ZODIAC DEVELOPERS P. LTD, MUMBAI V. ADDL CIT 7(3), MUMBAI

ITA 31/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8052 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SHAHU
• Assessee Lawyers: S C TIWARI; NATASHA MANGAT
• Keywords: Bonafide belief; Question of law; Reasonable cause
• Section: 143(3); 68; 10; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI SANJAY GARG, J M ITA NO. 31 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 5 - 06 ) ZODIAC DEVELOPERS PVT. LTD., 404, DEV PLAZA, S.V.ROAD, ANDHERI (WEST), MUMBAI - 58 VS. A D CIT - 7 (3), MUMBAI - 20 PAN/GIR NO. : A A ACZ 0 428 N ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. S.C.TIWARI & NATASHA MANGAT /REVENUE BY : M R . R.K.SHAHU DATE OF HEARING : 2 1 ST JULY , 201 4 DATE OF PRONOUNCEMENT : 10/10/ 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER CIT(A ) , DATED 28 - 8 - 2010 FOR THE ASSESSMENT YEAR 200 5 - 06 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271D AMOUNTING TO RS.19,90,000/ - . 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO NOTICED THAT THE CASH BOOK OF THE ASSESSEE COMPANY REVEALED THAT IT HAS RECEIV ED CASH FROM ONE OF THE DIRECTORS OF THE COMPANY NAMELY SHRI RAMESH SHA H. THE DETAILS STATED IN THE ASSESSMENT ORDER ARE AS UNDER : - ITA NO. 31 /1 1 2 MONTH AMT.(RS.) 1. JULY, 2004 140000 2. SEPT. 2004 115000 3. OCTOBER, 2004 480000 4. NOVEMBER,2004 460000 5. DECEMBER, 2004 270000 6. FEBRUARY,2005 125000 7. MARCH, 2005 400000 TOTAL 1990000 THE AO OBSERVED THAT ABOVE TRANSACTION OF MONEY HAVE BEEN DULY CONFIRMED BY SAID SHRI RAMESH SHAH THROUGH THE LETTER OF CONFIRMATION SIGNED BY HIM. SINCE THE SAID AMOUNT COULD NOT BE TAKEN INTO FOLD OF ASSESSABLE INCOME OF ASSESSEE IN TERMS OF S ECTION 68 OF THE ACT, IT WAS DECIDED BY AO THAT MONEY BE ACCEPTED AS EXPLAINED LOAN AND SINCE THERE WAS A PRIMA FACIE VI O LATION OF SECTION 269SS OF THE ACT, PENALTY PROCEEDINGS WERE INITIATED U/S. 271D(2) OF THE ACT. THE ASSESSEES CONTENTION BEFORE THE AO WAS AS UNDER : - THE ASSESSEE'S CASE IS MAINLY THAT THE CASH TRANSACTION BETWEEN THE DIRECTOR AND THE COMPANY WERE THROUGH CURRENT ACCOUNT AND WAS NECESSITATED FOR ENSURING MEETING OF THE FUND 'REQUIREMENTS OF THE COMPANY WHICH AROSE SUDDENLY FROM TIME TO T IME. RELEVANT PORTION OF ASSESSEE'S REPLY IS QUOTED BELOW FOR THE PURPOSE OF APPRECIATING THE TRANSACTION IN THE LIGHT OF SEC.269SS BEFORE GOING INTO THE VARIOUS JUDICIAL AUTHORITIES REFERRED TO/RELIED UPON BY THE ASSESSEE. 