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TMI Blog2018 (11) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... mon order of Ld.CIT(A) in ITA Nos.259 to 262/17-18 dated 25.06.2018 confirming the levy of penalty u/s.271D of the Act made by ld. Assessing Officer. 2.1 ITA Nos.2195 & 2197/Chny/2018 for assessment years 2014-15 & 2015-16 are the appeals against the common order of Ld.CIT(A) in ITA Nos.263 & 264/17-18 dated.25.06.2018, and ITA Nos.2199, 2201, 2203 & 2205/Chny/2018 for assessment years 2012-13 & 2015-16 are directed against the common order of Ld.CIT(A) in ITA Nos.255, 256, 257 & 258/17-18 dated 25.06.2018 confirming the levy of penalty u/s.271E of the Act made by ld. Assessing Officer. 3. Shri S.Sridhar represented on behalf of the Assessee, and Dr.Srinivasa Rao represented on behalf of the Revenue. 4. The facts in all the appeals are identical and consequently, it was submitted by ld.A.R that in regard to levy of penalty u/s.271D of the Act, the appeal in ITA No.2198/Chny/2018 can be taken as a sample and in regard to levy of penalty u/s.271E of the Act, the appeal in ITA No.2199/Chny/2018 can be taken as a sample. ITA No.2198/Chny/2018 -Sec.271D 5. Ld. Counsel for the assessee submitted that the assessee is a company. It was a submission that there was a search conducted at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was a submission that the assessee company never paid Dr. A.M Arun any interest. It was a submission that prima facie the assessee had shown the reasonable cause for taking the funds in cash from Dr. A.M Arun, who had in turn taken the loan in cash from Shri J. Dinakaran. It was a submission that the fact that the assessee has not paid any interest to Dr. A.M Arun, clearly showed that the transaction between the assessee and the Dr. A.M Arun was in the form of running account. It was a submission that Dr. A.M Arun would withdraw the cash from the assessee company's current bank account and repay the same to Shri J. Dinakaran. It was a submission that the assessee being a company, could not take a loan from Shri J. Dinakaran directly as taking of the loan was specifically barred from individuals. It was a submission that the assessee had shown reasonable cause for taking of the cash from Dr. A.M Arun and in view of the provisions of the section 273B of the Act, penalty levied u/s.271D was not exigible and the same was liable to be deleted. 5.1 It was an alternate prayer that the total of the transactions in cash between the assessee and Dr. A.M Arun, the Director of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had also relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs.Idhayam Publications Ltd., reported in [2006] 285ITR 221(Mad.) wherein the Hon'ble Madras High Court had held that the director having deposited funds in the form of cash in the current account of an assessee-company and also withdrawing the same from the current account, the same cannot be treated as loan or deposit. It was a submission that the Ld.CIT(A) without considering any of the explanation submitted by the assessee, confirmed the levy of penalty u/s.271D of the Act. It was a submission that provisions of the section 271D clearly shows that the same was for contravention to provisions of the section 269SS and perusal of the provisions of the section 269SS showed that it was under Chapter-XXB of the Income Tax Act, 1961, which was for the purpose of "counteracting evasion of tax". It was a submission that there was no unaccounted transactions in the present case and in fact, no additions on account of unaccounted transactions have been made in the case of assessee-companies, or in the case of Dr. A.M Arun. It was a submission that all the transactions were genuine and accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the section 269SS stood violated and provisions of the section 271D of the Act was exigible. Ld.D.R drew our attention to the provisions of the section 269SS(c) to say that the words used were "the amount or the aggregate amount referred to clause (a) or (b)". It was a submission that each transaction was to be considered not individually, but in aggregate and thus, the alternate prayer of the assessee in respect of the peak credit of the loans could not be agreed to. It was a further submission that the claim of assessee that the director of the assessee company, Dr. A.M Arun has been penalized for the same amount, and therefore, the assessee company should not be penalized, would not be acceptable in so far as the company is a different entity from Dr. A.M Arun, who is an assessee in his individual capacity. It was a submission that nothing has been brought on record to show that Dr. A.M Arun had taken the loan from Shri J. Dinakaran on behalf of the assessee company, or that Dr. A.M Arun acted on behalf of the assessee company. The Revenue was absolutely correct in levying the penalty under sections 271D and 271E of the Act in respect of the assessee for having ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been levied on account of the withdrawal in cash by Dr. A.M Arun for the purpose of repayment to Shri J. Dinakaran in respect of loan taken by Dr. A.M Arun on behalf of the assessee company. It was a submission that Dr. A.M Arun has also been penalized for repayment of the loan and clearly the penalty has been levied multiple times for the same amount. It was a submission that the provisions of the section 269SS and 269T of the Act was for the purpose of curtailing unaccounted transactions whereas in the present case, the transactions were fully accounted and had been done only on account of commercial exigencies. It was a submission that as the amounts had been taken in cash by Dr. A.M Arun from Shri J. Dinakaran, the same had to be repaid in cash itself, as that was the condition under which the loans had been taken by Dr. A.M Arun from Shri J. Dinakaran. It was a submission that consequently the funds had been withdrawn from assessee's bank account for the repayment of the loan by Dr. A.M Arun to Shri J. Dinakaran. 