SMT. PARAMJEET KAUR,LUDHIANA vs. JCIT, RANGE VII, LUDHIANA

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ITA 196/CHANDI/2018Status: DisposedITAT Chandigarh08 June 2018AY 2011-128 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the transactions were between a director and the company, maintained in current accounts, and did not constitute loans or deposits as envisaged by Section 269SS. The Tribunal found no evidence of unaccounted money or revenue leakage, deeming it not a fit case for penalty under Sections 271D/271E.

What were the facts?

The assessees, directors of a company, received and gave cash loans to the company, which were essentially withdrawals and deposits between their personal accounts and the company's accounts. The Assessing Officer and CIT(A) imposed penalties under Sections 271D and 271E for accepting cash deposits/loans exceeding the prescribed limit.

What were the issues?

Whether penalties under Sections 271D and 271E are leviable for cash transactions between a director and a company maintained in current accounts, in the absence of unaccounted money or revenue leakage.

Which sections of the Income-tax Act were involved?

Section 271D,Section 271E,Section 269SS

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Cases cited in this judgment(5)Show list

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Income Tax Appellate Tribunal, DIVISION BENCH ‘B’, CHANDIGARH

Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR

For Appellant: Shri. Nikhil Goyal
For Respondent: Shri Manu Malik
Hearing: 04/06/2018Pronounced: 08/06/2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA Nos. 192 & 193/Chd/2018 (Assessment Years: 2011-12) Shri Mohinder Pal Singh Vs. The Addl. CIT 8-A, Kitchlu Nagar Range- VII Ludhiana Ludhiana

PAN: ADVPS2237F

ITA Nos. 194 & 195 /Chd/2018 (Assessment Years: 2011-12) Shri Ramneek Sehgal Vs. The JCIT 8-A, Kitchlu Nagar Rang-VII Ludhiana Ludhiana PAN: AVMPS2817A (Appellant) (Respondent)

Assessee by : Shri. Nikhil Goyal Department by : Shri Manu Malik Date of hearing : 04/06/2018 Date of Pronouncement : 08/06/2018

ITA Nos. 196 & 197 /Chd/2018 (Assessment Years: 2011-12) Smt. Paramjeet Kaur Vs. The JCIT 8-A, Kitchlu Nagar Range-VII Ludhiana Ludhiana

PAN: AIPPS7061J (Appellant) (Respondent)

Assessee by : Shri. Nikhil Goyal Department by : Shri Manu Malik Date of hearing : 05/06/2018 Date of Pronouncement : 08/06/2018 O R D E R PER BENCH:

All the above appeals have been filed by different Assessees against the

order of the Ld. CIT(A)-3, Ludhiana. Since the issues involved are common in all

the above appeals pertaining to penalty under section 271D and 271E therefore

they are being adjudicated by way of this common order by taking the case of

Mohinder Pal Singh in ITA No. 192/193 CHD-2018 as the lead case.

2.

Appeal wise grounds reproduced here under:

Grounds of appeal in ITA No. 192-CHD-2018 for A.Y. 2011-12 1. That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 61,49,385/- under section 271D of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before him in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. Grounds of appeal in ITA No. 193-CHD-2018 for A.Y. 2011-12 1. That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 79,55,010/- under section 271D of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before her in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable.

Grounds of appeal in ITA No. 194-CHD-2018 for A.Y. 2011-12 1. That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 22,91,700/- under section 271D of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before her in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. Grounds of appeal in ITA No. 195-CHD-2018 for A.Y. 2011-12 1. That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 8,70,500/- under section 271E of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before her in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. Grounds of appeal in ITA No. 196-CHD-2018 for A.Y. 2011-12 1. That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 75,04,000/- under section 271E of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before her in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. Grounds of appeal in ITA No. 197-CHD-2018 for A.Y. 2011-12

1.

That the Ld. CIT(A) has erred in upholding the imposition of penalty of Rs. 76,68,000/- under section 271E of the Act which is arbitrary and unjustified. 2. That the Ld. CIT(A) has failed to appreciate the reasonable cause pleaded before her in the correct perspective and as such the order passed by him is arbitrary and unjustified. 3. That the order of the Ld. CIT(A) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable.

3.

Brief facts of the case are that the assessee has received cash loan from

the company namely M/s Ceigall India Ltd. Ludhiana in which he is a Director.

The amounts in cash have been received were varying from Rs. 15,000/- to Rs.

8,00,000/-.

4.

Before the Assessing Officer during the penalty proceedings under section

271D the assessee explained that “all the cash entries are by deposits in one

account by withdrawing the same from other bank due to emergency of

passing of cheques from the accounts and the entries due to business exigency

hence covered under reasonable cause and no entry is un genuine, no entry

has been carried with mala fide intention and there is no loss to the Revenue” .

The assessee has submitted the bank statements of M/s Ceigall India Ltd. from

where the cash was withdrawn by the company, the entry wise clarification was

also submitted before the Assessing Officer and reiterated that the cash loans

was given due to business exigencies. The assessee contended that penalty is

not leviable as the transactions are genuine, the loans were taken for

immediate business requirement and there was a reasonable cause for

accepting the deposit in cash.

5.

The Assessing Officer held that there cannot be any emergency situation

on 35 occasions over a period of one year and there was no reasonable cause

for withdrawal of the cash from one account and depositing the same in the

personal account of the Director and held that since the assessee has not given

any evidence to substantiate the claim of reasonable cause and hence penalty

is leviable.