'THE ASSESSEE HAS RECEIVED AMO UNTS IN CASH DURING CERTAIN MONTHS OF THE PREVIOUS YEAR FROM THE DIRECTOR SHRI. RAMESH SHAH AS SHOWN IN THE SHOW CAUSE NOTICE ISSUED BY YOU. THE ACCOUNT REFLECTING TRANSACTIONS BETWEEN THE ASSESSEE AND THE DIRECTOR WAS IN THE NATURE OF CURRENT ACCOUNT. THE DIRECTOR USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND WITHDRAW THE MONEY FROM THE SAME CURRENT ACCOUNT AS AND WHEN THE NEED ARISES. MORE IMPORTANTLY, SUCH TRANSACTIONS BETWEEN THE ASSESSEE AND THE DIRECTOR ARE ATTRIBUTABLE TO VARIOUS EXIGENCIES AND VI CISSITUDES OF THE BUSINESS. IT MAY NOT BE POSSIBLE FOR AN ASSESSEE TO PREDICT WITH PRECISION THE EXACT REQUIREMENTS OF MONEY FOR DISCHARGING ITS OBLIGATIONS CONNECTED TO THE BUSINESS, STATUTORY OR OTHERWISE. IT MAY NOT BE POSSIBLE FOR IT TO ANTICIPATE THE EXACT DATES ON WHICH IT MAY BE REQUIRED TO DISCHARGE SUCH OBLIGATIONS. THERE CAN BE SOME DIFFERENCE BETWEEN WHAT WAS ANTICIPATED AND WHAT WAS ACTUALLY REQUIRED. ITA NO. 31 /1 1 3 3 . IN THE PENALTY ORDER THE AO OBSERVED AS UNDER : - 2. IN THE COURSE OF ASSESSMENT PROCEED INGS, THE CASH BOOK OF THE ASSESSEE COMPANY REVEALED THAT IT HAS RECEIVED CASH FROM ONE OF THE DIRECTORS OF THE COMPANY NAMELY SHRI RAMESH SHAH. THE DETAILS STATED IN THE ASSESSMENT ORDER AS UNDER : - MONTH AMT.(RS.) 1. JULY, 2004 140000 2. SEPT. 2004 1 15000 3. OCTOBER, 2004 480000 4. NOVEMBER,2004 460000 5. DECEMBER, 2004 270000 6. FEBRUARY,2005 125000 7. MARCH, 2005 400000 TOTAL 1990000 THE ABOVE TRANSACTIONS OF MONEY HAVE BEEN DULY CONFIRMED BY THE SAI D SHRI RAMESH SHAH THROU G H THE LETTER OF CONFIRMATION SIGNED BY HIM BOTH IN THE CAPACITY OF THE BORROWER AS ALSO THE LENDER. SINCE THE SAID AMOUNT COU LD NOT BE TAKEN INTO T H E FOLD OF ASSESSABLE INCOME OF THE ASSESSEE IN TERMS OF SECTION 68 OF THE ACT, IT WAS DECIDED THAT THE MONEY BE ACCE P TED AS AN EXPLAINE D LOAN AND, SINCE THERE WAS A PRI MA F ACIE VIOLATION OF SECTION 269SS OF THE ACT, PENALTY PROCEEDINGS WERE REFERRED TO THE UNDERSIGNED BY THE ASSESSING OFFICER , IN TERMS OF SECTION 271 D(2). IN THIS BACKGROUND, THE PRESENT SHOW CAUSE NOTICE WAS I SSUED TO THE ASSESSEE ON 13/05/2008 WHICH WAS DULY SERVED ON THE ASSESSEE ON 14/05/2008. HE WAS ASKED TO EXPLAIN WHY PENALTY U/S.271 D SHOULD NOT BE IMPOSED FOR CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF T HE I T.A CT. THE AO FURTHER OBSERVED AS UND ER : - THE ASSESSEE COMPANY THROUGH ITS AUTHORIZED REPRESENTATIVE SHRI ASHOK SUNDRANI C .A. FROM M/S.SANGHAVI & ASSOCIATES, FURNISHED THE EXPLANATION DATED 16/06/2008 SEEKING EXONERATION FROM THE ABOVE DEFAULT COMMITTED URIDER SECTION 269SS AND THE INCUMBEN T PENALTY U/S.271D OF THE ACT. THE VARIOUS CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE COMPANY ARE DISCUSSED BELOW. 4 THE ASSESSEE'S CASE IS MAINLY THAT THE CASH TRANSACTION BETWEEN THE DIRECTOR AND THE COMPANY WERE THROUGH CURRENT ACCOUNT AND WAS NECES SITATED FOR ENSURING MEETING OF THE FUND REQUIREMENTS OF THE COMPANY WHICH AROSE SUDDENLY FROM TIME TO TIME. RELEVANT PORTION OF ASSESSEE'S REPLY IS QUOTED BELOW FOR THE PURPOSE OF APPRECIATING THE TRANSACTIONS IN THE LIGHT OF SEC.269SS BEFORE GOING INTO T HE VARIOUS JUDICIAL AUTHORITIES REFERRED TO/RELIED UPON BY THE ASSESSEE. 