THE ITO WARD - 1, Kakinada V. M/s Sri Ramalingeswara Commercial Complex, Kakinada

ITA 729/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1199 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO
• Assessee Lawyers: C V S MURTHY
• Keywords: Income from undisclosed sources; Reasonable cause; Avoidance of tax

Judgement Text

ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.729/VIZAG/2013 ( / ASSESSMENT YEAR: 2008-09) ITO, WARD - 1, KAKINADA VS. M/S. RAMALINGESWARA COMMERCIAL COMPLEX KAKINADA [P AN: AAPFS9541R ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.27/VIZAG/2014 (ARISING OUT OF I.T.A.NO.729/VIZAG/2013) ( / ASSESSMENT YEAR: 2008-09) M/S . RAMALINGESWARA COMMERCIAL COMPLEX KAKINADA VS. ITO, WARD - 1, KAKINADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M. NARAYANA RAO, DR / RESPONDENT BY : SHRI C.V.S. MURTHY, AR / DATE OF HEARING : 12.04.2016 / DATE OF PRONOUNCEMENT : 06.05.2016 ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASS ED BY THE CIT(A), VISAKHAPATNAM DATED 21.10.2013 AND IT PERTAINS TO T HE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 31.3.2009 DECLARING TOTAL INCOME OF ` 3,31,290/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT'). FROM THE RECORDS AVAILABLE WITH THE DEPARTMENT, THE A.O. NOTICED THAT THE ASSESSEE FIRM HAD ACCEPTED LOAN OF ` 25 LAKHS EACH FROM ITS PARTNERS SHRI S. RAMA KRISHNA REDDY AND SHRI S. KR ISHNA REDDY, OTHERWISE THAN BY WAY OF CROSSED CHEQUE/DEMAND DRAF T IN VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THEREFO RE, THE A.O. ISSUED A SHOW CAUSE NOTICE U/S 271D R.W.S. 269SS OF THE ACT AND ASKED TO EXPLAIN WHY PENALTY U/S 271D OF THE ACT SHALL NOT B E LEVIED FOR ACCEPTING THE LOANS IN CONTRAVENTION OF THE PROVISIONS OF SEC TION 269SS OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE APPEARED AND SUBMITTED THAT THERE WAS NO VIOLATION ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 3 REFERRED TO IN SECTION 269SS OF THE ACT, AS THE ASS ESSEE HAS NOT ACCEPTED LOAN IN CASH. THE ASSESSEE FURTHER SUBMIT TED THAT THE FIRM HAS AVAILED LOAN FROM ANDHRA BANK AND THE SAME HAS BEEN REPAID BY PARTNERS FROM THEIR INDIVIDUAL ACCOUNTS. THE FIRM H AS ACKNOWLEDGED THE DEBT BY PASSING JOURNAL ENTRIES IN THE BOOKS OF ACC OUNTS OF THE FIRM, THEREFORE, IT CANNOT BE CONSIDERED AS ACCEPTANCE OF LOAN OR DEPOSIT IN VIOLATION OF SECTION 269SS OF THE ACT. IT WAS FURTH ER SUBMITTED THAT THESE ARE GENUINE TRANSACTIONS AND THE SOURCES FOR THE CA SH RECEIVED FROM THE PARTNERS HAS BEEN EXPLAINED BEFORE THE A.O. THE GEN UINE TRANSACTIONS CANNOT BE BROUGHT UNDER THE PURVIEW OF RIGOROUS PRO VISIONS OF SECTION 271D OF THE ACT. THE A.O. AFTER CONSIDERING THE EXP LANATIONS OF THE ASSESSEE HELD THAT THE ASSESSEE HAS VIOLATED THE PR OVISIONS OF SECTION 269SS OF THE ACT AND HAS BECOME LIABLE FOR PENALTY U/S 271D OF THE ACT. THE A.O. FURTHER HELD THAT AS PER THE PROVISIONS OF SECTION 271D OF THE