6.

The Ld. CIT(A) confirmed the penalty on the grounds that the assessee has

failed to substantiate its claim even during the appellate proceedings about the

reasonableness of urgency of the cash loan. The Ld. CIT(A) relied on the

judgment in the case of Tenamal Chajjer (2005) 96 ITD 210 (Chennai) wherein it

was held that the provisions of Section 269SS is very strict and will apply strictly

where the loan or deposit is taken or accepted from any other person otherwise

by an account payee cheque or account payee draft if the amount of such

loan or deposit or the aggregate amount of such loan or deposit is Rs. 20,000 or

more. The only saving clause for reasonable cause is provided in section 273B for

violation of section 269SS and in view of this provision, no penalty under section

271D will be imposed if there is any reasonable clause. The Ld. CIT(A) has also

relied on the judgment in the case of Khijaria Leathers 99 TTJ 616 (Chennai)

wherein it was held that the genuineness of transactions do not exclude the

provisions of Section 269SS.

7.

Before us the Ld. AR argued that the transactions entered between the

assessee who is a director in the company from where the cash deposits have

been received cannot be treated as loan or deposit at all as envisaged in the

provisions of Section 269SS as the amount has been withdrawn by the Director

from the current account maintained by the company. He argued that it is not

the case of the Department that any unaccounted cash has been identified in

the case of the assessee. He further argued that the assessee is a director

maintaining current account with the Company and the assessee is regularly

withdrawing funds from the Company either in cash or via bank transfers and

the reason for the same has been explained on Page 4-5 of the CIT(A) order.

Similarly, the assessee is transferring the funds to the account of the Company as

and when required at the time of emergency needs of the funds by the

Company at the time of clearing of the cheques in the regular course of the

business. At times the transaction is being settled with the salary income or

against the funds transferred by the assessee either via cash or by bank

transfers. This is regular transaction between a director and a Company and this

does not at all constitute loans and deposits as envisaged under section 269SS

of the Act.

7.1. The Ld. AR further argued that it is not the case of the department that

any unaccounted cash has been found, identified are detected in the case of

the assessee. There is always been a corresponding entry in the current account

of the Director maintained by the company. To that extent he argued that the

purpose of the enactment of the provision of Section 269SS is to stop the

circulation of unaccounted cash or introduction of unaccounted monies into

the books by the way of loans which is not the case in the case of the assessee.

He further relied on the judgment in the case of CIT Vs. Idhayam Publications

Ltd. 163 Taxmann 265 wherein it was held that the payment of monies into

current account and withdrawals of monies from the current account in the

presence of any other evidence cannot attract provisions of Section 269SS.

Further reliance was also placed in the case of S.R. Associated Construction Vs.

JCIT (ITAT Kolkata)- ITA No. 209 & 210/Kol/2013 wherein it was held that the

transactions between the company and its Director maintained in a current

account would neither be categorized as a loan or deposit.

8.

The Ld. DR vehemently supported the order of the Ld. CIT(A) wherein the

Ld. CIT(A) in (para no. 7) confirmed the order on the ground that the plain

provisions of the Act is duly attracted. Regarding the case laws cited by the Ld.

AR namely CIT Vs. Idhyam Publications Ltd., S.R. Associated Construction (supra)

no contrary decision was brought to our notice.

9.

We have heard Ld. Representatives of both the parties and perused the

material placed before us.

10.

The issue is whether penalty can be levied in the absence of any other

material to prove or indicate introduction of unaccounted money or any doubt

casted by the department regarding the genuineness of the source or whether

the assessee has brought reasonable cause to enter into such transactions. On

perusal of the records the reasonable cause as canvassed by the assessee is

examined below:

The reasons given by the assessee are 1. Household withdrawals against the salary 2. Cash withdrawn from the company and deposited with PNB SB Account 3. Credit Card payment

Similarly the assessee has given loan to the company mentioned the reasons as 1. Cash withdrawn from HDFC Account and given to the company.

11.

All these transactions have been undertaken between two bank accounts by withdrawing cash from one account and depositing the cash into the other account. The source of repayment or payment of loan was never in question. There was no leakage of Revenue or detection of circulation of unaccounted money by way of cash loans which was the fundamental purpose to curb the circulation of black money. The transactions have been taken place between two current accounts and also between the Director of the Company and the Company itself in the form of maintenance of a current account for contingencies of business purpose and also for contingencies of the Director for salary and payment of credit card dues. While such transactions may attract other provisions of the Income Tax Act,1961, but it is not a fit case for the levy of penalty under section 271E/271D. Hence keeping in view the facts of the instant case and for reasons mentioned above, and in the absence of any evidence of introduction of unaccounted money and following the judgments in the case of CIT Vs. Harpal Singh Jaswant Singh in ITA No. 146 of 1995 (P&H High Court) and

CIT Vs. Saini Medical Stores 277 ITR 420, and CIT Vs. Sunil Kumar Goyal 183 Taxman 53, and keeping in view the facts and circumstances specific to the instant case, no penalty can be leviable under section 271E and Section 271D of the Income Tax Act.

12.

In the result all the appeals of the Assessee’s are allowed.

Order pronounced in the open Court.

Sd/- Sd/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 08/06/2018 AG Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR

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