'THE ASSESSEE HAS RECEIVED AMOUNTS IN CASH DURING CERTAIN MONTHS OF THE ITA NO. 31 /1 1 4 PREVIOUS YEAR FROM THE DIRECTOR SHRI RAMESH SHAH AS SHOWN IN THE SHOW CAUSE NOTICE ISSUED BY YOU. THE ACCOUN T REFLECTING TRANSACTIONS BETWEEN THE ASSESSEE AND THE DIRECTOR WAS IN THE NATURE OF CURRENT ACCOUNT THE DIRECTOR USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND WITHDRAW THE MONEY FROM THE SAME CURRENT ACCOUNT AS AND WHEN THE NEED ARISES. AFORE IMPORTANT LY SUCH TRANSACTIONS BETWEEN THE ASSESSEE AND THE DIRECTOR ARE ATTRIBUTABLE TO VARIOUS EXIGENCIES AND VICISSITUDES OF THE BUSINESS. IT MAY NOT BE POSSIBLE FOR AN ASSESSEE TO PREDICT WITH PRECISION THE EXACT REQUIREMENTS OF MONEY FOR DISCHARGING ITS OBLIGAT IONS CONNECTED TO THE BUSINESS, STATUTORY OR OTHERWISE. IT MAY NOT BE POSSIBLE FOR IT TO ANTICIPATE THE EXACT DALES ON WHICH IT MAY BE REQUIRED TO DISCHARGE SUCH OBLIGATIONS. THERE CAN BE SOME DIFFERENCE BETWEEN WHAT WAS ANTICIPATED AND WHAT WAS ACTUALLY R EQUIRED. (EMPHASIS MINE) IT IS IMPORTANT TO NOTE THE ADMISSION THAT THE WHOLE TRANSACTIONS WERE THROUGH A CURRENT ACCOUNT MAINTAINED BY THE SAID DIRECTOR WITH THE ASSESSEE COMPANY. THE ASSESSEE HAS NOT BROUGHT OUT ANYTHING ON RECORD AS TO WHETHER ALL TH E DIRECTORS MAINTAIN SUCH CURRENT ACCOUNT WITH THE ASSESSEE COMPANY AND WHETHER THERE HAS BEEN SUCH TRANSACTIONS WITH OTHER DIRECTOR(S). HOWEVER, THE ASSESSEE HAS FURTHER RAISED ANOTHER CONTENTION REGARDING THE OBJECT OF INCORPORATING THE PROVISIONS OF SEC .269SS BEING FOR CHECKING THE PROLIFERATION OF BLACK MONEY AND TO PUT AN END TO THE PRACTICE OF GIVING FA L SE AND SPURIOUS EXPLANATION ABOUT THE UNACCOUNTED MONEY BROUGHT AND SO ON . THE AO ALSO OBSERVED AS UNDER : - THE ASSESSEE HAS FURTHER EXPLAINED THAT THE ASSESSEE AND THE DIRECTOR WERE ON THE RECORDS OF THE INCOME - TAX DEPARTMENT AND BOTH DECLARED THE TRANSACTIONS TO THE DEPARTMENT. SINCE THE DEPARTMENT HAS NOT DISPUTED THE GENUINENESS OF THE TRANSACTIONS DECLARED BY BOTH THE PARTIES, THIS FACT WOULD NO T BE RELEVANT FOR DECIDING THE EFFECT OF SEC.269SS READ WITH SEC.271D. THE PROVISIONS OF SECTION 269SS IS A PROHIBITIVE PROVISION WITH SPECIFIC OVERRIDING EXCLUSIONS AS CAN BE SEEN FROM THE FIRST AND SECOND PROVISO THERETO. THE SAID SECTION IS EXTRACTED FO R READY REFERENCE. AFTER DISCUSSING VARIOUS CASE LAWS, THE AO CAME TO THE CONCLUSION THAT ASSESSEE COULD NOT SHOW REASONABLE CAUSE FOR ACCEPTING THE AMOUNT IN CASH IN EXCESS OF RS. 20,000/ - FROM THE DIRECTOR. ACCORDINGLY, HE LEVIED PENALTY EQUAL TO THE AM OUNT SO ACCEPTED I.E. RS. 19,90,000/ - U/S. 271D OF THE INCOME TAX ACT. ITA NO. 31 /1 1 5 4 . BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 5 . AR APPEARING ON BEHALF OF THE ASSESSEE CONTENDED THAT THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHYAM PUBLICATIONS