ACT, IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOS IT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT, HE SHAL L BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF LOAN O R DEPOSIT SO TAKEN OR ACCEPTED. IN THE PRESENT CASE, THE ASSESSEE FIR M HAS ACCEPTED ` 50 LAKHS UNSECURED LOAN FROM TWO OF ITS PARTNERS, THER EFORE, IT IS A CLEAR CASE OF VIOLATION OF SECTION 269SS OF THE ACT. WITH THESE OBSERVATIONS, LEVIED PENALTY OF ` 50 LAKHS U/S 271D OF THE ACT. ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 4 3. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURT HER SUBMITTED THAT IT HAS NOT ACCEPTED CASH LOAN FROM PARTNERS, THEREF ORE, THERE WAS NO VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE, THE PROVISIONS OF SECTION 271D OF THE ACT ARE NOT ATTRA CTED. IT WAS FURTHER SUBMITTED THAT THIS IS PURELY A BUSINESS TRANSACTIO N RECORDED IN THE BOOKS OF ACCOUNTS OF THE FIRM BY WAY OF JOURNAL ENT RIES, BUT NOT BY WAY OF CASH ENTRY. THE ASSESSEE FURTHER SUBMITTED THAT PROVISIONS OF SECTION 269SS OF THE ACT APPLIES ONLY, WHEN ANY PERSON ACCE PTS LOANS OR DEPOSITS IN EXCESS OF THE SPECIFIED LIMITS OTHER TH AN BY WAY OF CHEQUES OR DRAFTS. IN THE PRESENT CASE ON HAND, THE ASSESS EE FIRM HAS BORROWED LOAN FROM NATIONALIZED BANKS AND THE PARTNERS OF TH E FIRM HAVE REPAID THE AMOUNT TO THE BANKS FROM THEIR INDIVIDUAL ACCOU NTS. THE FIRM HAS ACKNOWLEDGED THE DEBT BY PASSING NECESSARY JOURNAL ENTRIES IN THE BOOKS OF THE FIRM TO GIVE CREDIT TO THE PARTNERS AC COUNT. THE PROVISIONS OF SECTION 269SS OF THE ACT DOES NOT COVER THE LOAN S OR DEPOSIT ACCEPTED BY WAY OF JOURNAL ENTRIES. THE ASSESSEE FURTHER SU BMITTED THAT THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS . THE FIRM HAS RECORDED THE LOANS IN THE BOOKS OF ACCOUNTS OF THE FIRM AND THE PARTNERS HAVE PROVED THE SOURCES FOR THE LOAN GIVEN TO THE F IRM. MOREOVER, THE ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 5 REPAYMENT HAS BEEN MADE TO A NATIONALIZED BANK. UND ER THESE CIRCUMSTANCES, THE A.O. WAS NOT CORRECT IN COMING T O THE CONCLUSION THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT. IT WAS FURTHER SUBMITTED THAT WHEN THE SOURCES OF FUND S WERE EXPLAINED AND THEIR UTILIZATION WAS ALSO PROPERLY EXPLAINED B Y THE RESPECTIVE PARTNERS, JUST BECAUSE THE LOAN HAS NOT BEEN ACCEPT ED BY CHEQUE OR DEMAND DRAFT, NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE H ELD THAT NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT, WHEN THE LOAN HA S BEEN ACCEPTED BY WAY OF JOURNAL ENTRIES. THE CIT(A) FURTHER HELD TH AT THE ASSESSEE FIRM HAS ACKNOWLEDGED THE DEBT BY PASSING JOURNAL ENTRIE S IN THE BOOKS OF ACCOUNTS, THEREFORE, THERE IS NO VIOLATION REFERRED TO IN SECTION 269SS OF THE ACT. IT WAS FURTHER HELD THAT THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE FIRM HAS RECORDED THE TRANSACTIONS IN THE BOOKS OF ACCOUNTS AND ALSO EXPL AINED THE SOURCES FOR THE LOAN ACCEPTED FROM