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TMI Blog2011 (6) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... as loan/deposits in its statutory report in form 3(1). Relief claimed in appeal. The order of the CIT(A) on the issues raised in the aforesaid grounds be set aside and that the order of the AO be restored. "[1] On the facts and in the circumstances of the case the Ld. CIT(A) has erred in canceling the order levying penalty of ₹ 30,92,911/ - under sect ion 271E of the Act without considering the fact that there was no reasonable cause for the assessee to indulge in to cash transact ions in violation of Sect ion 269T of the Act. [2] The Ld. CIT(A) has erred in disregarding the fact that the statutory Auditors in their report in form 3(1) has reported these transact ions as loan / deposits whereas CIT(A) has termed them as transact ions in cur rent account. Relief claimed in appeal. The order of the CIT(A) on the issues raised in the aforesaid grounds be set aside and that the order of the AO be restored. " 2. None appeared on behalf of the assesse; instead wr it ten submissions have been filed . We, therefore, decided to dispose of the appeal in the light of these written submissions, after hearing the learned Departmental Representative. 3 Adverting to ground nos. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al ty u/s 271D & 271E of the Act. However, the Addl. CIT did not accept the submissions of the assessee on the ground the transact ions were reported in the statutory Audit Report and the assessee did not establish with reference to each of the transaction that Shri Suryakant R Shah acted as a custodian only, holding the money for brief period, and that the same were deposited in the hostel's bank account at the earliest opportunity. Accordingly, the Addl. CIT imposed a penalty of ₹ 24,52,740/- & ₹ 30,92,911/- u/s 27ID & 271E of the Act respectively. 4. On appeal, the learned CIT(A) cancel led the penalty levied u/s 271D of the Act in the following terms: - "3.3 During the course of appellate proceedings, the AR had furnished certain evidences relating to the penalty initiated under section 27ID of the Act for contravention of provisions of Sec.269 SS of the Act. The same were forwarded to the AO for his comments which in turn, the AO vide his remand report dated 12.09.2008 submitted his comments. The gist of the AO's comments is as under: 3.3.1 On examination, the AO found that in the following 5 cases accounts were credited by passing journal entries for v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 269SS are not applicable. - 4.2.2 Without prejudice, even if provisions of section 269SS are applicable, no penalty is leviable in view of the following: 4.2.2.3 It may be noted that the circumstances for receipt of these amounts are already explained. That amounts are credited to account of Charitable trust which is regularly assessed to tax and which files returns but is not liable to tax. Both the parties to the transaction are identified and assessed to tax. There is no evasion of tax either actual or even alleged as seen from the penalty order and the remand report. That assessee was not aware that genuine transactions in cash could attract penalty. In these circumstances, penalty is not justified when there is no allegation of any evasion of tax and there is only a technical or venial breach of provisions of section 269SS. 4.2.2.4 Under section 271D, whenever there is contravention of provisions of section 269SS, penalty is not automatic but opportunity of hearing has to be given to the assessee and penalty is leviable only when there is no reasonable cause. 4.2.2.5 Reliance is placed on various decisions including the following: Decision of Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence in these cases also there was no violation of sect ion 269T (This view accords with the decision of Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd. (262 ITR 260) . 3.6 Regarding the other amounts, paid in cash, the appellant has submit ted the following: - 3.6.1 That the transact ions in this case are in the nature of current account and not in the nature of loan or deposit in as much as no interest is paid. Hence, provisions of sect ion 269SS and 269T are not applicable. That the circumstances for making these payments are already explained. That repayments are made to Charitable trust which is regularly assessed to tax and which is liable to file return but is not liable to tax. Both the parties to the transaction are identified and assessed to tax. There is no evasion of tax either actual or even alleged as seen from the penalty order and the remand report. That assessee was not aware that genuine transact ions in cash could at tract penalty. In these circumstances, penalty is not justified when there is no allegation of any evasion of tax and there is only a technical or venial breach of provisions of sect ion 269T. 3.6.2 Under sect ion 271E, wheneve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S of the Act, which read as under: " No person shall , after the 30th day of June, 1984, take or accept from any other person (hereafter in this sect ion 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 refer red to in clause (a) together with the amount or the aggregate amount referred to in clause (b) , is twenty thousand rupees or more: ……………………………………………………………………………………… …………………………………… ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) found that repayments in cash were only ₹ 12,03,155/ - while ₹ 2,10,000 was repaid by cheque and ₹ 10,36,756/ - through journal entries besides ₹ 6,43,000/ - incorrectly considered as repayments of loan/deposit. There is nothing on record to show that these transactions were attached with certain conditions or stipulation as to period of repayment, rate of interest, manner of repayment, etc. so as to treat the said transact ions as loans or deposits. The Revenue have not placed before us any material suggesting that the transactions were actually in the nature of loans or deposits. Since there is nothing on record to suggest that the transact ions are in the nature of loans or deposits, apparently, the provisions of sect ion 269SS & 269T are not attracted. The meaning of "deposit" and "loan" has been explained on page 8454 of the Chaturvedi and Pithisaria's Income tax Law. Fifth Edit ion, Volume 5, as under: "'Deposit ' and ' loan'- these two are not identical in meaning. - I t is true that both in the case of a loan and in the case of a deposit there is a relationship of a debtor and a creditor b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned, there is no case against the assessee that these transact ions had anything to do with evasion of tax or concealment of income. In the instant case, as is apparent from the penalty orders, there were number of transact ions between the assessee and the parties referred to above. As regards amount stated to have accepted through journal entries, there is no violation of provisions of sec. 269SS of the Act as held by the Hon'ble Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd.,262 ITR 260. 7.5 Hon'ble Madras High Court in CIT V Idhayam Publications Limited 285 ITR 221 (Mad) held that deposits and withdrawals of money from current account could not be considered as loan or advance. . 7.6 There is another aspect of the matter. In the case of Bombay Conductors & Electricals Ltd. Vs. DCIT, 56 TTJ 580(Ahd.), the Tribunal found that there was no evidence on record to show that infraction of the provisions was with the knowledge or in defiance of the provisions. It was further found that there was nothing on record to indicate that the assessee had indulged in any tax planning or tax evasion and if at all there was a violation, it was mere venial or techn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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