LTD., REPORTED IN (2006) 285 ITR 221 (MAD) , HAS HELD THAT CASH TRANSACTION WITH DIRECT OR , HAVING RUNNING CURRENT ACCOUNT WITH THE ASSESSEE COMPANY, ANY DEPOSIT AND WITHDRAWAL OF MONEY FROM THE CURRENT ACCOUNT COULD NOT BE CONSIDERED AS A LOAN OR ADVANCE UNDER RULE 2(B)(IX) OF COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975 . ACCORDINGLY, IT WAS HELD THAT DEPOSITS DOES NOT INCLUDE ANY AMOUNT FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMPANY . THEREFORE, THE CASH TRANSACTION BETWEEN THE ASSESSEE AND THE DIRECTOR - CUM - SHAREHOLDER WAS NOT A LOAN OR DEPOSIT AND THERE WAS NO VIOLATION OF SECTION 269SS, HENCE, PENALTY U/S. 271D WAS NOT LEVIABLE. 5 .1 AR INVITED OUR ATTENTION TO THE COPY OF CURRENT ACCOUNT OF DIRECTOR MAINTAINED IN THE BOOKS O F ACCOUNTS OF THE ASSESSEE COMPANY WHICH IS A PRIVATE LIMITED COMPANY AND CONTENDED THAT PAYMENT AND WITHDRAWAL IN CURRENT ACCOUNT DOES NOT COME IN THE PURVIEW OF THE LOANS OR DEPOSITS, ACCORDINGLY, THERE WAS NO VIOLATION OF SECTION 269SS. FURTHER RELIANCE WAS PLACED ON THE DECISION OF CHHATTISGARH HIGH COURT IN THE CASE OF CIT VS. PREETI FUELS & FLAMES (P) LTD., (2011) 330 ITR 129 , WHEREIN IT WAS HELD THAT RULE 2(B)(IX) OF COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975 EXEMPTS FROM THE DEFINITION OF DEPOS IT INTER ALIA, ANY AMOUNT RECEIVED FROM A PERSON WHO AT THE TIME OF RECEIPT WAS A DIRECTOR OF THE COMPANY . THEREFORE, IT WAS HELD THAT THE TRIBUNAL WAS JUSTIFIED IN DELETING ITA NO. 31 /1 1 6 THE PENALTY U/S. 271D IN RESPECT OF DEPOSITS RECEIVED BY THE ASSESSEE COMPANY FRO M ITS DIRECTOR/PROMOTERS. 5 . 2 FURTHER RELIANCE WAS PLACED ON THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CASE OF DILLU CINE ENTERPRISES (P) LTD. VS. ADCIT, REPORTED IN (2002) 80 ITD 484 (HYD) , IN SUPPORT OF THE PROPOSITION THAT WHERE SHORT TERM FUNDIN G OF THE ASSESSEE COMPANY BY ONE OF ITS DIRECTORS TO ENABLE IT TO MEET ITS BUSINESS EXIGENCIES AND WITHDRAWAL OF MONEY AS AND WHEN RE QUIRED BY HIM DID NOT ATTRACT T HE PROVISIONS OF SECTION S 269SS AND 271D AS THE TRANSACTIONS WERE UNDISPUTEDLY GENUINE. 5.3 WITH REFERENCE TO THE ABOVE DECISION, AR DRAWN OUR ATTENTION TO THE OBSERVATION MADE BY THE AO IN PARA 2 OF HIS ORDER, WHEREIN THE AO HAS OBSERVED THAT THE TRANSACTION OF MONEY HAVE BEEN DULY CONFIRMED BY SAID SHRI RAMESH SHAH, DIRECTOR OF COMPANY THROUGH THE LETTER OF CONFIRMATION. SINCE THE SAID AMOUNT COULD NOT BE TAKEN INTO FOLD OF ASSESSABLE INCOME OF ASSESSEE IN TERMS OF SECTION 68 OF THE ACT, IT WAS DECIDED THAT MONEY BE ACCEPTED AS AN EXPLAINED LOAN AND SINCE THERE WAS A PRIMA FACIE VIOLATION OF S ECTION 269SS OF THE ACT, PENALTY PROCEEDINGS WERE INITIATED U/S. 271D. AS PER LEARNED AR, IN VIEW OF GENUINENESS OF THE LOAN, THE SAME WAS ACCEPTED AND NO ADDITION WAS MADE BY THE AO U/S. 68. ACCORDINGLY, HE CONTENDED THAT SUCH