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Issues Involved:
1. Legality of the penalty u/s 271D for contravention of section 269SS. 2. Interpretation of the terms "take or accept" in section 269SS. 3. Applicability of penal provisions in the context of journal entries. Summary: Issue 1: Legality of the penalty u/s 271D for contravention of section 269SS The appeal challenges the order of the CIT(A) sustaining the penalty levied u/s 271D for the assessment year 1991-92. The assessee argued that no cash was received from Mr. Banthia, and the journal entry made on 31-3-1991 was merely to acknowledge the debt incurred in connection with the purchase of a plot on 20-11-1989. The Assessing Officer's basis for initiating penalty proceedings was the alleged cash loan of Rs. 27.67 lakhs from Mr. Banthia, which was not substantiated by any material evidence. The Tribunal found that the sum was directly paid by Mr. Banthia to the vendors of the land, and the assessee merely acknowledged the debt by passing a journal entry. Consequently, the penalty u/s 271D could not be upheld as there was no cash transaction during the relevant financial year. Issue 2: Interpretation of the terms "take or accept" in section 269SS The Tribunal examined the terms "take or accept" used in section 269SS and concluded that these terms are used with reference to "loan or deposit" respectively. The section applies only where money passes from one person to another by way of loan or deposit. The Tribunal rejected the contention that the acceptance of debt by making a journal entry falls within the ambit of section 269SS. The Tribunal emphasized that the provision cannot be applied where the debt is acknowledged by passing an entry in the books of account without any transfer of money. Issue 3: Applicability of penal provisions in the context of journal entries The Tribunal highlighted that penal provisions must be construed strictly, and no person can be penalized unless the default falls within the four corners of the penal provisions. The Tribunal referred to the decision of the Ahmedabad Bench in the case of Bombay Conductors & Electricals Ltd., where it was held that constructive loan or deposit could not come within the mischief of section 269SS. The Tribunal also cited the Supreme Court's observation in Bombay Steam Navigation Co. (1953)(P.) Ltd. v. CIT, stating that an agreement to pay a debt does not necessarily constitute a loan. The Tribunal concluded that the acknowledgment of debt by passing a journal entry does not fall within the ambit of section 269SS, and thus, the penalty u/s 271D could not be sustained. Conclusion: The Tribunal set aside the order of the CIT(A) and canceled the penalty levied u/s 271D, allowing the appeal of the assessee.
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