2023 (1) TMI 622 - AT - Income Tax

Penalty u/s 271D read with section 269SS and Penalty u/s 271E read with section 269D - cash transaction undertaken for day to day cash adjustment of receipt of cash and payment in cash between two companies i.e., assessee and M/s Rajasthan Lok Vikas Finance Resources Ltd. - HELD THAT - Both the companies are regularly assessed to tax. There is no dispute by the parties that the transactions between them are not genuine and unrecorded transaction in either of the assessee company. The source of cash already explained and there is no adverse observation on these aspects of cash recorded as paid and received from each other. The revenue has not controverted to the factual position that both the companies were operating from same premises and source of cash were out of the disclosed sources. As the cashier was operating for both the company used the cash of the either company and passed necessary entry to complete the books and record the correct state of affairs and there is no doubt about genuineness of the transactions recorded. The bench noted that cashier makes payment on behalf of both the company, i.e. assessee and M/s. Rajasthan Lok Vikas Finance Resources Ltd. The cashier made the payment without ascertaining the cash balance of each company. Based on this action it has happen that in one company there is excess cash and in another it is in short and vice versa. Cashier has completed the cash book and this excess cash receipt or paid to each company is accounted in cash as per the availability of cash in each company. There is no question about the source of cash in each company by the revenue. Merely, the amount paid or received is in cash and interest is paid the same is considered as advances in violation of section 269SS/T and consequent thereupon considered it for levy of penalty u/s. 271D/E of the Act. These transactions are made during the course of business and just to avoid the deficit of cash which is arisen on account of the common cashier. This regular transaction out of the disclosed sources and is not recorded with an intent to considered it as loan or deposit. Merely on the regular balance interest paid the transaction recorded by the cashier to settle the deficit in the cash between the two company is not a loan as it is construed with purpose for which the provisions are enacted in the law. The transfer of money from one company to another with a specific intention is a mere book adjustment and cannot be considered as loan or deposit. This regular, bonafide and genuine transaction recorded as book adjustment cannot be termed considered as loan or deposit and it is not in violation of provision of section 269SS/T. See MAHESHWARI NIRMAN UDYOG 2007 (7) TMI 216 - RAJASTHAN HIGH COURT There exist a reasonable cause and plausible reason. The transactions are duly recorded in the books of the both companies and considering the explanation given the assessee and the judicial precedent of jurisdictional High Court we direct to delete the levy of penalty u/s. 271D and 271E of the Act in this case. Accordingly, the grounds of appeal raised by the assessee is allowed.

Summary

Issues Involved:
1. Maintainability of a single composite appeal for two separate penalty orders.
2. Legitimacy of penalties under sections 271D and 271E for alleged violations of sections 269SS and 269T of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Maintainability of a Single Composite Appeal:
The Revenue argued that the assessee should have filed two separate appeals for two separate penalty orders. However, the assessee contended that a composite appeal is maintainable. The Tribunal referred to the case of Dalpatbhai Damjibhai v. CIT (1994) 205 ITR 144 (Guj), where it was held that if appeals are provided to the same authority against two or more orders, a composite appeal should be regarded as competent. The Tribunal noted that the CIT(A) issued a single order and there was no cross objection from the department. Consequently, the Tribunal decided to consider and decide the appeal of the assessee by a single consolidated order, deeming the composite appeal maintainable.

2. Legitimacy of Penalties under Sections 271D and 271E:
The assessee argued that the transactions between it and M/s Rajasthan Lok Vikas Finance Resources Ltd. were not loans or deposits but current account transactions between sister concerns with common management. The Tribunal considered the facts that both companies were under the same management, had common staff, and operated from the same premises. The cash transactions were managed by a common cashier, and entries were made to balance the day books at the end of each day. The Tribunal noted that the transactions were genuine, recorded in the books of both companies, and there was no intention to contravene the provisions of the Act.

The Tribunal referred to various judicial precedents, including Muthoot M. George Brothers Vs. ACIT 46 ITD 10 (Cochin) and Gururaj Mini Roller Flour Mills Vs. ACIT (2015) 118 DTR 218 (AP), which held that inter-se transactions between sister concerns managed by the same group of people cannot be considered as loans or deposits. The Tribunal also emphasized the legislative intent behind sections 269SS and 269T, which is to curb unaccounted cash transactions, and noted that the transactions in question were duly recorded and genuine.

The Tribunal further referred to the jurisdictional High Court decision in CIT vs. Maheshwari Nirman Udyog (2008) 302 ITR 201 (Raj), which emphasized that penalties under sections 271D and 271E should not be imposed if there was a reasonable cause for the failure. The Tribunal concluded that the transactions were bona fide, genuine, and recorded in the books of both companies, and there was no intention to evade tax. Therefore, the penalties under sections 271D and 271E were not justified.

Conclusion:
Considering the facts, judicial precedents, and the legislative intent behind the relevant provisions, the Tribunal allowed the appeal of the assessee and directed the deletion of penalties under sections 271D and 271E. The Tribunal found that the composite appeal was maintainable and that the transactions in question did not constitute violations of sections 269SS and 269T, thereby providing reasonable cause for not imposing the penalties.