GENUINE TRANSACTION BETWEEN TH E DIRECTOR AND ASSESSEE COMPANY WHICH E NABLE D THE ASSESSEE COMPANY TO MEET ITS BUSINESS EXIGENCIES, SHOULD NOT ATTRACT THE PROVISIONS OF SECTION 269SS AND 271D. 5 .4 RELIANCE WAS ALSO PLACED ON THE DECISION OF HON BLE JHARKHAND HIGH COURT IN THE CASE OF OME C ENGINEERS VS. CIT, REPORTED IN (2007) ITA NO. 31 /1 1 7 294 ITR 599 , WHEREIN IT WAS HELD THAT, THEREBEING NO FINDING OF AO, CIT(A) OR TRIBUNAL THAT THE TRANSACTIONS IN VIOLATION OF S.269SS WERE NOT GENUINE, ASSESSEE S RETURN HAVING BEEN ACCEPTED UNDER SECTION 143(3) AFTE R SCRUTINY, THERE BEING ALSO NO FINDING THAT TRANSACTIONS WERE MALA FIDE AIMED AT DISCLOSING CONCEALED MONEY, IMPOSITION OF PENALTY UNDER SECTION 271D MERELY FOR TECHNICAL MISTAKE COULD NOT BE SUSTAINED. THE PRECISE OBSERVATION OF THE HONBLE HIGH COURT WA S AS UNDER : - THE NATURE OF PENALTY AND PRINCIPLE GOVERNING IMPOSITION OF THE SAME ARE WELL SETTLED BY A CATENA OF DECISIONS OF THE SUPREME COURT AND THE VARIOUS HIGH COURTS. THE SETTLED PROPOSITION OF LAW, T HEREFORE, IS THAT THE PROVISIONS DEALING WITH P ENALTY MUST BE STRICTLY CONSTRUED. AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI - CRIMINAL PROCEEDING AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY EITHER ACTED DELIBERATELY IN DEFIANCE OF L AW OR WAS GUILTY OF CONDUCT, CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DISREGARD OF HIS OBLIGATION. PENALTY WILL ALSO NOT BE' IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. RATHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION WHICH IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOS E PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. REFERENCE MAY BE MADE TO THE DECISION IN HI NDUSTAN STEEL LTD. (SUPRA). 5 .5 LEARNED AR ARGUED THAT IN THE INSTANT CASE ALSO UNDER THE SCRUTINY ASSESSMENT FRAMED U/S. 143(3), THE AO HAS NOT DOUBTED GENUINENESS OF THE TRANSACTION, WHICH WAS ACCEPTED AND NO ADDITION WAS MADE U/S. 68 OF THE ACT , APPLYI NG THE PROVISIONS OF LAW LAID DOWN BY HON BLE JHARKHAND HIGH COURT AS DISCUSSED ABOVE , THERE WAS NO MERIT FOR IMPOSING PENALTY U/S. 271D. ITA NO. 31 /1 1 8 6 . RELIANCE WAS ALSO PLACED ON THE DECISION OF HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SPEEDWAYS RUBBER (P) LTD., REPORTED IN (2010) 326 ITR 31 (P&H) , WHEREIN IT WAS HELD THAT TRANSACTION IN QUESTION WAS BONA FIDE TRANSACTION AND THAT THE DEFAULT IN ACCEPTING MONEY IN CASH WAS OF TECHNICAL NATURE WHICH DID NOT JUSTIFY THE LEVY OF PENALTY UNDER SECTION 271D . 6 . 