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TMI Blog2018 (7) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee well before 11.10.2007. These facts would show that there was no urgent business necessity for the assessee on both the occasions to accept the loan in cash. Further, the assessee has also failed to demonstrate that on both the dates the assessee was not having sufficient funds in its possession. We are of the view that the assessee has failed to show that there was a reasonable cause for getting loans in violation of the provisions of sec. 269SS of the Act. Penalty confirmed - Decided against assessee - I.T.A. No. 6304/Mum/2012 - - - Dated:- 13-6-2018 - Shri G.S. Pannu (AM) And Shri Joginder Singh (JM) For The Assessee : Shri M.S. Mathuria For The Department : Shri R.P. Meena ORDER Per B.R. Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 01-08- 2012 passed by Ld CIT(A)-19, Mumbai confirming penalty of ₹ 2.00 lakhs levied by the Additional Commissioner of Income tax u/s 271D of the Act for violation of provisions of sec. 269SS of the Act during the year relevant to the assessment year 2008-09. Thus, the solitary issue urged in the appeal related to the imposition of penalty u/s. 271D of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Bench as such based on the reference note of the Division Bench. Hence, copy of the reference note made by the Division bench was given to both the parties. Accordingly, with the concurrence of both parties, the subject reference is being disposed of considering the entirety of issue relating to the imposition of penalty u/s. 271D of the Act in this case. 5. After going through the reference made by the Division Bench, the Ld Counsel appearing for the assessee, Shri M.S. Mathuria, submitted that he did not agree with the observations made by the Division Bench in paragraph 5 of its reference note, wherein the Division Bench had stated that the assessee had contended that there is no necessity for the assessee to prove the exigency of accepting the loan and deposit in contravention of provisions of sec. 269SS of the Act. He submitted that he did not contend so and further submitted that he is agreeing that the assessee is indeed required to show that there was reasonable cause for violating the provisions of sec. 269SS of the Act. Referring to Paragraph 3.2 of the order passed by Ld CIT(A), the Ld A.R submitted that the assessee has earlier demonstrated that there was busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10-2007 by payees s a/c cheque. 2) ₹ 1,00,000/- on 05-12-2007. The subsequent payment was required to pay of the clearing forwarding towards their bill which consists of custom duty, other charges and octroi and his commission. The fund was falling short and ₹ 1,00,000/- was required to be taken on cash. On earlier occasion though it was felt cash would be required it was actually not and hence payment was returned immediately. It is under these circumstances cash was deposited by one of the directors as aforesaid. Thus, the appellant has submitted that the amount brought in by the director in cash from time to time for immediate requirement of the appellant company did not amount to transaction of loan/deposit and thus the penalty u/s 271D is incorrectly levied by the AO. 9. The Ld CIT(A) was not convinced with the explanations of the assessee. The ld CIT(A) took support of following observations made by Hon ble Supreme Court in the case of Asst. Director of Inspection (Investigation) Vs. Kum. A.B. Shanthi (255 ITR 258)(SC):- that (1) if there was a genuine and bonafide transaction and (2) if for any reason the taxpayer could not get a loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons from taking or accepting, after 30th June, 1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft Placing heavy reliance on the above said Explanatory Note, the Ld A.R contended that the AO did not give any finding that the loan so taken by the assessee constituted its unaccounted income. He further submitted that the tax authorities have not recorded any finding that the impugned loans were taken in cash with malafide intentions and with the sole objective of bringing concealed or undisclosed income into the books in order to avoid or evade tax. By placing reliance on the decision rendered by Hon ble Bombay High Court (in particular paragraph 25 of its order) in the case of CIT Vs. Triump International Finance (I) Ltd (2012)(345 ITR 270), the Ld A.R contended that the impugned penalty should be cancelled on the above said reason. 12. The Ld A.R further submitted that the assessee has taken impugned loans from its director. He submitted that the deposits taken by the limited companies are governed by provisions of section 58A of Companies Act, 1956. As per the above said provision, the deposits taken fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has given explanations before Ld CIT(A) that it took the loan by way of cash in order to meet the business requirements. However, the assessee has failed to substantiate the said explanation by furnishing any document to show that there was any urgency for getting loans by way of cash. With regard to the explanations offered before Tribunal also, the assessee did not furnish any documentary evidence to support the same. 16. The Ld D.R submitted that the assessee, before the Tribunal, has only elaborated the explanations already given before ld CIT(A). However he has brought in certain fresh facts, i.e., the assessee has given the name of party from whom the goods were expected to have been imported, the sequence of events like delay in shipment, tour program of director, the date of dispatch of goods from Hongkong etc. He submitted that even these fresh facts were also not substantiated with any evidence. The Ld D.R, accordingly, submitted that the assessee has failed to show that there was any reasonable cause for violating the provisions of sec. 269SS and accordingly contended that the penalty u/s 271D of the Act was rightly confirmed by Ld CIT(A). In support of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods were supposed to be imported, when the goods were shipped etc. 18. There is no dispute between the parties that bonafide nature of transactions alone would not be sufficient to escape the clutches of sec. 271D of the Act. As per the decision rendered by Hon ble Supreme Court in the case of Kum. A.B. Shanthi (supra), it is required to be established that there was some bonafide reasons for the assessee for not taking or accepting loan or deposit by account payee cheque or account payee bank draft, so that the provisions of sec.273B of the Act will come to the help of the assessee. Only in such cases, the AO is precluded from levying penalty u/s 271D of the Act. The Ld A.R took support of Explanatory note given while introducing the provisions of sec. 269SS of the Act. However, the Hon ble Supreme Court has rendered its decision in the case of Kum. A.B.Shanthi (supra) after considering the same and has expressed the view extracted above. In the case of Triump International Finance (I) Ltd (supra) also, the Hon ble Bombay High Court has deleted the penalty only on the ground of existence of reasonable cause. 19. The Ld A.R also contended that the impugned transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods were not shipped either on 01-10-2007 or on 05-10-2007, i.e., on the dates on which the impugned loans were taken. The question of payment of customs duty etc., would arise only upon shipment or receipt of goods. In fact, the assessee admits that the goods were expected to be shipped on the second occasion only on 11.10.2007, while the cash loan was taken on 05-10-2007. If the director had given cheque on 05-10-2007, the funds would have been credited to the account of the assessee well before 11.10.2007. These facts would show that there was no urgent business necessity for the assessee on both the occasions to accept the loan in cash. Further, the assessee has also failed to demonstrate that on both the dates the assessee was not having sufficient funds in its possession. 23. In view of the foregoing discussions, we are of the view that the assessee has failed to show that there was a reasonable cause for getting loans in violation of the provisions of sec. 269SS of the Act. Accordingly we are of the view that the Ld CIT(A) was justified in confirming the penalty of ₹ 2.00 lakhs imposed by the assessee. 23. In the result, the appeal filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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