9. In reply, the ld.D.R submitted that nothing has been brought on record to justify the repayment of the loan in cash. It was a submission that the prayer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.Arun to the two assessee's herein. The utilization details given before the AO shows break-up of the purposes for which the amount received from Dr.A.M.Arun has been used. The first page of the cash flow chart is attached herewith as follows: Utilization of Payment of amount received from Dinakaran Date Amount received by Dr.AM Arun Banks/NBFC- loan repayments Vasan Denta l Hospi tal salary Employees salary Doctor's Professional fees Critical Vendor's payments Hospital rent payment Statutory payment Total Opening Bank Balance including Operational Cash Balance Amount received from JD Total all Bank Balance Total payments 1 2 3 4 5 6 7 8 9 10 11 12 13 14 3-Jan.12 1,200,000 - - -- - - - - - 15,943,936 1,200,000 17,143,936 17,048,320 4.Jan.12 700,000 - -- - - - 11,378,596 700,000 12,078,596 3,430,639 5.Jan.12 1,100,000 - - 10,239,034 38,08,734 - - 48,322,771 41,861,189 1,100,000 42,961,189 124,020,848 9.Jan.12 2,500,000 - - - - - 4,467,535 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,355,450 - - - - - - 8,355,472 32,797,055 3,200,366 35,997,421 34,346,258 26 Mar 13 1,000,000 - - - - - - - - 15,789,039 1,000,000 16,787,039 26,700,698 27 Mar 13 1,655,375 - - - - - - - - 21,712,350 1,655,376 23,367,726 14,156,607 28 Mar 13 700,000 1,540,460 - - - - - - 1,540,483 15,944,962 700,000 16,644,962 33,478,156 28 Mar 13 - - - - - - - - - - - - - 30 Mar 13 2,799,367 13,933,362 - - - - - - 13,933.386 82,984,452 2,799,367 85,783,819 77,385,856 31 Mar 13 - 8,000,000 - - - - - - 8,000,025 27,631,869 - 27,631,869 1,846,530 3 Apr 13 - - - - - - - - - 73,704,091 - 73,704,091 199,781,524 4 Apr 13 - - - - - - - - - 151,959,631 - 151,959,631 16,827,794 12. A perusal of the cash flow statement produced shows the amount received by Dr.A.M.Arun on various dates and the payments made on the various dates. For example, amounts had been taken on 3rd January, and 4th January of Rs. 12.00 lakhs and Rs. 7.00 lakhs respectively, when the assessee had Rs. 1.59 Cr bank an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by Dr.A.M.Arun for the purpose of assessee to meet the unaccounted expenses of the assessee. In fact, in neither of the Assessment Orders, is there any addition on account of unexplained investments or unaccounted funds/expenses. The demands are on account of disallowances of expenditure. However, a perusal of the search assessment order in the case of Shri J.Dinakaran as submitted by the Ld.DR at the behest of the bench shows that certain unaccounted income is being assessed in the hands of Shri J.Dinakaran. The assessment seems to have been made on the basis of re-worked notional balance sheet and statement of affairs prepared from the seized records. The Assessment Order of Shri J.Dinakaran makes a mention of the loan given to Dr.AM.Arun at Page No.4 Para No.4 of the Assessment Order, specifically the Assessment Order in the case of Shri J.Dinakaran for the AY 2015-16. Thus, unaccounted incomes in respect of these loan transactions have been traced as unaccounted income of Shri J.Dinakaran. Thus,what becomes clear from the above facts is that the unaccounted cash of Shri J.Dinakaran has been routed through Dr.A.M.Arun, deposited intothe accounts of the two assessees her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h evidence and, in fact, the cash flow submitted by the assessee negates the claim of business exigency. 16. A perusal of the decision of the Hon'ble jurisdictional High Court in the case of M/s.Idhayam Publications Ltd., reported in 285 ITR 221 (Madras) relied upon by the assessee shows that a Private Ltd. Company had received cash from its Director.Consequently, the Hon'ble Jurisdictional High Court had given a finding that deposit/withdrawal of the money from the current account could not be considered as a loan or advance. In the present assessee's case, herein, Dr.A.M.Arun admittedly is one of the promoter shareholder and director of the assessee companies. But the cash which has been deposited in the bank account of the assessee companies, is not that of Dr.A.M.Arun, the shareholder and director. Dr.A.M.Arun allegedly has deposited the cash in the various bank accounts of the assessee companies maintained with the City Union Bank. The cash has been obtained by Dr.A.M.Arun from Shri J.Dinakaran. The fact that Dr.A.M.Arun deposited the cash in the bank account of the two assessee companies herein itself puts into question the issue of reasonable cause. This is not a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts in cash from Dr.A.M.Arun in violation of provisions of Sec.269SS, the penalty levied u/s.271D of the Act as levied by the Addl. Commissioner and as confirmed by the Ld.CIT(A) stands confirmed. The decision of the Hon'ble jurisdictional High Court in the case of M/s.Idhayam Publications Ltd., referred to supra, has no application on the facts of the present case and the principles laid down by the Hon'ble Jurisdictional High Court in the case of Shri P.Muthukaruppan, referred to supra, and Nandhi Dhall Mills, referred to supra, have been rightly applied by the Addl. Commissioner and the Ld.CIT(A). 19. Coming to the penalty levied u/s.271E of the Act, the admitted fact remains that cash has been deposited into the bank account of the assessees herein. The funds having been routed through the bank accounts, why was the same withdrawn in the cash for repayment to Dr.A.M.Arun and subsequently to Shri J.Dinakaran is not explained. What stop the bank transfer of the funds from the assessee's bank account to the bank accounts of Dr.A.M.Arun and consequent transfer to Shri J.Dinakaran. The Assessment Order in the case of Shri J.Dinakaran gives the picture that the moneys were the u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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