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TMI Blog2016 (5) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... d cheque/demand draft in violation of the provisions of section 269SS of the Act. Therefore, the A.O. issued a show cause notice u/s 271D r.w.s. 269SS of the Act and asked to explain why penalty u/s 271D of the Act shall not be levied for accepting the loans in contravention of the provisions of section 269SS of the Act. In response to the show cause notice, the authorized representative of the assessee appeared and submitted that there was no violation referred to in section 269SS of the Act, as the assessee has not accepted loan in cash. The assessee further submitted that the firm has availed loan from Andhra Bank and the same has been repaid by partners from their individual accounts. The firm has acknowledged the debt by passing journal entries in the books of accounts of the firm, therefore, it cannot be considered as acceptance of loan or deposit in violation of section 269SS of the Act. It was further submitted that these are genuine transactions and the sources for the cash received from the partners has been explained before the A.O. The genuine transactions cannot be brought under the purview of rigorous provisions of section 271D of the Act. The A.O. after considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that when the sources of funds were explained and their utilization was also properly explained by the respective partners, just because the loan has not been accepted by cheque or demand draft, no penalty can be levied u/s 271D of the Act. The CIT(A) after considering the submissions of the assessee held that no penalty can be levied u/s 271D of the Act, when the loan has been accepted by way of journal entries. The CIT(A) further held that the assessee firm has acknowledged the debt by passing journal entries in the books of accounts, therefore, there is no violation referred to in section 269SS of the Act. It was further held that the A.O. has not doubted the genuineness of the transactions. The assessee firm has recorded the transactions in the books of accounts and also explained the sources for the loan accepted from the partners. Therefore, the A.O. was not correct in coming to the conclusion that this is a colourable device for avoidance of tax. With these observations, the CIT(A) directed the A.O. to delete the penalty of ` 50 lakhs levied u/s 271D of the Act. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 4. The Ld. D.R. submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that there is a violation referred to in section 269SS of the Act which warrants levy of penalty u/s 271D of the Act. In support of his arguments, relied upon the judgement of ITAT, Pune Bench in the case of Sun Flower Builders Pvt. Ltd. Vs. DCIT and also ACIT Vs. Gujarat Ambuja Proteins Ltd. 3 SOT 822. 6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The facts which lead to imposition of penalty u/s 271D of the Act are that the assessee firm has repaid loan borrowed from M/s. Andhra Bank through its partner's account. The firm has borrowed loan from the bank which was repaid by the partners of the firm from their individual accounts. The firm has passed journal entries in the books of accounts to acknowledge the debt from the partners. The A.O. was of the opinion that any loan in excess of specified limit accepted otherwise than by way of account payee cheque or draft comes within the provisions of section 269SS of the Act, thereby penalty is leviable u/s 271D of the Act. It is the contention of the assessee that these are genuine transactions, therefore, no penalty can be levied u/s 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Section 271D of the Act provides for levy of penalty for the contraventions of the provisions of section 269SS of the Act. Section 269SS of the Act prohibits acceptance of cash loans beyond specified limits. As per the provisions of section 269SS of the Act, any person takes or accepts any loan or deposit other than by way of account payee cheque or demand draft, then he shall be liable to pay, by way of penalty a sum equal to the amount of loan or deposit so taken or accepted. The object behind the insertion of section 269SS is to prevent the assessee's from explaining the unaccounted cash found in the course of search by way of cash loans or deposits taken from various persons and also bringing into the books of accounts unaccounted income in the form of loans or deposits. The section deprives persons from taking or accepting from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of such loan or deposit or the aggregate of amount of such loan exceeds ` 20,000/-. Therefore, from the provisions of section, it is very clear that the object of insertion of this section is to prohibit persons explaining the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries and also the genuineness of the transactions is not in doubt. The relevant portion is reproduced hereunder: "7.3 In the case of Gujarat Ambuja Proteins Ltd., the Hon'ble ITAT, Ahmedabad Bench, has held "9. After going through the rival contentions, I am of the opinion that on merits, the imposition of penalty is uncalled for. In the first place, it is absolutely clear that the accounts of Ambuja Agro Industries Ltd. were credited by journal entries on account of payments made by the said company for an on behalf of the appellant-company and thus there was no actual receipt of money. Necessary documentary evidence was furnished in proof of the same before the Dy. CIT as well as before me. Provisions of s.269SS are applicable when any loan or deposit is taken otherwise than by an account payee cheque or account payee bank draft. Loan or deposit as per Expln. (iii) to s. 269SS means loan or deposit of money. In other words, if the credit is for the amount of money received or accepted, only then the provisions of s. 269SS will be applicable and for the journal entry wherein no actual money is received, the said provisions to my mind, cannot be invoked. The enlargement of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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