through account payee cheque. The ld. AR referred to the copy of bank statement of Shri Rakesh Mahajan placed on page no. 9 of the paper book, wherein the receipt of the amount of Rs. 49.00 lakh is appearing. The ld. AR stated that the name of M/s Tina Organics P. Ltd. was mentioned inadvertently in the ledger account of Shri Rakesh Mahajan and there was no loan outstanding in the name of M/s Tina Organics P. Ltd. He Mahajan Industries P. Ltd. further submitted that even if any loan or deposits through current account, then, same are not in the category of loan or deposit as per the provision of the Comopanies Act, as upheld by the Madras High Court in the case of CIT vs. Idhayam Publication Ltd. 285 ITR 281 and Chhattisgarh High Court in case of CIT vs. Preeti Fuels and Flames Ltd. 238 CTR 226.
We have heard the rival submission and perused the material on record. From the order of the lower authorities and submissions of both the parties, we find that as far as first transaction of Rs. 2.5 lakh is concerned, it is evident that it was not a loan transaction and it was merely a purchase/sale transaction between the assessee company and its director Shri Rakesh Mahajan and in such circumstances, the provision of section 269T are not attracted and hence the transaction is not liable for penalty u/s 271E of the Act.
As regards to the second transaction of Rs. 49.00 lakhs , the ld AR has submitted that there was no loan outstanding from M/s. Tina Organics P. Ltd. This fact has been observed by the ld CIT(A) also and the Sr. DR has not controverted, and thus, we don’t have any reason to disbelieve the fact . In such circumstances, there being, no repayment by otherwise than account payee cheque, penalty levied u/s 271E of the Act deserved to be deleted. The ratio of the judgement in the case of TRIUMPH International (supra) is not applicable over the facts of the assessee as there is no repayment of loan or deposit by otherwise than account payee cheque. In view of above finding, the arguments of the ld AR as to whether the any amount received from the Director or Shareholder of a Company is not loan or deposit under the Companies Rules 26(1X), are rendered academic only and not required to adjudicate upon. Further we find that when there was no repayment of loan or deposit otherwise than by account payee cheque, the question of reasonable cause for violation of 269T also does not arise in the case of the assessee. Accordingly, we dismiss the ground Nos. 1 to 3 of the Revenue.
Mahajan Industries P. Ltd. 7. The grounds No. 4 to 6 of the appeal are general in nature and hence we are not required to adjudicate upon. Accordingly, the grounds are held infructuous and dismissed. 8. In the result appeal of the Revenue is dismissed. The decision is pronounced in the open court on 9th March, 2016.