THE PARTNERS. THEREFORE, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THIS IS A COLOURAB LE DEVICE FOR AVOIDANCE OF TAX. WITH THESE OBSERVATIONS, THE CIT(A) DIRECTE D THE A.O. TO DELETE THE PENALTY OF ` 50 LAKHS LEVIED U/S 271D OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 6 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ORDER OF THE ITAT, HYDERABAD IN T HE CASE OF G. VENKATA LAKSHMI VS. IT DEPARTMENT IN ITA NO.394/HYD/2013 DA TED 12.7.2013 HAS NOT BECOME FINAL AS FURTHER APPEAL U/S 263A OF THE ACT IS PREFERRED BY THE DEPARTMENT. THE LD. D.R. FURTHER SUBMITTED T HAT THE CIT(A) ERRED IN DELETING THE PENALTY BY RELYING UPON THE CASE LA WS PUT FORTH BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS PROPERLY. T HE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT , BY ACCEPTING CASH LOANS IN EXCESS OF SPECIFIED LIMITS, THEREFORE, PEN ALTY IS LEVIABLE U/S 271D OF THE ACT. IT IS FURTHER ARGUED THAT SECTION 269S S OF THE ACT CLEARLY STATES THAT NO PERSON SHALL AFTER 30 TH DAY OF JUNE, 1994 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT, OTHERWIS E THAN BY AN ACCOUNT PAYEE CHEQUE OR DRAFT IN EXCESS OF THE SPEC IFIED AMOUNT. THE ASSESSEE HAS ACCEPTED THE CASH LOANS FROM TWO OF IT S PARTNERS AND RECORDED THE FACT IN THE BOOKS OF ACCOUNTS. THEREFO RE, THERE IS A CLEAR VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT WHICH ATTRACTS THE PENALTY U/S 271D OF THE ACT. 5. THE LD. A.R. OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE A.R. FURTHER SUBMITTED THAT THE ASSESSI NG OFFICER IS NOT JUSTIFIED IN CONCLUDING THAT JOURNAL ENTRY PASSED I N THE FIRMS BOOK BY ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 7 DEBITING THE ANDHRA BANK LOAN AND CREDITING THE IND IVIDUAL PARTNERS ACCOUNT IS TANTAMOUNT TO ACCEPTANCE OF LOAN IN VIOL ATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE A.R. F URTHER SUBMITTED THAT THE ASSESSEE HAS BORROWED LOAN FROM ANDHRA BANK AND PARTNERS OF THE FIRM HAVE REPAID THE LOAN FROM THEIR INDIVIDUAL ACC OUNTS. THE FIRM HAS ACKNOWLEDGED THE DEBT FROM THE PARTNERS BY PASSING THE JOURNAL ENTRIES IN THE BOOKS OF ACCOUNTS. THE A.O. HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS. THE FIRM HAS RECORDED THE TRANSA CTIONS IN THE BOOKS OF ACCOUNTS AND ALSO EXPLAINED THE SOURCES FOR THE LOA N FROM THEIR PARTNERS INDIVIDUAL ACCOUNTS. THE A.O. CANNOT LEVY PENALTY U NDER SEC. 271D, WHEN THE TRANSACTION IS GENUINE FOR THE SIMPLE REAS ON THAT THERE IS A VIOLATION OF THE PROVISION OF SECTION 269SS OF THE ACT. IT IS FURTHER ARGUED THAT IT IS A CLEAR CASE OF REPAYMENT OF LOAN BORROWED FROM THE BANK BY THE FIRM THROUGH ITS PARTNERS ACCOUNTS. T HE REPAYMENT HAS BEEN MADE TO A BANKING COMPANY. UNDER THESE CIRCUM STANCES, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT TH ERE IS A VIOLATION REFERRED TO IN SECTION 269SS OF THE ACT WHICH WARRA NTS LEVY OF PENALTY U/S 271D OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON THE JUDGEMENT OF ITAT, PUNE BENCH IN THE CASE OF SUN FL OWER BUILDERS PVT. LTD. VS. DCIT AND ALSO ACIT VS. GUJARAT AMBUJA PROT EINS LTD. 3 SOT 822. ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 8 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTS WHICH LEAD TO IMPOSITION OF PENALTY U/S 271D OF THE ACT ARE THAT THE ASSESSEE FIRM HAS REPAID LOAN BORROWED FROM M/S . ANDHRA BANK THROUGH ITS PARTNERS ACCOUNT. THE FIRM HAS BORROWE D LOAN FROM THE BANK WHICH WAS REPAID BY THE PARTNERS OF THE FIRM FROM T HEIR INDIVIDUAL ACCOUNTS. THE FIRM HAS PASSED JOURNAL ENTRIES IN TH E BOOKS OF ACCOUNTS TO ACKNOWLEDGE THE DEBT FROM THE PARTNERS. THE A.O. WAS OF THE OPINION THAT ANY LOAN IN EXCESS OF SPECIFIED LIMIT ACCEPTED OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DRAFT COMES WITHIN THE P ROVISIONS OF SECTION 269SS OF THE ACT, THEREBY PENALTY IS LEVIABLE U/S 2 71D OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THESE ARE GENUI NE TRANSACTIONS, THEREFORE, NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT. THE ASSESSEE FURTHER CONTENDED THAT THE FIRM HAS NOT ACCEPTED LO ANS OR DEPOSITS IN VIOLATION OF SECTION 269SS OF THE ACT. MERE PASSIN G OF JOURNAL ENTRIES TO ACKNOWLEDGE DEBT FROM THE PARTNERS DOES NOT TANTAMO UNT TO ACCEPTANCE OF CASH LOANS IN VIOLATION OF SECTION 269SS OF THE ACT. 7. THE ONLY ISSUE CAME UP FOR OUR CONSIDERATION IS WHETHER ACCEPTANCE OF LOANS BY WAY OF JOURNAL ENTRY IS TANT AMOUNT TO ACCEPTANCE OF LOANS, OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CH EQUES OR DEMAND ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 9 DRAFTS WHICH ATTRACTS PENALTY UNDER SEC. 271D OF TH E ACT. IT IS THE CONTENTION OF THE A.O. THAT IF A PERSON TAKES OR AC CEPTS ANY LOAN OR DEPOSIT IN EXCESS OF THE SPECIFIED LIMIT IN CONTRAV ENTION OF PROVISIONS U/S 269SS OF THE ACT, HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY, A SUM OF EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS ACCEPTE D TWO CASH LOANS OF ` 25 LAKHS OF EACH FROM TWO OF THE PARTNERS OF THE F IRM. THEREFORE, HELD THAT IT IS NOT A MERE ACKNOWLEDGEMENT OF DEBT BY PA SSING THE JOURNAL ENTRIES, BUT IT IS A CLEAR VIOLATION OF THE PROVISI ONS OF SECTION 269SS OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE FIRM HAS NOT ACCEPTED ANY CASH LOAN IN VIOLATION OF THE PROVISIO NS OF SECTION 269SS OF THE ACT. THE PARTNERS HAVE REPAID THE LOAN BORROWE D BY THE FIRM FROM THEIR INDIVIDUAL BOOKS OF ACCOUNTS. THE FIRM HAS A CKNOWLEDGED THE LOAN BY PASSING JOURNAL ENTRIES SO AS TO GIVE CREDIT TO PARTNERS ACCOUNTS IN FIRM BOOKS OF ACCOUNTS. THEREFORE, ACCEPTANCE OF LO AN BY PASSING JOURNAL ENTRIES CANNOT BE CONSIDERED AS ACCEPTANCE OF LOAN IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT, CONSEQUENTL Y, PENALTY IS LEVIABLE. