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2023 (6) TMI 519 - AT - Income TaxPenalty u/s 271D 271E - Accepting and repayment of loans / deposits from the Managing Director of the Company - whether notice has been issued after the date of the order imposing penalty? - HELD THAT - We find that the notice referred to by the assessee is only system generated notice while uploading the order imposing penalty u/s. 271D 271E of the Act, in ITBA portal as required under the law, which is clearly evident from the records that the ITBA portal has generated notice u/s. 274 r.w.s.271D 271E of the Act, on 04.03.2019 and also order imposing penalty u/s. 271D 271E of the Act, also dated 04.03.2019. From the above, it is clear that it is only a system generated notice when the orders have been uploaded in ITBA portal only. On the other hand, from the orders imposing penalty u/s. 271D 271E of the Act, it is very clear that the AO initiated penalty proceedings by issuance of notice u/s. 271D 271E of the Act, on 03.08.2018 and passed order imposing penalty on 26.02.2019. Therefore, we are of the considered view that there is no merit in objection raised by the assessee, and thus, the same is rejected. Period of limitation u/s. 275(1)(c) - HELD THAT - In the present case, the AO sent a proposal for initiation of penalty proceedings on 24.07.2018 and the AO issued notice u/s. 271D 271E of the Act, on 03.08.2018, within less than a month. Therefore, we are of the considered view that the ratio laid down by the Hon ble Delhi High Court Rishikesh Buildcon (P) Ltd., 2022 (11) TMI 1038 - DELHI HIGH COURT is not applicable to the facts of the present case. The assessee had also relied upon the decision of Mahesh Wood Products (P) Ltd 2017 (5) TMI 433 - DELHI HIGH COURT We find that the facts of the case before the Hon ble Delhi High Court are entirely different to the facts of the present case, and thus, we are of the considered view that the case laws relied upon by assessee is not applicable to the facts of the present case. Contravention of provisions of Sec. 269SS 269TT - Accepting and repayment of loans / deposits from the Managing Director of the Company - HELD THAT - The claim of the assessee that it has received cash for urgent requirement for making payment for various expenditure, is also not correct, because, the assessee received a sum of Rs. 18 lakhs from Mr.M.Muruganandam on 14.09.2011, even though, the assessee had more than Rs. 11 lakhs cash in hand as on that date in the books of accounts. From the above, it is very clear that the justification given by the assessee for receiving loans advances in cash from its Managing Director is unsubstantiated. Further, the assessee had also repaid loans advances in cash in huge amount on various dates and could not explain why loans have been repaid in cash. Therefore, we are of the considered view that the assessee could not explain the reasonable cause for accepting loans advances in cash in contravention of provisions of Sec. 269SS 269TT of the Act. Arguments of the assessee that its place of business situated where there is no adequate banking facilities - The assessee is maintaining a current account with Canara Bank and there is a Canara bank at Cheyyar Town. From the above, it is clear that the arguments of the assessee that there is no adequate banking facilities, in a place, where its business is carried on, is unsubstantiated. There is a clear violation of provisions of Sec. 269SS of the Act, in accepting loans advances in cash from its Managing Director and also there is a clear violation of provisions of Sec. 269TT of the Act, in repayment of loans advances in cash to its Managing Director and which warrants levy of penalty u/s. 271D 271E of the Act. The Ld.CIT(A) after considering relevant facts has rightly upheld penalty levied u/s. 271D 271E of the Act, and thus, we are inclined to upheld the findings of the Ld.CIT(A) and dismiss the appeals filed by the assessee.
Issues Involved:
1. Whether the penalty order levied by the CIT(A) is barred by limitation. 2. Whether the Addl. CIT arbitrarily assumed jurisdiction to levy penalty under Sections 271D and 271E. 3. Whether the provisions of Sections 269SS and 269T apply to the transactions between the assessee and its Managing Director. 4. Whether the business exigency justified the acceptance and repayment of loans in cash. Summary: Issue 1: Limitation of Penalty Order The assessee argued that the penalty order was barred by limitation as per Section 275(1)(c) of the Income Tax Act. The Tribunal found that the notice issued on 03.08.2018 and the penalty order passed on 26.02.2019 were within the six-month limitation period. The Tribunal rejected the argument that the limitation period should commence from the date the proposal was sent by the AO to the Addl. CIT. Issue 2: Jurisdiction of Addl. CIT The assessee contended that the Addl. CIT arbitrarily assumed jurisdiction to levy the penalty. The Tribunal held that the Addl. CIT was competent to initiate and levy the penalty under Sections 271D and 271E, and the satisfaction of the AO was necessary to decide whether penalty proceedings could be initiated. Issue 3: Applicability of Sections 269SS and 269T The assessee argued that the cash transactions between the company and its Managing Director were current account transactions and not loans or advances. The Tribunal found that the assessee's ledger showed significant cash transactions without proper explanations. The Tribunal upheld the CIT(A)'s finding that these transactions were indeed loans and advances, thus attracting the provisions of Sections 269SS and 269T. Issue 4: Business Exigency The assessee claimed that the cash transactions were due to business exigency in a remote town with inadequate banking facilities. The Tribunal found that the assessee's location had sufficient banking facilities, including a Canara Bank branch. The Tribunal concluded that the assessee failed to substantiate the urgent need for cash transactions and upheld the penalties for violating Sections 269SS and 269T. Conclusion: The Tribunal dismissed the appeals, upholding the penalties levied by the AO under Sections 271D and 271E for contraventions of Sections 269SS and 269T. The Tribunal found no merit in the arguments regarding limitation, jurisdiction, the nature of transactions, and business exigency.
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