2014 (11) TMI 474 - AT - Income Tax

Transaction covered u/s 269T/271E or not Bonafide of transaction Contravention of section 2699SS/T or not - Held that - There cannot be any justification in making repayments in cash when at the same time the assessee had received payments through transfer entries from the same party - The argument of the assessee that cash was paid after making adjustment of sales made to assessee is also not correct as the sales were made at the closing of month of December whereas the cash payments were made in the month of November - repayments in contravention of provisions of section 269T are ₹ 10,80,000 - All these payments were made in Ghaziabad as the assessee is based in Ghaziabad whereas the Bank of the firm M/s Premsons Forging Pvt. Ltd. is situated at Kanpur - It is not understandable as to how these payments were carried from Ghaziabad to Kanpur and that too on many days in the month whereas the facility of online deposit in third party bank account was also available - The classification by assessee in his balance sheet cannot alter the nature of transaction which necessarily was a loan or deposit and even if the amount is considered deposit then deposit includes advance against goods - There was no reasonable cause in making cash payments as the repayments made in Ghaziabad has been claimed to have been deposited in Kanpur which is beyond human probabilities specifically keeping in view of the fact that during the period of repayments in cash the assessee received from same party through journal entries huge amounts the order of the CIT(A) is upheld Decided against assessee.

Summary

Issues Involved:
1. Validity of passing/serving a single order/demand notice under two different provisions of the Act.
2. Applicability of Sections 269T/271E to the transactions in question.
3. Assessing Officer's presumption regarding the nature of the transaction.
4. Consideration of reasonable cause for repayment in cash.

Detailed Analysis:

1. Validity of Single Order/Demand Notice:
The appellant contended that the Assessing Officer erred by passing a composite order for penalties under Sections 269SS and 269T, claiming it was not tenable in law. The tribunal found this contention untenable, noting that no grievance was caused to the assessee as the appeal was decided on merits and not rejected on procedural grounds. Therefore, the tribunal dismissed this ground.

2. Applicability of Sections 269T/271E:
The appellant argued that the transactions were genuine and not covered under Sections 269T/271E, as they were advances from customers and not loans. However, the tribunal upheld the penalty under Section 271E, agreeing with the CIT(A)'s observation that the funds received were in the nature of deposits. The tribunal noted that the nature and sequence of transactions indicated these were deposits or loans, not advances against sales, as the sales occurred much later and in lesser amounts.

3. Assessing Officer's Presumption:
The appellant claimed that the Assessing Officer mistakenly presumed the advances were loans, leading to an incorrect penalty imposition. The tribunal found that the assessee received significant funds from sister concerns and repaid a portion in cash, which was against the provisions of Section 269T. The tribunal noted that the transactions were correctly classified as deposits, and the appellant's argument that these were advances was not supported by the transaction sequence and amounts.

4. Consideration of Reasonable Cause:
The appellant argued that there was a reasonable cause for making cash repayments, as immediate cash was required to clear issued cheques. However, the tribunal found no reasonable cause, noting that the repayments in cash were made in Ghaziabad while the bank account of the lender was in Kanpur. The tribunal highlighted that the appellant received significant amounts through journal entries during the same period, negating the urgency argument. The tribunal also dismissed the appellant's reliance on various case laws, stating that those cases involved different circumstances and reasonable causes not applicable here.

Conclusion:
The tribunal dismissed the appeal, upholding the penalty under Section 271E for violation of Section 269T. The tribunal found that the transactions were correctly classified as deposits, and there was no reasonable cause for the cash repayments, affirming the CIT(A)'s detailed analysis and conclusions. The order was pronounced in the open court on February 28, 2014.