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR T HE REASON THAT THE ASSESSEE HAS NOT ACCEPTED ANY LOANS IN EXCESS OF TH E SPECIFIED LIMITS OTHERWISE THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DE MAND DRAFT. THOUGH PARTNERS HAVE REPAID THE LOANS IN CASH, THE GENUINENESS OF THE ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 10 TRANSACTIONS WAS NOT IN DOUBTFUL. THE PARTNERS HAV E REPAID THE LOAN TO M/S. ANDHRA BANK WHICH WAS ACCOUNTED IN THE BOOKS O F ACCOUNTS OF THE FIRM BY PASSING JOURNAL ENTRIES. THE PARTNERS HAVE EXPLAINED THE SOURCES FOR THE LOAN. UNDER THESE CIRCUMSTANCES, T HE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THERE IS A VIOLATION REFERRED TO IN SECTION 269SS OF THE ACT WHICH ATTRACTS PENALTY U/S 271D OF THE ACT. 8. SECTION 271D OF THE ACT PROVIDES FOR LEVY OF PEN ALTY FOR THE CONTRAVENTIONS OF THE PROVISIONS OF SECTION 269SS O F THE ACT. SECTION 269SS OF THE ACT PROHIBITS ACCEPTANCE OF CASH LOANS BEYOND SPECIFIED LIMITS. AS PER THE PROVISIONS OF SECTION 269SS OF T HE ACT, ANY PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOSIT OTHER THAN BY WAY OF ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT, THEN HE SHALL BE LIABLE TO PAY, BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT OF LOAN OR DEPOSI T SO TAKEN OR ACCEPTED. THE OBJECT BEHIND THE INSERTION OF SECTIO N 269SS IS TO PREVENT THE ASSESSEES FROM EXPLAINING THE UNACCOUNTED CASH FOUND IN THE COURSE OF SEARCH BY WAY OF CASH LOANS OR DEPOSITS T AKEN FROM VARIOUS PERSONS AND ALSO BRINGING INTO THE BOOKS OF ACCOUNT S UNACCOUNTED INCOME IN THE FORM OF LOANS OR DEPOSITS. THE SECTI ON DEPRIVES PERSONS FROM TAKING OR ACCEPTING FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 11 DRAFT, IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE OF AMOUNT OF SUCH LOAN EXCEEDS ` 20,000/-. THEREFORE, FROM THE PROVISIONS OF SECTION, IT IS VERY CLEAR THAT THE OBJECT OF INSERT ION OF THIS SECTION IS TO PROHIBIT PERSONS EXPLAINING THE UNACCOUNTED CASH OR ASSETS BY WAY OF PURPORTED LOAN OR DEPOSIT ACCEPTED IN CASH. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DETAILS AVAILABLE ON RECORD , WE FIND THAT THE TRANSACTIONS ARE GENUINE. THE FIRM HAS BORROWED LOA N FROM M/S. ANDHRA BANK. THE PARTNERS OF THE FIRM HAVE REPAID THE LOAN BORROWED FROM THE ANDHRA BANK FROM THEIR INDIVIDUAL ACCOUNTS. THE SO URCE FOR THE AMOUNT OF LOAN HAS BEEN EXPLAINED BY THE PARTNERS. THE FI RM HAS RECORDED THE TRANSACTIONS IN BOOKS OF ACCOUNTS OF THE FIRM AND D ISCLOSED IN THE REGULAR RETURN OF INCOME FILED U/S 139(1) OF THE ACT. THER EFORE, WE ARE OF THE OPINION THAT THESE ARE GENUINE TRANSACTIONS, WHICH SHOULD BE KEPT OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 26 9SS OF THE ACT. SINCE THE TRANSACTIONS ARE GENUINE AND THE SOURCE OF THE LOAN HAS BEEN EXPLAINED, THERE IS NO REASON FOR THE A.O. TO LEVY PENALTY U/S 271D OF THE ACT. 9. IT IS PERTINENT HERE TO DISCUSS THE CASE LAWS RE LIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE JUDGEMENT O F ITAT, PUNE BENCH IN THE CASE OF SUN FLOWER