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TMI Blog2012 (12) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of the transactions will constitute reasonable cause for not invoking the provisions of section 271D of the Act – In favor of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl. CIT did not accept the submissions of the assessee on the ground that:- i) It is a fact that the said loan is not taken/accepted by the assessee through account payee cheques or account payee bank draft, which is a clear violation of section 269SS. ii) The assessee has claimed that it did not have a bank account. The same cannot be an excuse to contravene the provision of section 269SS. These day's bank account is opened in a day or two. There is no contingency which prevented the assessee to have a bank account or to get into the hurried transactions. The ledger account shows transactions on various dates; which means that the assessee had consciously ignored the provision of section 269SS and the same is a lame excuse given as an aftermath in reply to the penalty notice. (iii) The payment made by "Duce" was with a clear intent of giving loan to the assessee, which was given otherwise by an account payee cheque or account payee bank draft. (iv) The decision of Hon'ble Delhi High court in the case of Noida Toll Bridge is not applicable to the assessee as in that case the lender was holding a substantial interest in the appellant company. The same has been a finding and j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision of section 269SS by the assessee company, which is effectively controlled by the lender, the same is apparent from the structure of the transactions and agreement. Therefore the transaction is not out of any emergency or contingency. The same has been done with no regard to provision of Income Tax Act. ix) These transactions have been done in a pre planned, predetermined, structured manner, without a reasonable cause and justification, by consciously ignoring the provisions of section 269SS of the Income-tax Act, 1961. Accordingly, the Addl. CIT, levied a penalty of Rs.14,32,57,724/- u/s 271D of the Act for accepting loan in contravention of provisions of section 269SS of the Act. 3. On appeal, the learned CIT(A) cancelled the penalty in the following terms:- "4.2 I have carefully considered the penalty order and the submissions made by the Id. AR. As per the facts of this case, the appellant company was incorporated on 18.05.2006. As such, this is the first year of its operation. During the year under consideration, the appellant had executed a development agreement with the developer, M/s Duce Properties & Investment Pvt. Ltd. (subsequently known as M/s Jindal Rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h markings for each payment, copy of title deeds of land purchased, copy of audited Balance Sheets and statement of accounts of M/s Duce, copy of joint development agreement, reconciliation of land payments with the account of M/s Duce and confirmation from M/s Duce were urnished before the AO during the assessment and penalty proceedings. In fact, as argued by the Id. AR, the appellant and M/s Duce are associate companies belonging to the same group and the said transactions were done in bonafide and genuine manner under the joint development agreement in accordance with the Haryana Land Ceiling & Township Development Regulations. The payments made by M/s Duce for purchase of the above land ,to the farmers on behalf of the appellant has been duly shown by the appellant as unsecured loan as per book entry. In this regard, I find that section 269SS was introduced w.e.f. 01.04.1984 to curb introduction of black money in the form of cash through loans and deposits. The purpose of introduction of section 269SS by the Finance Act, 1984 w.e.f. 01.04.1984 as per the Board's Circular was to plug the loophole in cases where unaccounted cash found during search operation was sought to be exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as he was of the view that the assessee had violated the provisions of section 269SS of the Act because the payment of Rs. 4.85 crores to the Delhi Government was not made in the manner prescribed in section 269SS of the Act. We may note at this stage itself that the said payment had in fact been made by IL & FS vide account payee cheque to the Delhi Government and the amount was debited to the account of the assessee in its books of account. Not being satisfied with the reply filed by the assessee to the show cause notice, the Assessing Officer levied a penalty of Rs. 4.85 crores under section 271D of the Act on the assessee for alleged violation of the provisions of section 269SS of the Act. Aggrieved, the assessee preferred appeal to the Commissioner of Income tax (Appeals) but without any success. The assessee carried the matter in further appeal to the Tribunal. By the impugned order, the Tribunal had deleted the said penalty. While holding that the provisions of section 269SS of the Act were not attracted, the Tribunal has noticed that:(i) in the instant case, the transaction was by an account payee cheque, (ii) no payment on account was made in cash either by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: ………………………………………………………………………………………………………………………………….. Explanation: For the purpose of this section, (iii) 'Loan or deposit' means loan or deposit of money." 5.1 The aforesaid provisions of s. 269SS say that if the stipulated amount of loan or deposit is accepted otherwise than by crossed cheque or account payee bank draft, there is a violation of the said provisions. But the explanation appended to the provisions of s. 269SS of the Act makes it clear that deposit or loan must be made through money. Here, in the instant case, details of unsecured loans revealed that the assessee had accepted unsecured loans otherwise than by crossed cheque or account payee bank draft and all the transactions were through book adjustment carried out by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. Vs. DCIT, 61 ITD 227(Pune), ACIT Vs. Gujrat Ambuja proteins Ltd., 89 TTJ 324 (Ahd.),ACIT Vs. Ruchika Chemicals & Industries Pvt. Ltd.,88 TTJ85(Del),and Jagvijay Auto Finance Pvt. Ltd. vs. ACIT,52 ITD504(Jaipur), the ITAT have consistently held that the acknowledgement of debt by the assessee-company by passing a journal entry in its books of account would not come within the ambit of the words 'loan or deposit' as mentioned in section 269SS and 269T of the Act. Similar view was taken in the case of Bombay Conductors & Electricals Ltd. Vs. DCIT,56 TTJ 580(Ahd.). This decision of the ITAT has been upheld by Hon'ble High Court in the case of CIT Vs. Bombay Conductors & Electricals Ltd, 301 ITR 328(Guj).A similar view has been taken by the Hon'ble jurisdictional High Court in Noida Toll Bridge Co. Ltd.(supra),followed by the ld. CIT(A). 5.4 We find that the ITAT Cochin Bench in their decision in the case of Muthoot M George Bankers(supra) held that the transactions inter se between the sister concerns and the assessee cannot partake of the nature of either "deposit " or " loan ", though interest might have been paid on the same. Excepting for the transfer of funds being wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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