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TMI Blog2023 (10) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... NJUNATHA. G, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-11, Chennai, dated 09.03.2018 and pertains to assessment year 2008-09. 2. The assessee has raised the following grounds of appeal: 1. The order of The Commissioner of Income Tax (Appeals) - 11, Chennai dated 09.03.2018 in .TA.No.315/2016-17/CIT(A)- 11 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in confirming the levy of penalty u/s 271D of the Act for the presumed violation of the provisions of section 269SS of the Act without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the sustenance of the levy of penalty u/s 271D of the Act was wrong, erroneous, unjustified, incorrect and not sustainable in law and ought to have appreciated that the order imposing penalty was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 4. The CIT (Appeals) failed to appreciate that the transaction between the company and the Director/share ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers of the land were residing in remote places and insisting for cash payments. Since, there is a business exigency in making cash payments, the appellant company has taken loan from director in cash. Therefore, it cannot be said that there is a violation referred to u/s. 269SS of the Act, which attracts provisions of section 271D of the Act. 4. The AO, after considering relevant submissions of the assessee and also taken note of relevant facts opined that, the appellant has violated provisions of section 269SS of the Act, in accepting cash loan of Rs. 2,02,10,000/- from Shri. T. Mohan, Director of the company, which attracts provisions of section 271D of the Act. The ld. Assessing Officer, has discussed the issue at length in light of certain judicial precedents and held that the claim of the appellant that it could not open bank account in those areas for the reason that, they have purchased lands from various sellers and once the sellers found that there are transactions in the said area, they will escalate the price and will not be willing to sell their land is a figment of imagination and is not a reasonable or acceptable cause. Therefore, rejected arguments of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in those areas on the reason that they have purchased from various sellers; when once the sellers found that there are transactions in the said area, they will escalate the price and will not be willing to sell their land is assessee's figment of imagination and is not a reasonable or acceptable cause for exigencies for purchase of lands. Even if the same submission of the assessee is true its pointed out that the very purpose of Sec.269SS is to avoid such land transactions taking place in an non-transparent manner, leading to increase in Black Money' rather its to encourage such transactions to take place through banking transactions. In this case, the assessee company has not even opened a bank account to purchase such a costly immovable property. 11. This clearly shows that the assessee has not made any effort to conduct financial transactions in a transparent manner. Therefore, its hereby held that the assessee company has not taken any effort to conduct business without violating Provisions of Income tax Act such as 269SS and has not established any reasonable cause for the way it has conducted its business transactions in cash; which has lead to increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptance of loan/deposit. In the present case, the transaction between appellant and director is a routine current account, where the Director has given money to the company for purchase of lands. The ld. Counsel for the assessee further submitted that assuming for a moment, said transaction is considered as loan or deposit, but still it is outside the scope of provisions of section 269SS of the Act, because the Director Shri. T. Mohan has directly paid consideration for purchase of land to seller and has routed the transactions by way of journal entries in the books of accounts of the assessee. Since, the alleged loan has been taken through journal entries, the same cannot be considered as violation of section 269SS of the Act. In this regard he relied upon the decision of Jurisdictional High Court of Madras in the case of CIT vs Idhayam Publications Ltd [2006] 285 ITR 221 and the decision of Hon ble Delhi High Court in the case of CIT vs M/s. Muthoot Financiers in ITA No. 336/2002 dated 03.02.2015. 8. The ld. DR, Shri. AR V Sreenivasan, Addl. CIT, supporting the order of the ld. CIT(A) submitted that facts brought on record by the Assessing Officer clearly shows that, there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 269SS of the Act, in light of various arguments of the ld. Counsel for the assessee and we ourselves do not subscribe to the reasons given by the AO for the simple reason that, as per provisions of section 269SS of the Act, any loan or deposit in excess of Rs. 20,000/- cannot be received other than by way of account payee cheque/bank draft or by way of electronic transfer of funds. The term loan or deposit has been defined which includes loan or deposit of money. In general meaning of loan means, any loan borrowed from third party with payment of interest. Similarly, the original meaning of deposit means any sum received as deposit in pursuant to payment of interest. Therefore, the transactions between the appellant company and its director has to be understood in the context, in which said transactions has been entered into and further to ascertain whether said transactions falls within the ambit of provisions of section 269SS of the Act. Admittedly, the appellant has received loan from its director Shri. T. Mohan, for the purpose of purchase of lands in the name of the company. In fact, the appellant company has purchased lands in various survey numbers in Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the explanation of the assessee is bonafide and reasonable, then said explanation needs to be considered in light of reasonable cause as provided u/s. 273B of the Act. In the present case, if you go by the explanation of the assessee, it appears that there is a reasonable cause in accepting loan from director in contravention of provisions of section 269SS of the Act, for two reasons. Firstly, entire amount of loan has been utilized for acquisition of capital asset for the purpose of business of the company. Secondly, the appellant and the director both have disclosed transactions in their books of accounts for the relevant previous year. Further, the director has explained the source for loan given to the appellant company. Since, all these paramount s are satisfied, the genuineness of the transactions is not in doubt. Further, it is a case of loan between director and appellant company. Although, the appellant company and its director are two separate legal entities, but both cannot be considered as separate for the purpose of these transactions. If there are transactions between company and director, then said transactions inter-se cannot be considered as loan or deposit withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... san Healthcare P Ltd vs ACIT (supra), is not applicable to the facts of the present case. 15. The ld. DR, has also relied upon the decision of Hon ble High Court of Madras in the case of P. Baskar vs CIT (Supra). We find that in the said case, the assessee has obtained cash loan in the form of cheque discounting facility with the financers and assessee could not explain business exigency with evidence. Under those facts, the Court held that the provisions of section 271D of the Act, was rightly invoked and penalty u/s. 271D of the Act is in accordance with law. In the present case, simpliciter transaction between company and director are in the nature of current account and thus, said case laws cannot be applied to the facts of the present case. 16. The ld. DR, also relied upon the decision of Hon ble High Court of Madras in the case of Kasi Consultant Corporation vs DCIT (Supra). In the said case, the assessee firm has accepted deposits in cash exceeding prescribed limit from the public for the purpose of real asset business and said loans were in contravention of provisions of section 271D of the Act and thus, the Hon ble High Court held that penalty u/s. 271D of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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