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TMI Blog2012 (12) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... ques (other than account payee cheques) as securities which is contravention of provisions of section 269SS of the Act." 3. Briefly stated facts are that scrutiny assessment u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was framed and during the course of assessment proceedings, the Assessing Officer noticed that the assessee had accepted cheques (other than account payee cheques) for certain individuals wherein the sum involved in each case was in excess of ₹ 20,000/-. Referring to the provisions of Section 269SS of the Act, it was held by the Ld. Addl. CIT that this amounted to acceptance of loan or deposit otherwise than by account payee cheque or account payee draft, in contravention of the provisions of Section 269SS. The assessee was called upon to show-cause why the same may not be levied. The assessee duly filed reply to the show-cause notice and the explanation given by the assessee was not accepted by the Ld. Addl. CIT and he imposed penalty u/s 271D of ₹ 2,20,72,084/-. Against this assessee filed appeal before Ld. CIT(A) who after considering the submissions of assessee allowed the appeal. 4. Against the order of Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,- (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b) is [twenty] thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,- (a) Government ; (b) Any banking company, post office savings bank or cooperative bank ; (c) Any corporation established by a Central, State or Provincial Act ; (d) Any Government company as defined in section 617 of the Companies Act, 11956 (1 of 1956) ; (e) Such other institution, associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions, on the facts of the present case, it appears that Assessing Officer has wrongly applied the provisions. Since in this case, the assessee had, in fact, given loan to the farmers, therefore, there was no question of accepting of loan or deposit, in fact, the assessee had given loan which was repaid by the farmers. We find that Ld. CIT(A) has dealt with this issue in para-5 and 5.1 of his order, which is reproduced hereinbelow:- "5. I have considered the submissions of the ld. AR and the facts of the case. Here the assessee, being a "shroff", has two lines of business - cheque discounting business and money lending business. The two lines of business are separate and distinct. Separate ledgers are maintained in respect of the two lines of business. In the money lending business, the assessee accepts loans/advances on which interest is paid and lends out money by way of loan on which interests is charged. In this line of business, all transactions above ₹ 20,000/- have been made by assessment year of account payee cheques. It is only with regard to the cheque discounting line of business that the assessee has received the aggregate amount of ₹ 2,20,72,084/- thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved against the sale of goods and not by way of loan or the deposit of money). Hence, I am of the opinion that the transaction in question did not amount to loan or deposit in the hands of the assessee." From the above, we do not find any infirmity in the order passed by Ld. CIT(A) as he has rightly held that the transactions in question did not amount to loan or deposit in the hands of the assessee. Thus, the provisions of Section 269SS of the Act are not applicable. Therefore, the order of Ld. CIT(A) is hereby upheld and this ground of Revenue's appeal is dismissed. 8. In the result, Revenue's appeal is dismissed. Coming to ITA No.1429/Ahd/2010. 9. The facts are identical as in Revenue's appeal in ITA No.1428/Ahd/2010 the issue is with regard to deletion of penalty of ₹ 2,10,44,348/- levied u/s 271E of the Act for repayment of loan / deposits in cash in contravention of provisions of Section 269T of the Act. 10. Ld. CIT-DR supported the order of Assessing Officer. 11. We have heard the Ld. CIT-DR and perused the materials available on record. We find that in this case also there is a wrong application of law by the Assessing Officer. The Ld. CIT(A) has dealt with this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either was the amount in question kept as a 'deposit with the assessee by the farmer for return after a specified period. Here, the nature of the transaction, being a cheque discounting transaction, clearly places the sum outside the scope of either loan or deposit. In a cheque discounting transaction, the shroff makes the payment against the security of the cheque. Hence, the true nature of the transaction would be that the cheque amounts only to an instrument of security which in turn is encashed by the 'shroff' on the due date sometime in the future. If at all any loan transaction takes place, it would be the farmer who would be the recipient (although it would be difficult to hold so, given the fact that the same would be received against the sale of goods and not by way of loan or the deposit of money). Hence, I am of the opinion that the transaction in question did not amount to loan or deposit in the hands of the assessee. 5.2 Another aspect of the matter is whether the transactions of bill/cheque discounting were intended by the legislature to be within the ambit of the section. Ion this regard reference can be made to Circular No. 345 dated 28th June, 1982, explaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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