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2009 (4) TMI 803

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..... ngs under section 271E should not be initiated for the violation of provisions of section 269T as the payment of loan amounting to Rs. 86,350 has been paid in cash. The assessee submitted before the Assessing Officer that M/s. Ram Kumar Krishan Kumar was in urgent need of money and he could not wait up to clearance of cheque, and as such the assessee indeed made the repayment of loan in cash. The assessee also filed the copy of account with M/s. Ram Kumar Krishan Kumar. The assessee also filed copy of cash receipt given by M/s. Ram Kumar Krishan Kumar confirming the receipt of repayment of loan in cash. The Assessing Officer initiated penalty proceedings under section 271E and issued a show cause notice under section 271E dated February 28, 2006, fixing the hearing on March 22, 2006. In the course of penalty proceedings, the assessee filed its reply vide letter dated May 31, 2006, and letter dated June 6, 2006, where it was submitted that the assessee had a credit balance in the account of M/s. Ram Kumar Krishan Kumar, and an amount of less than Rs. 20,000 was repaid in cash on a single day as the concerned party had refused to accept the payment by way of cheque. It was further .....

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..... ted that as and when the money required either by the assessee or by M/s. Ram Kumar Krishan Kumar, the transaction of accepting or paying money were taking place between the assessee and M/s. Ram Kumar Krishan Kumar. He further submitted that the transaction in question was neither loan nor deposit as contemplated under section 269T of the Act. He further submitted that the repayment of the amount were made in cash as the party concerned was in an urgent need of money and refused to accept the amount by account payee cheque or draft. He further submitted that in the course of survey operation under section 133A at the business premises of the assessee, the assessee had declared or surrendered an amount of Rs. 6,34,925 and paid the tax accordingly, on the understanding that the Department would not levy any penalty. He, therefore, submitted that the penalty confirmed by the learned Commissioner of Income-tax (Appeals) is totally unjustified and it is, thus, to be deleted. The learned Departmental representative, on the other hand, supported the orders of the authorities below. We have considered the rival contentions of both the parties and have carefully gone through the orders .....

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..... .2,00,000 has been repaid in part not exceeding Rs. 20,000 on a single day would not absolve the assessee from rigour of section 269T of the Act as is clear from the section itself. Since the repayment on various dates is the repayment out of the amount of Rs. 2,00,000, though in part, the repayment is squarely covered by the provisions of section 269T of the Act. Now, the question arises as to whether the aforesaid amount payable by the assessee to M/s. Ram Kumar Krishan Kumar was in the nature of loan or deposit within the meaning of section 269T of the Act. Learned counsel for the assessee has submitted before us that it is not a deposit within the meaning of section 269T of the Act. However, the Assessing Officer has issued the show-cause notice on the footing that the assessee has made the repayment of loan in cash in violation of the provisions of section 269T of the Act. The case made out by the Assessing Officer while imposing the penalty is the case of repayment of loan and not deposit. It is now clear that on or after June 1, 2002, both loan or deposit are covered by section 269T of the Act. The word loan has been inserted in section 269T by the Finance Act, 2002, .....

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..... 2002, and thereafter, after the insertion of the word loan in section 269T of the Act, with effect from June 1, 2002. We make it clear that even though the loans were taken before inserting the word loan in section 269T, if the repayment is made after the insertion of word loan in section 269T, the provisions of section 269T would be equally applicable as so held by the hon ble Madras High Court in the case of A. M. Shamshuddeen v. Union of India [2000] 244 ITR 266 as under (page 269) : I am also of the view that the contention of learned counsel for the petitioner that the provisions of section 269T are not applicable as the loans were obtained in the year 1983 or 1984 is not well founded. In my view, the date on which the loans were obtained is not relevant for the applicability of section 269T of the Act and the question has to be considered when the loans were repaid. The loans were admittedly repaid in the year 1991 and at that time, the provisions of section 269T have come into force and the question whether the provisions were in force on the date when the loans were taken is not relevant for the applicability of section 269T. Admittedly, the provisions of sectio .....

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..... ntly required by M/s. Ram Kumar Krishan Kumar on different dates. The assessee has also failed to furnish the details and information as to for what purpose this aforesaid money paid to M/s. Ram Kumar Krishan Kumar was utilised by the said party. The assessee has withheld all these information, which leads to an inference that the party might have utilised this money to cover up any shortfall of cash in their account. In the light of these facts and discussions made above, we are, therefore, of the considered opinion that the assessee has not been able to prove that the assessee was prevented by sufficient and reasonable cause for not complying with the provisions of section 269T of the Act. The assessee s contention that no penalty under section 271E should have been imposed by the Assessing Officer inasmuch as the Department had agreed not to levy any penalty as the assessee had already declared or surrendered income of Rs. 6,34,925 during the course of survey conducted against the assessee under section 133A of the Act is also found to be misplaced. The assessee had declared additional income of Rs. 6,34,925 during the course of survey operation, which was accepted by the Depa .....

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