BUILDERS PVT. LTD. VS. DC IT(SUPRA). THE ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 12 COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD THAT ACKNOWLEDGEMENT OF DEBT BY PASSING JOURNAL ENTRIES IN THE BOOKS OF ACCOUNTS CANNOT BE CONSIDERED AS ACCEPTANCE OF LOAN IN VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT, CONSEQUENTL Y, NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT. THE RELEVANT PORTION I S REPRODUCED HEREUNDER: IT IS SEEN THAT IN THE CASE OF SUNFLOWER BUILDERS ( P) LTD., THE HONBLE ITAT, PUNE HAS HELD:- THIS CLEARLY SHOWS THAT THIS SECTION CAN BE APPLIE D ONLY WHERE MONEY WAS PASSED FROM ONE PERSON TO ANOTHER BY WAY OF LOAN O R DEPOSIT. THIS PROVISION CANNOT, THEREFORE, BE APPLIED WHERE THE DEBT IS ACK NOWLEDGED BY PASSING ENTRY IN THE BOOKS OF ACCOUNT, DEPENDING UPON THE FACTS OF T HE CASE. HENCE, THE ACKNOWLEDGEMENT OF THE DEBT BY THE ASSESSEE-COMPANY BY PASSING A JOURNAL ENTRY IN ITS BOOKS OF ACCOUNT WOULD NOT COME WITHIN THE A MBIT OF THE WORDS LOAN OR DEPOSIT AS MENTIONED IN SECTION 269SS. THEREFORE, EVEN ON THIS GROUND THE LEVY OF PENALTY COULD NOT BE SUSTAINED. 10. THE ASSESSEE RELIED UPON THE JUDGEMENT OF ITAT, AHMEDABAD BENCH IN THE CASE OF ACIT VS. GUJARAT AMBUJA PROTEI NS LTD. 3 SOT 822. THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILA R CIRCUMSTANCES HELD THAT NO PENALTY CAN BE LEVIED WHEN THE LOAN IS ACCE PTED BY WAY OF JOURNAL ENTRIES AND ALSO THE GENUINENESS OF THE TRA NSACTIONS IS NOT IN DOUBT. THE RELEVANT PORTION IS REPRODUCED HEREUNDE R: 7.3 IN THE CASE OF GUJARAT AMBUJA PROTEINS LTD., THE HONBLE ITAT, AHMEDABAD BENCH, HAS HELD 9. AFTER GOING THROUGH THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT ON MERITS, THE IMPOSITION OF PENALTY I S UNCALLED FOR. IN THE ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 13 FIRST PLACE, IT IS ABSOLUTELY CLEAR THAT THE ACCOUN TS OF AMBUJA AGRO INDUSTRIES LTD. WERE CREDITED BY JOURNAL ENTRIES ON ACCOUNT OF PAYMENTS MADE BY THE SAID COMPANY FOR AN ON BEHALF OF THE AP PELLANT-COMPANY AND THUS THERE WAS NO ACTUAL RECEIPT OF MONEY. NECESSA RY DOCUMENTARY EVIDENCE WAS FURNISHED IN PROOF OF THE SAME BEFORE THE DY. CIT AS WELL AS BEFORE ME. PROVISIONS OF S.269SS ARE APPLICABLE WH EN ANY LOAN OR DEPOSIT IS TAKEN OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. LOAN OR DEPOSIT AS PER EXPLN. (III) TO S. 269SS MEANS LOAN OR DEPOSIT OF MONEY. IN OTHER WORDS, IF THE CREDIT IS FOR THE AMOUNT OF MONEY RECEIVED OR ACCEPTED, ONLY THEN THE PROVISION S OF S. 269SS WILL BE APPLICABLE AND FOR THE JOURNAL ENTRY WHEREIN NO ACT UAL MONEY IS RECEIVED, THE SAID PROVISIONS TO MY MIND, CANNOT BE INVOKED. THE ENLARGEMENT OF THE MEANING OF DEPOSIT BY THE DIRECT TAX LAWS (AMEN DMENT) ACT, 1987, SO AS TO INCLUDE DEPOSIT OF ANY NATURE WOULD ALSO H AVE NO RELEVANCE IN THE PRESENT CASE FOR THE REASON THAT SUCH ENLARGEMENT O F THE MEANING OF THE SAID TERM WOULD BE EFFECTIVE IN THE