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TMI Blog2015 (10) TMI 2238X X X X Extracts X X X X X X X X Extracts X X X X ..... t Singh, C.A. For the Respondent : Shri P. Dam Kanunjna, Sr. DR ORDER Per L. P. Sahu, Accountant Member This appeal by the assessee is directed against the order of ld. CIT(A)- XVI, New Delhi dated 04.06.2011, challenging the confirmation of penalty of ₹ 30,00,000/- imposed by AO u/s. 271D of the Income-tax Act, 1961 for the assessment year 2007-08. 2. The brief facts of the case are that the assessment of the assessee u/s. 143(3) was completed on 11.12.2009 at a total income of ₹ 1,03,78,160/- as against returned income of ₹ 1,02,55,632/-. During the course of assessment proceedings, the Assessing Officer having perused the loan account of Shri Harpal Singh Pasricha, Managing Director of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h lists out entities and persons on whom the prohibition contained in section 269SS does not apply and the loans recorded through journal entry are not covered in those exceptions. He also observed that the assessee failed to explain as to why the loan was not accepted by the assessee company by way of account payee cheque/draft particularly when the assessee company and both of its directors maintained bank account and therefore, reasonable cause u/s. 273B does not come to the rescue of the appellant. Aggrieved by the impugned order, the assesseecompany has come up in this appeal before us. 3. The ld. Counsel for the assessee contended that in order to expore financial assistance from lending institution, the assessee company had the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same amount to the loan account of Mr. Harpal Singh. Therefore, this journal entry does not stand in breach of section 269SS, as observed by the authorities below. The ld. Counsel for the assessee further contended that there is no involvement of physical transfer of money in this case, as there was a journal entry which did not fall within the mischief of section 269SS warranting levy of penalty u/s. 271D of the Act as per Explanation (iii) appended to section 269SS which explains (iii). Loan or Deposit means Loan or Deposit of money. It was also argued that the shares were subsequently allotted to Shri Harpal Singh Pasricha and Mrs. Neelam Kaur as the loan account of both Directors was later on adjusted against share capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as under : 269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,- (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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 am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 51 of that Act; (ii) co-operative bank shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ; (iii) loan or deposit means loan or deposit of money; (iv) specified sum means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.] From the bare reading of above section in consonance with its Explanations, it is apparent that the deposit or loan must be through money, as explained in Explanation (iii) to this section. It is not in dispute that the loan of ₹ 30 Lakhs has been accepted by the assessee-company in the present case by way of journal entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the type of loan to be accepted. Para 32.4 of the Circular gives the meaning of loan or deposits which says that the expression of loan or deposit for the purpose of the provision will mean Loan or deposit of money . This implies that only those loans and deposits are covered by section 269SS where funds/money are transferred. We, therefore, are of the opinion that where the loans are recorded by merely passing adjustment entries or journal entries are outside the scope of section 269SS of the Act. Therefore, in our considered opinion, the ld. CIT(A) was not justified in confirming the penalty against the assessee on this count. Our view stands fortified by catena of decisions of Hon ble jurisdictional High Court and various Be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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