1 ATTENTION OF THE BENCH WAS ALSO INVITED TO THE FOLLOWING OBSERVATIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHREE AMBICA FLOUR MILLS CORPORATION, REPORTED IN (2008) DTR (GUJ) 169 , WHEREIN IT WAS OBSERVED BY THE HON BLE HIGH C OURT THAT WHERE THE TRANSACTIONS BETWEEN SISTER CONCERNS ARE NOT COVERED BY EITHER PROVISIONS OF S.269SS OR S. 269T OF THE ACT , NO PENALTY SHOULD BE IMPOSED . IT HAS FURTHER BEEN HELD THAT IT IS A COMMON TRADING PRACTICE FOR PARTIES TO MAKE PAYMENT ON BEHAL F OF EACH OTHER TO SISTER CONCERN. THAT THE PROVISIONS OF S.269SS AND S.269T OF THE ACT HAVE BEEN BROUGHT ON STATUTE BOOK WITH A SPECIFIC INTENTION OF CURBING BLACK MONEY AND TAKING ADVANTAGE OF CASH TRANSACTION FOR EXPLAINING THE CASH AVAILABLE DURING THE SEARCH. SINCE THE DEFAULT, IF ANY, IS OF A VENIAL NATURE , NO PENALTY CAN BE IMPOSED. ACCORDINGLY, ORDER OF TRIBUNAL IN RELATION TO DELETION OF PENALTY UNDER S.271D AND S. 271E OF THE ACT , WAS UPHELD. 7 . ON THE OTHER HAND, IT WAS VEHEMENTLY ARGUED BY LEARN ED DR THAT CASH LOAN WAS GIVEN BY DIRECTOR TO ITS COMPANY IN EXCESS OF RS. 20,000/ - AND, THERE WAS NO REASONABLE CAUSE FOR SUCH GIVING OF LOAN OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE. THE AO WAS JUSTIFIED IN LEVYING PENALTY ITA NO. 31 /1 1 9 U/S. 271D. HE FURTHER RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SAMORA HOTELS (P) LTD., (2012) 19 TAXMANN.COM 285 (DELHI) , WHEREIN IT WAS HELD THAT ASSESSEES CONTENTION REGARDING BONAFIDE BELIEF OF LOAN ACCEPT ED BY IT FROM ITS DIRECTOR/SHAREHOLDER WERE NOT COVERED B Y SECTION 269SS, WAS AN AFTERTHOUGHT AND SINCE IT WAS NOT ESTABLISHED THAT THERE WAS BONAFIDE REASON FOR NOT ACCEPTING THE SAID AMOUNT THROUGH ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE DRAFTS, THE PENALTY WAS HELD TO BE CORRECTLY LEVIED. FURTHER RELIANCE WAS PLACED ON THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF BUILTEC ENGINEERS & BUILDERS, REPORTED IN (2013) 31 TAXMANN.COM 406(MADRAS) , WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE HAS NOT SHOWN ANY ACCEPTABLE OR UNAVOIDABLE CIRCUMSTANCES OR IMPRACT ICABILITY OR DIFFICULTY IN RECEIVING MONEY OTHERWISE THAN IN CASH, IMPOSITION OF PENALTY UNDER SECTION 271D WAS JUSTIFIED. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF AUTO PISTON MFG. CO. (P) LTD, (2013) 38 TAXMANN.COM 61 (P&H) , WHEREIN IT WAS HELD THAT NO SUBSTANTIAL QUESTION OF LAW AROSE OUT OF THE ORDER OF THE TRIBUNAL UPHOLDING THE PENALTY WHERE THE TRIBUNAL AFTER DISCUSSING FACTS IN DETAIL HAD DISREGARDED THE EXPLANATION GIVEN BY ASSESSEE REGARDING ACCEPTING LOAN, OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE. 8 . AFTER GOING THROUGH THE PROPOSITION OF LAW LAID DOWN BY THE VARIOUS HIGH COURTS AS DISCUSSED ABOVE, WE FOUND THAT MOST OF THE HIGH COURTS ARE OF THE VIEW THAT WHERE LOANS AND ADVANCES ARE ACCEPTED BY THE DIRECTOR OF COMPANY AND WHICH IS NOT FOUND TO BE INGENUINE AND ASSESSEES RETURN OF INCOME HAVING BEEN UNDER SCRUTINY ASSESSMENT ITA NO. 31 /1 1 10 U/S. 143(3) AND NO ADDITION HAVING BEEN MADE ON ACCOUNT OF SUCH LOAN AND THERE IS NO FINDING THAT TRANSACTIONS WERE MALAF IDE AIMED AT DISCLOSING CONCEALED