2015 (4) TMI 1077 - AT - Income Tax

Penalty u/s. 271D - Deposits and loans in cash in excess of prescribed limit - Held that - We find that the facts are that the assessee company Mahmood Associates (P) Ltd. received cash loan from its director Md. Mahmood. In view of the above proposition of law laid down by various High Courts i.e. Hon ble M.P. High Court in the case of Indore Plastics P. Ltd. 2002 (7) TMI 19 - MADHYA PRADESH High Court , Idhayam Publications Ltd. 2006 (1) TMI 97 - MADRAS High Court and Natvarlal Purshottamdas Pareekh 2008 (2) TMI 287 - GUJARAT HIGH COURT , supra, we find that the penalty levied by JCIT, Range-12, Kolkata and confirmed by CIT(A) needs to be quashed. No contrary decision was pointed out by Ld. Sr. DR despite we specifically asked him whether any High Court decision is available against the assessee or not. In term of the above, we delete the penalty levied by JCIT and confirmed by CIT(A). - Decided in favour of assessee

Summary

Issues involved:
Penalty imposed under section 271D of the Income-tax Act for violation of section 269SS - Confirmation of penalty by CIT(A) - Applicability of legal precedents on the receipt of unsecured loans in cash from directors.

Detailed Analysis:

Issue 1: Penalty under section 271D imposed for violation of section 269SS
The appeal was against the confirmation of a penalty imposed under section 271D of the Income-tax Act by the JCIT. The penalty was initiated due to the assessee company receiving cash loans from its directors, which was considered a violation of section 269SS. The AO and JCIT found that the company received cash loans from its directors, leading to the penalty proceedings.

Issue 2: Confirmation of penalty by CIT(A)
The CIT(A) confirmed the penalty imposed by the JCIT under section 271D. Despite the assessee's explanations and submissions, the CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

Issue 3: Applicability of legal precedents
The assessee's counsel relied on legal precedents from various High Courts to support their case. References were made to cases such as CIT Vs. Indore Plastics P. Ltd., CIT Vs. Idhayam Publications Ltd., and CIT Vs. Natvarlal Purshottamdas Pareekh. These cases established that transactions between companies and their directors, even if in cash, did not necessarily constitute loans or deposits under section 269SS.

Judgment:
After considering the arguments and legal precedents cited, the Tribunal ruled in favor of the assessee. The Tribunal noted that the assessee company had received a cash loan from its director, which was a settled issue based on the legal precedents cited. The Tribunal found no contrary decision presented by the Revenue. Therefore, the penalty imposed by the JCIT and confirmed by the CIT(A) was quashed, and the appeal of the assessee was allowed.

This judgment highlights the importance of legal precedents in interpreting tax laws and the significance of established principles in determining the applicability of penalties for violations. The Tribunal's decision showcases the necessity of thorough legal analysis and the reliance on past judgments to support legal arguments effectively in tax matters.