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2018 (11) TMI 1418 - AT - Income TaxLevy of penalty u/s.271D - assessee has not been able to substantiate its claim for receiving amounts in cash - Held that - When the language of the provision is crystal clear, the object of the purpose of the enactment of the said provision would no more have any say in the matter. A plain reading of Sec.271D establishes that it is a mandatory provision and a person contravening the provisions of Sec.269SS in any manner cannot escape from the payment of the penalty of equivalent amount so received as loan or deposit by him, unless exceptional and reasonable cause is proved. It is a well settled principle of interpretation that the taxing statutes have to be construed strictly and that when the language is clear and unambiguous it has to be construed in the literal sense bereft of any equitable or social reasons or any hardship likely to be suffered. Thus, as the assessee has not been able to substantiate its claim for receiving amounts in cash from Dr.A.M.Arun in violation of provisions of Sec.269SS, the penalty levied u/s.271D as levied by the Addl. Commissioner and as confirmed by the CIT(A) stands confirmed. The decision in the case of M/s.Idhayam Publications Ltd. 2006 (1) TMI 97 - MADRAS HIGH COURT has no application on the facts of the present case and the principles laid down by the Hon ble Jurisdictional High Court in the case of Shri P.Muthukaruppan 2015 (7) TMI 848 - MADRAS HIGH COURT and Nandhi Dhall Mills 2015 (3) TMI 19 - MADRAS HIGH COURT have been rightly applied by the Addl. Commissioner and the Ld.CIT(A). Levy of penalty u/s 271E - Held that - The assesses herein has been used as the custodian of the unaccounted cash of J. Dinakaran by depositing it in the bank accounts of the assesses herein by their shareholder and director Dr.A. M. Arun. The assessee have not been able to give any explanation to substantiate with evidence for the repayment of the deposits to Dr.A.M.Arun in cash. As and when J. Dinakaran required the cash the cash seems to have been withdrawn by Dr. A. M. Arun from the bank accounts of the assesses herein and paid to J. Dinakaran. The question that has been raised that the moneys given by the shareholder and Director to the Private Ltd. Company is not a loan or deposit because no interest has been charged, would not hold well in so far as the balance sheet of the assessee clearly shows that Dr.A.M.Arun is an unsecured creditor. The assessee is also not able to give a term to the moneys deposited and withdrawn in the bank account of the assessee companies by Dr.A.M.Arun other than the term deposit . A deposit need not be interest bearing. So also a loan. A deposit is putting money into the account of the assessee and that is exactly what has been done by Dr.A.M.Arun in the case of the assesses herein and that deposit has been returned/withdrawn by Dr.A.M.Arun. Penalty u/s.271E as levied by the Addl. Commissioner and as confirmed by the Ld.CIT(A) is on a right foot and does not call for any interference. - Decided against assessee.
Issues Involved:
1. Levy of penalty under Section 271D of the Income Tax Act for contravention of Section 269SS. 2. Levy of penalty under Section 271E of the Income Tax Act for contravention of Section 269T. 3. Consideration of reasonable cause for cash transactions under Section 273B. 4. Examination of the applicability of judicial precedents in the context of the case. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271D for Contravention of Section 269SS: The appeals concern the levy of penalties under Section 271D due to the assessee companies receiving cash loans from their director, Dr. A.M. Arun, who in turn had borrowed the cash from Shri J. Dinakaran. The assessee argued that the cash was necessary to meet business exigencies, such as salaries, fees, and statutory payments. However, the Revenue contended that the transactions were not genuine business exigencies but rather a means to channel unaccounted funds. The Tribunal found that the cash flow statements provided by the assessee did not substantiate the claim of urgent financial necessity, thereby justifying the penalty under Section 271D. 2. Levy of Penalty under Section 271E for Contravention of Section 269T: The appeals also addressed penalties under Section 271E for the repayment of the cash loans. The assessee argued that the cash withdrawals were necessary to repay the loans taken by Dr. A.M. Arun from Shri J. Dinakaran. The Tribunal noted that the funds were routed through bank accounts, and there was no reasonable explanation for the cash withdrawals when bank transfers could have been used. The Tribunal upheld the penalties under Section 271E, emphasizing that the transactions were part of laundering unaccounted cash. 3. Consideration of Reasonable Cause under Section 273B: The assessee invoked Section 273B, arguing that there was a reasonable cause for accepting and repaying loans in cash due to business exigencies. However, the Tribunal found that the cash flow statements contradicted the claim of financial urgency and that the transactions were not substantiated as genuine business needs. Consequently, the Tribunal ruled that the assessee failed to demonstrate a reasonable cause, thus not warranting relief under Section 273B. 4. Examination of Judicial Precedents: The assessee relied on the decision in CIT vs. Idhayam Publications Ltd., where it was held that transactions between a company and its director through a running account did not constitute loans or deposits. However, the Tribunal distinguished this case, noting that the cash deposited by Dr. A.M. Arun was not his own but borrowed from a third party, Shri J. Dinakaran. The Tribunal also referred to the decisions in Nandhi Dhall Mills vs. CIT and P. Muthukaruppan vs. JCIT, which supported the imposition of penalties for similar contraventions. The Tribunal concluded that these precedents justified the penalties under Sections 271D and 271E. Conclusion: The Tribunal dismissed the appeals, upholding the penalties under Sections 271D and 271E. The Tribunal found that the assessee failed to substantiate the claim of reasonable cause for the cash transactions, and the judicial precedents cited by the assessee were not applicable to the facts of the case. The penalties were deemed appropriate as the transactions were part of laundering unaccounted funds.
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