MARTIN ALEX CORREA,MUMBAI vs. JCIT RG 24(2), MUMBAI

This is an appeal filed by the assessee against the order dated 25th February 2013, passed by the learned Commissioner (Appeals)– 34, Mumbai, confirming imposition of penalty under section 271D of Shri Martin Alex Correa 2 the Income Tax Act, 1961 (for short "the Act") for the assessment year 2007–08.

Briefly the facts are, the assessee is an individual. In the course of assessment proceedings for the impugned assessment year, the Assessing Officer, noticing that the assessee has accepted cash loan of ` 2.50 lakh in violation of provisions of section 269SS of the Act, forwarded information to the appropriate authority for initiating action for imposition of penalty under section 271D. As a consequence, proceedings for imposition of penalty under section 271D, was initiated with issuance of show cause notice on 22nd December 2010 to the assessee. In response to the said show cause notice, it was explained by the assessee that he had received cash of ` 2.50 lakh from M/s. Edna Misquitta on 3rd August 2006. It was submitted that said Ms. Edna Misquitta’s husband had immovable property for the management of which he had appointed the assessee attorney before his death on 17th December 2000. It was submitted after her husband’s death, Ms. Edna Misquitta, also executed a power of attorney on 14th August 2001 in favour of the assessee for managing the property inherited by her. It was submitted that as a result of such power of attorney the relationship between the assessee with M/s. Edna Misquitta is that of a trust and trustee and not of a lender and Shri Martin Alex Correa 3 borrower. It was submitted, the lady had advanced money to the assessee from time to time which as on 31st March 2007, aggregated to ` 1.06 crores which also included the amount of ` 2.50 lakh given in cash. It was submitted though the amount of ` 2.50 lakh was shown as loan in the Balance Sheet due to the mistake committed by the Accountant, but, real nature of transaction between the assessee and M/s. Edna Misquitta, is not in the nature of loan but funds given by her in trust. The authority concerned, however, did not find merit in the explanation of the assessee. He was of the view that the claim of the assessee that due to mistake committed by the Accountant, the amount of ` 2.50 lakh was shown as loan in the Balance Sheet is not acceptable. He further observed on verification of books of account, he found that the assessee has shown the said amount as loan. He also observed, the assessee has not produced any evidence to indicate that the amount of ` 2.50 lakh was taken for purchase of any property in the name of Ms. Edna Misquitta. Thus, on the basis of the above, the authority concerned proceeded to pass an order on 10th February 2011, imposing penalty of ` 2.50 lakh under section 271D of the Act.

Being aggrieved of penalty order so passed, the assessee preferred appeal before the first appellate authority. The learned Commissioner (Appeals), after considering the submissions of the Shri Martin Alex Correa 4 assessee and examining the facts and materials on record, observed that on going through the power of attorney, it was not indicated that relationship between the assessee and M/s. Edna Misquitta, is in the nature of trustee and trust. He also observed that no documentary evidence could be produced by the assessee to demonstrate that the amount received was for the purpose of purchase of any property whereas the Balance Sheet and books of account of the assessee show the amount of ` 2.50 lakhs as loan. Therefore, opining that provision of section 269SS was violated by the assessee in accepting the cash loan, he sustained the imposition of penalty under section 271D of the Act.

The learned Counsel for the assessee submitted before us that purpose of introducing of section 269SS is to curb introduction of unaccounted money. In case of assessee, since the transaction is genuine and no unaccounted cash was introduced, the provisions of section 269SS of the Act are not applicable. In this context, he relied upon the following decisions:–

The learned Departmental Representative, on the other hand, submitted that the provisions of section 269SS puts a bar on cash transaction exceeding certain prescribed limit. Therefore, receipt of loan exceeding the prescribed limit in cash straight away attracts the provisions of section 269SS. The learned Departmental Representative

We have considered the submissions of the parties and perused the material available on record. We have also examined the case laws relied upon by the learned counsel for the assessee. Undisputedly, it is a fact on record that the assessee in its Balance Sheet has shown the amount of ` 2.50 lakh as loan received in cash. Even the books of account of the assessee mention the aforesaid amount of ` 2.50 lakhs as loan. Therefore, as per assessee’s own narration, since he has received cash loan of ` 2.50 lakh, prima–facie, there is a violation of provisions contained under section 269SS of the Act. Though, the assessee has tried to wriggle out from rigours of sections 269SS and 271D of the Act by contending that such entries in the Balance Sheet and books of account are as a result of mistake committed by the Accountant but, in our view, such plea of the assessee is not acceptable as it is not a bona fide plea. Though the assessee has made

In the result, assessee’s appeal stands dismissed. Order pronounced in the open Court on 09.10.2015