MONEY, IMPOSITION OF PENALTY U/S. 271D MERELY ON TECHNICAL MISTAKE CANNOT BE SUSTAI NED. IN THE INSTANT CASE BEFORE US, THE MONEY WAS ACCEPTED BY THE COMPANY FROM DIRECTOR AND IT WAS EXPLAINED THAT MONEY WAS ACCEPTED THROUGH CURRENT ACCOUNT AND WAS NECESSITATED FOR ENSURING MEETING OF FUNDS REQUIREMENT OF COMPANY WHICH AROSE SUDDENLY. THE TRANSACTIONS OF RECEIPT OF CASH WAS DULY CONFIRMED BY THE DIRECTOR AND THE SAME WAS IN THE NATURE OF CURRENT ACCOUNT. THE DIRECTOR USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND WITHDRAW MONEY FROM THE CURRENT ACCOUNT AS AND WHEN THE NEED ARISES. IT WAS ALSO EXPLAINED THAT SUCH TRANSACTIONS WERE ATTRIBUTABLE TO VARIOUS EXIGENCIES AND VICISSITUDES OF THE BUSINESS. HOWEVER, THERE ARE DECISIO NS OF HIGH COURT WHEREIN IT WAS HELD THAT WHERE ASSESSEE IS UNABLE TO PROVE THE EXIGENCY, THE PENALTY IS IMPOSABLE. HOWEVER, KEEPING IN VIEW THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD., 88 ITR 192 , IN WHICH IT WAS HELD THAT IF IN A CASE OF TAXING PROVISION TWO REASONABLE CONSTRUCTIONS ARE POSSIBLE, CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. FURTHERMORE, IN CASE OF PODDAR CEMENT, 226 ITR 225 , THE HONBLE SUPREME COURT HELD THAT WHERE TWO VIEWS ARE POSSIBLE, ONE FAVORABLE TO ASSESSEE HAS TO BE PREFERRED. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT AND KEEPING IN VIEW THE OBSERVATION OF THE AO AT PARA 2 OF HIS ASSESSMENT ORDER TO THE EFFECT THAT CASH BOOK OF THE ASSESSEE COMPANY WAS PRO DUCED BEFORE HIM WHEREIN HE FOUND ACCEPTANCE OF CASH FROM THE DIRECTOR. HOWEVER, EVEN AFTER ITA NO. 31 /1 1 11 VERIFYING THE CASH BOOK THERE IS NO ANY ADVERSE OBSERVATION BY THE AO TO THE EFFECT THAT ON THE DATE OF ACCEPTING CASH THE COMPANY WAS NOT IN ANY URGENT NEED OF FUN DS. WITHOUT ANY SUCH ADVERSE OBSERVATION AND ALSO THE AOS ACTION OF ACCEPTANCE OF GENUINENESS OF LOAN U/S. 68 AND IN NOT MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE COMPANY, PUTS THE CASE AT PAR WITH THE DECISION OF THE JHARKHAND HIGH COURT IN THE CAS E OF OMEC ENGINEER S (SUPRA) , WHEREIN IT WAS HELD THAT, THEREBEING NO FINDING OF AO, CIT(A) OR TRIBUNAL THAT THE TRANSACTIONS IN VIOLATION OF S.269SS WERE NOT GENUINE, ASSESSEES RETURN HAVING BEEN ACCEPTED UNDER SECTION 143(3) AFTER SCRUTINY, THERE BEING A LSO NO FINDING THAT TRANSACTIONS WERE MALA FIDE AIMED AT DISCLOSING CONCEALED MONEY, IMPOSITION OF PENALTY UNDER SECTION 271D MERELY FOR TECHNICAL MISTAKE COULD NOT BE SUSTAINED. 9 . IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR IMPOSITION OF PENALTY U/S.271D OF THE I.T. ACT. 1 0 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/10/ 201 4 . 10/10/ 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/10 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. ITA NO. 31 /1 1 12 / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI //TRUE COPY//