2024 (2) TMI 788 - AT - Income Tax

Penalty u/s 271-D and 271-E - accepting loan in cash from the director of the company - default u/s 269SS - details of loans accepted have also not been recorded in audit report of the assessee-company for the year under consideration - HELD THAT - From the above judgment in the case of Thamira Green Farm (P.) Ltd 2023 (10) TMI 839 - ITAT CHENNAI it is vivid that transaction done during the business exigency does not attract the penalty under section 271D of the Act. We note that in the assessee s case under consideration the transactions between Directors and assessee-company are on account of business exigency. Besides, assessee-company and the director both have disclosed transactions in their respective books of accounts for the relevant previous year. In the assessee s case, it was not a case of loan taken/given from/to public, but amount received/paid to director to meet the business exigencies. Therefore, delete the penalty under section 271D. Levying penalty u/s 271E - assessee-company has repaid loan during the year on various dates to two Company s Directors, and these amounts paid being more than Rs. 20,000/- - HELD THAT - As there is an issue of acceptance of loan accepted, issue of repayment of loan on same set of facts and circumstances, hence it does not require separate adjudication.

Summary

Issues Involved:
1. Penalty under Section 271D for violating Section 269SS of the Income Tax Act, 1961.
2. Penalty under Section 271E for violating Section 269T of the Income Tax Act, 1961.

Summary:

Issue 1: Penalty under Section 271D for violating Section 269SS

The assessee, a Private Limited Company, received unsecured loans totaling Rs. 24,00,000/- from its directors, which were deposited in the company's bank account. The Assessing Officer noted that these transactions violated Section 269SS of the Income Tax Act, which prohibits accepting loans or deposits of Rs. 20,000/- or more in cash. Consequently, a penalty of Rs. 24,00,000/- was imposed under Section 271D. The assessee argued that these were current account transactions for business purposes and should not attract penalties. The Tribunal found merit in the assessee's submission, stating that the transactions were at arm's length, for business purposes, and did not involve personal gain. Citing the ITAT Chennai judgment in Thamira Green Farm (P.) Ltd, the Tribunal ruled that such transactions do not fall under the purview of Section 269SS, thus deleting the penalty.

Issue 2: Penalty under Section 271E for violating Section 269T

The assessee also repaid loans totaling Rs. 34,00,000/- to its directors in cash, which the Assessing Officer found to be in violation of Section 269T of the Income Tax Act. A penalty of Rs. 34,00,000/- was imposed under Section 271E. The Tribunal applied the same reasoning as in the first issue, considering these repayments as current account transactions for business purposes. The Tribunal concluded that these transactions did not violate Section 269T and deleted the penalty, thus allowing the appeal.

Conclusion:

Both appeals by the assessee were allowed, and the penalties under Sections 271D and 271E were deleted. The Tribunal emphasized that the transactions were for business purposes and did not attract the provisions of Sections 269SS and 269T.