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TMI Blog2011 (11) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... dav, K.G. Bansal, JJ. Piyush Kaushik, Adv. for the Appellant A.K. Monga, Sr. DR for the Respondent ORDER K.G. Bansal, Accountant Member:- 1. In this appeal, the assessee has taken up five grounds. These grounds contain facts and arguments also. Thus, the grounds are not in accordance with the Tribunal Rules. The real grievance is projected in ground no. 1 that on the facts and in the circumstances of the case and in law, the CIT(Appeals) was incorrect and unjustified in upholding the levy of penalty of Rs. 11.00 lakh u/s 271D of the Income-tax Act, 1961 ('the Act' for short). 2. The facts of the case are that in the course of assessment proceedings for assessment year 2006-07, the AO noted two credits in the name of Natco Exports Pvt. Ltd. ('Natco' for short) of Rs. 10.00 lakh and Ajay Grover of Rs. 1.00. It was found that Natco made a payment of Rs. 10.00 lakh vide demand draft no. 542527 dated 08.06.2005 to Roaming India Pvt. Ltd. ('Roaming' for short) on behalf of the assessee. This DD was not made account payee as the issuing bank, the Union Bank of India, informed that there was no crossing on the DD. The DD was collected by ING Vysya Bank. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. It is the case of the ld. counsel that since the transaction has been disclosed to the revenue and it is a bona fide transaction, the levy of penalty was not justified. 3.1 In reply, the ld. DR relied on the order of the ld. CIT(Appeals). The findings of this order have already been reproduced by us. 4. We have considered the facts of the case and submissions made before us. It is seen that Natco paid a sum of Rs. 10.00 lakh by way of a bearer demand draft to Roaming on behalf of the assessee. Further, Ajay Grover paid a sum of Rs. 1.00 lakh to Rangappa in cash on behalf of the assessee. Journal entries were passed in the books of the assessee showing these persons as creditors in respect of the amounts. The AO considered the sum of Rs. 10.00 lakh paid by Natco as dividend u/s 2(22)(e). He also levied a penalty of Rs. 11.00 lakh u/s 271D in respect of violation of section 269SS of the Act. This penalty has been confirmed by the ld. CIT(Appeals). The case of the ld. counsel is that no money has been received by the assessee, the transactions have been disclosed and they are bona fide. There is no doubt in these matters. Therefore, the penalty cannot be levied. On the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an account payee cheque or account payee bank draft after 30.06.1984. The case of the ld. counsel is that since the transactions are disclosed and they are bona fide, the levy of penalty goes against the spirit of the explanatory notes. However, in this case, it has been held that the provision is quite rational and which achieves the objective of curbing black money. The provision is not discriminatory or arbitrary. Therefore, it is in conformity with the constitution. Thus, the question was totally different and, thus, the decision was rendered in a different context. 4.3 In the case of CIT vs. Sunil Kumar Goel, (2009) 315 ITR 163 (P and H), it has been mentioned that under section 273B, the assessee is permitted to show cause and tender explanation. The explanation of the assessee was found to be bona fide by the Tribunal and it was also held that it was not aimed at avoiding any tax liability. The genuineness of the transaction was accepted. The bona fides of the transaction and genuineness of the transaction would constitute a reasonable cause. 4.4 In the case of Udai Chand Santosh Kumar Jain vs. ITO, 79 TTJ 88, it was not shown that the loan was taken from sister c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he constitution and are meant to ensure that a tax-payer is not allowed to give a false explanation for his unaccounted money. In the case of Thenamal Chhajjer (supra) it has been held that where the amounts are admitted to be loan and no reasonable cause is advanced regarding the loan, the levy of penalty u/s 271D will be justified. 4.8 On perusal of the aforesaid cases, the relevant considerations are that the amount taken or accepted should be a loan or a deposit. If it is so, it is for the assessee to show that a reasonable cause existed for accepting the amount as aforesaid. In case a satisfactory explanation is tendered, the penalty may not be levied; if not, the penalty may be levied. Thus, the levy does not depend upon mere proof of default. 4.9 Coming to the facts of this case, it is clear that two persons paid certain amounts to third parties at the insistence of the assessee otherwise than by account payee bank draft or account payee cheque. Natco paid a sum of Rs. 10.00 lakh on behalf of the assessee by bearer bank draft. This amount has been assessed as dividend u/s 2(22)(e) by the AO. However, it is not known whether the assessee has accepted this finding or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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