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TMI Blog2024 (10) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... eceiving cash for transfer of immovable property would not have come to knowledge of assessee who was a woman having elementary education and no knowledge of tax laws, there was reasonable cause as mandated u/s 273B for failure to comply with Section 269SS and, therefore, penalty u/s 271D was not warranted and same was to be deleted. Accordingly, in view of the facts of the assessee s case and the judicial precedents on the said subject which have held that provisions of Section 271DD are not attracted in circumstances where the assessee has been able to demonstrate a reasonable cause for non-complying with the provisions of Section 269SS of the Act, no penalty can be levied u/s 271D we are of the considered view that Ld. CIT(A) erred in facts and in law in upholding the penalty under Section 271D on the assessee, looking into the instant facts. Appeal of assessee allowed. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Mehul K. Patel, A.R. For the Respondent : Shri R. N. Dsouza, CIT DR ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was to pay a yearly license fee of Rs. 120/- per gram to Shri Mandaliya. This transaction was recorded solely through a journal entry in the assessee's books, classifying the gold as an unsecured loan. Subsequently, the gold's value, amounting to Rs. 1,30,63,574/-, was reported as capital in M/s. Sparkle Gold. However, the agreement signed on July 12, 2011, indicated that the terms of the loan, particularly the payment of the license fee, violated Section 269SS of the Income Tax Act. The assessee defended his actions before the Assessing Officer by explaining that this was his first year in the retail and wholesale jewellery business and he required gold stock for starting his operations and thus borrowed gold from Shri Mandaliya under the condition of returning it after a specified period. The assessee argued that since he received physical gold rather than cash, the transaction did not contravene the definition of loan under Section 269SS of the Act. During penalty proceedings, the Joint Commissioner of Income Tax (JCIT) found that the assessee failed to provide adequate justification for accepting the gold loan in violation of Section 269SS. The JCIT noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary business le. In M/s Sparkle Gold. As per section 269SS of the Act no person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the deposition any loan or deposit otherwise than by an account payee cheque or account payee bank draft exceeding Rs. 20,000/- . Therefore, the loan acceptable in form of Gold is violating the provision of section 269SS of the Act. Therefore, I am of the opinion that this is a fit case for levy of penalty u/s. 271D of the Act as the assessee has violated the provisions of section 269SS without any reasonable cause in accepting the loans/deposits in the form of Gold amounting to Rs. 1,30,63,574/- from Shri Kaushik Kantilal Mandaliya during the year under consideration. 11. Accordingly, I hereby levy a penalty of Rs. 1,30,63,574/- u/s 271D of the Act, for accepting loans/deposits otherwise than by account payee cheque/draft in violation of section 269SS of the Act. 12. Assessing Officer is directed to issue demand notice and challan accordingly and make necessary entries in the records. 6. In appeal Ld. CIT(Appeals) confirmed the penalty imposed by the Assessing Officer. Ld. CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the lender negates the argument that there were no other options for loan acceptance. Therefore, Ld. CIT(Appeals) held that the assessee failed to demonstrate the necessity for the method of loan acceptance he chose, and the arguments presented by the assessee do not justify a deviation from the provisions of the law. Accordingly, Ld. CIT(Appeals) upheld the penalty imposed by the JCIT. While passing the order, Ld. CIT(Appeals) made the following observations: 5.3 The appellant emphasizes that the term money has a legal meaning as well as a popular sense both of which bar the inclusion of bullion or metal of any kind as such in the concept of money . On the one hand, the appellant himself contends that the gold metal in physical form had been accepted by him in the form of a loan and on the other hand the appellant raises a plea that gold in physical form does not fall within the meaning of money . Whether the gold metal or any other valuable item is accepted as and by way of loan or deposit by any person from any other person, it certainly indicates the contravention of the provision of Section 269SS of the Act, which specifically provides for the specified mode of carrying ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the above discussion, the facts that are involved in the instant case reveal that the appellant bad miserably failed to prove the necessity of using any other mode of raising loans otherwise than by way of the modes enumerated specifically in the provision of Section 269SS of the Act, thereby attracting the levy of penalty under the provision of Section 271D of the Act. Merely because the appellant had placed on record a copy of the Gold Agreement in the course of penalty proceedings before the JCIT, does not prove that there was a reasonable cause in not following the provision of Section 269SS of the Act. Be that as it may, the Statement of Facts and written submission of the appellant are examined in light of the evidences relied upon by him in the course of appellate proceedings. It is undisputed that the impugned amount of Rs. 1,30,63,574/- was accepted as a loan by the appellant from a third party in the form of gold metal in physical form during the financial year 2011-12 relevant to A.Y 2012-13. It is not a case where the appellant or the said third party did not have bank accounts at the relevant time or there was any reasonable cause for not following the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee s case, no cash or deposits were involved and both the assessee as well as Mr. Kaushik Mandaliya (the lender) was both have reported all the required details in their respective books of accounts and there is nothing which is unaccounted and therefore, there is neither any evasion of tax nor any intention to evade taxes. The third argument of the Counsel for the assessee was that entry for Gold taken is booked as unsecured loan in the journal entry in his books of accounts. Gold was taken with a condition to return the same after a stipulated time and therefore, there was no other way to book an entry in his books of accounts other than journal entry in order to record a transaction in it s actual form. The Counsel for the assessee relied on judicial precedents in support of the contention that provisions of Section 269SS of the Act were not attracted merely on the basis of journal entries. The Counsel for the assessee further submitted that there was a reasonable cause for taking the Gold from the lender which was that this was the assessee s first year in jewellery retail and wholesale business and it was with this intention that the assessee took loan of Gold stock to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f money and Gold metal , by the very definition of loan falls outside the purview of Section 269SS of the Act. Further, we would like to place reliance on some judicial precedents which have thrown useful like on the subject. 12. In the case of Ajitnath Hi-Tech Builders (P.) Ltd. 92 taxmann.com 228 (Bombay), the High Court held that journal entries constitute a recognized mode of recording of transactions and in absence of any adverse finding by authorities that journal entries were made with a view to achieve purposes outside normal business operations or there was any involvement of money, there is a reasonable cause for not complying with section 269SS and penalty under section 271D is not to be imposed. 13. The SLP filed by the Department was dismissed by Hon ble Supreme Court as reported in 102 taxmann.com 57 (SC). 14. In the case of Sudhir Kumar Rawat 148 taxmann.com 155 (Jabalpur - Trib.), the ITAT held that penalty under Section 271D was levied upon assessee for alleged violation of Section 269SS for having received certain amount from his wife in cash but it was found that assessee had not received any amount in cash from his wife and instead he received sale consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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