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2016 (9) TMI 1535 - AT - Income TaxPenalty u/s 271D - default u/s 269SS - Taking or accepting of loan/ deposits of ₹ 20,000/- or more by way of mode of payment other than account payee cheque / draft - HELD THAT - Section 271D applies to a transaction where a deposit or loan money is accepted by an assessee otherwise than by an account payee cheque or an account payee draft. This is also explicit from clause (iii) of the explanation to Section 269SS of the Act which defines loan or deposit of money. Although in the case of cut vs. Triumph International Finance (I) Ltd. 2012 (6) TMI 358 - BOMBAY HIGH COURT it is held that the liability recorded in the books of account by way of journal entries i.e. crediting the amount of party to whom monies payable and debiting the account of a party from whom monies are receivable in the books of account is in contravention of provisions of Section 269T of the Act but in that case also the penalty was held to be not leviable for the reason that transaction was bona fide and was not to evade taxes. In assessee's case also, the transaction is bonafide and it was not to evade taxes. In this view of the matter and further perusing the citations of the case laws we find no infirmity in the order of the ld. CIT(A) which is sustained on this issue. Thus the solitary ground of the Revenue is dismissed.
Issues Involved:
1. Deletion of penalty under Section 271D of the Income Tax Act, 1961 for alleged violation of Section 269SS. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271D for Violation of Section 269SS: The Revenue appealed against the order of the CIT(A), Kota, which deleted a penalty of ?82,56,589 imposed under Section 271D for violation of Section 269SS. The primary issue was whether the assessee had accepted loans or deposits in a manner contravening Section 269SS, which mandates that loans or deposits of ?20,000 or more must be accepted only through an account payee cheque or draft. The Addl. CIT, Range-1, Kota, had observed that the assessee received loans from M/s Sankalp Foundation and M/s Gopi Bai Foundation through book entries rather than account payee cheques or drafts, which he considered a violation of Section 269SS. The Addl. CIT relied on the decision of the Hon'ble Mumbai High Court in CIT vs. Triumph International (P) Ltd., which held that repayment of loans through journal entries contravenes Section 269T and, by extension, similar logic applies to Section 269SS. The CIT(A) deleted the penalty, reasoning that Section 269SS was intended to prevent the introduction of unaccounted money through cash loans and does not apply to journal entries in the books of accounts. The CIT(A) directed the deletion of the penalty, noting that the transactions were bona fide and not intended to evade taxes. The Revenue argued that the CIT(A) erred in deleting the penalty, citing the case of CIT vs. Triumph International Finance (I) Ltd., which supported the imposition of penalties for journal entries. However, the assessee contended that the transactions were bona fide, involved no cash, and were conducted through account payee cheques or drafts, thus not violating Section 269SS. The assessee provided detailed documentation to support their claim, including ledger accounts and bank statements. The Tribunal noted that Section 269SS applies to transactions involving the acceptance of money otherwise than by an account payee cheque or draft. It emphasized that the section's purpose is to prevent cash transactions and that journal entries do not involve the acceptance of money. The Tribunal found that the transactions were bona fide and not intended to evade taxes, aligning with the CIT(A)'s reasoning and the cited case laws supporting the non-applicability of Section 269SS to journal entries. Therefore, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal and confirming that the penalty under Section 271D was not applicable in this case. Conclusion:The Tribunal dismissed the Revenue's appeal, agreeing with the CIT(A) that the penalty under Section 271D was not applicable as the transactions were bona fide, conducted through proper banking channels, and did not involve the acceptance of money in contravention of Section 269SS. The assessee's cross-objection supporting the CIT(A)'s order was deemed infructuous and also dismissed. Order pronounced in the open court on 1/09/2016.
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