CASE OF THE PER SON OTHER THAN A COMPANY. NO DOUBT, DEPOSIT OR LOAN CAN BE CREATED BY CONSTRUCTIVE RECEIPT BY BOOK ADJUSTMENT OR ACCOUNT ADJUSTMENT BU T FOR CREATION OF SUCH DEPOSIT OR LOAN BY DINT OF SUCH CONSTRUCTIVE RECEIP T, THERE MUST BE MANIFEST INTENTION TO DO SO. IN THE PRESENT CASE, THIS INTENTION IS ABSOLUTELY MISSING. FOR VIOLATION OF S. 269SS, IT NECESSARILY REQUIRES INVOLVEMENT OF TRANSFER OF MONEY WHICH IS MISSING I N THIS CASE. THIS BEING THE SITUATION, IN MY OPINION, PENALTY HAS BEEN IMPO SED ON WRONG PRESUMPTION. FOR ARRIVING AT THIS DECISION, I AM G UIDED BY JUDGEMENT OF HONBLE TRIBUNAL, AHMEDABAD BENCH, IN ITA NO.1609/A HD/1994 FOR ASST. YR. 1991 IN CASE OF BOMBAY CONDUCTORS AND ELECTRICA LS LTD. AND JUDGEMENT OF THE TRIBUNAL, JAIPUR BENCH, IN CASE OF JAGVIJAY AUTO FINANCE (P) LTD. VS. ASST. CIT (1995) 52 ITD 504. 10. FURTHER, EVEN IF FOR ARGUMENTS SAKE IT IS ACCEP TED THAT A BREACH OF A STATUTORY PROVISIONS IS THERE, STILL THERE IS EXIST ENCE OF A REASONABLE CAUSE AVAILABLE TO THE APPELLANT IN TERMS OF PROVISIONS O F SECTION 271B. FOR COMING TO THIS DECISION, I AM GUIDED BY VERY CLEAR F INDING OF HONBLE JURISDICTIONAL TRIBUNAL IN THE CASE OF VEER SALES C ORPORATION VS. CIT (1994) 121 CT R 46, WHICH SQUARELY APPLIES TO THE FACTS OF THE APPELLANTS CASE. LIKE FACTS OF THE VEER SALES CORPORATION, IT IS AN UNDISPUTED FACT THAT THE GUINENESS OF ALL THE TRANSACTIONS HAVE BEE N ACCEPTED BY THE DEPARTMENT. 11. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASES REFERRED ABOVE, WE ARE OF THE VIEW THA T NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT, WHEN THE LOAN IS ACCEPT ED BY ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 14 ACKNOWLEDGEMENT OF DEBT BY PASSING JOURNAL ENTRIES IN THE BOOKS OF ACCOUNTS. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAS NOT DOUBTED TH E GENUINENESS OF THE TRANSACTIONS. THE FIRM HAS ACCEPTED LOAN FROM THE P ARTNERS AND ALSO EXPLAINED SOURCES. MOREOVER, THE REPAYMENT OF LOAN IS MADE TO A NATIONALIZED BANK. UNDER THESE CIRCUMSTANCES, THE A.O. WAS NOT CORRECT IN LEVYING PENALTY U/S 271D OF THE ACT. THEREFORE, WE DIRECT THE A.O. TO DELETE THE PENALTY LEVIED U/S 271D OF THE ACT. 12. THE ASSESSEE HAS FILED THE CROSS OBJECTION IN S UPPORT OF THE ORDER OF THE LD. CIT(A). THEREFORE, FOR THE REASONS RECO RDED IN THE PRECEDING PARAGRAPHS, WE ARE OF THE OPINION THAT THE CROSS OB JECTION FILED BY THE ASSESSEE IS NOT MAINTAINABLE. HENCE, THE SAME IS D ISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH MAY16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 06.05.2016 VG/SPS ITA NO.729/VIZAG/2013 M/S. RAMALINGESWARA COMMERCIAL COMPLEX, KAKINADA 15 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO WARD-1, KAKINADA 2. / THE RESPONDENT M/S. SRI RAMALINGESWARA COMMERC IAL COMPLEX, 4-337, MAIN ROAD, PENUGUDURU, KAKINADA, EAST GODAVARI DIST .-533 016. 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM