M/s Chawla Chemtech Pvt. Ltd., Rajpura V. JCIT, Mandi Gobindgarh

ITA 776/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8417 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S MITTAL
• Keywords: Search and seizure; Question of law; Reasonable cause; Tax effect
• Section: 273B; 68; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 776/CHD/2015 ASSESSMENT YEAR: 2008-09 M/S CHAWLA CHEMTECH PVT. LTD., VS. THE JOINT CIT, RAJPURA (PUNJAB) MANDI GOBINDGARH, GOBINDGARH PAN NO. AABCC2468A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY : SH. S.S.MITTAL DATE OF HEARING : 19.02.2016 DATE OF PRONOUNCEMENT : 29.02.2016 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), PATIALA DATED 3.9.2015 IN CONFIRMING THE PENALTY OF RS. 5 LAKHS IMPOSED U/S 271D OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT ') FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PRIVATE LIMITED COMPANY RUNNING A COLD STORAGE AT CHANDIGAR H ROAD, RAJPURA HAVING THREE DIRECTORS NAMELY SH. MADAN LAL CHAWLA, SHRI R AKESH CHAWLA AND MRS. REEVA CHAWLA. THE ASSESSEE SUBMITTED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 29.9.2008 DECLARING A LOSS OF RS. 4,98,400/-. 2 SUBSEQUENTLY, THE ASSESSEE REVISED THE RETURN ON 27 .2.2009. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 30 TH MARCH 2010. HOWEVER, THE CASE WAS SELECTED FOR SCRUTINY AS PER CASS. STATUTORY NOTIC ES WERE ISSUED TO THE ASSESSEE AND IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITT ED THE REQUISITE INFORMATION WITH RELEVANT DOCUMENTARY EVIDENCE. THE ASSESSING O FFICER WHILE EXAMINING THE BALANCE SHEET AS ON 31.3.2008, NOTICED THAT THERE W AS INCREASE IN THE AMOUNT OF SHARE CAPITAL. THE SHARE CAPITAL AS ON 31.3.2008 WA S RS. 35 LAKHS AGAINST RS. 30 LAKHS AS ON 31.3.2007. AS PER SCHEDULE A OF THE B ALANCE SHEET AS ON 31.3.2008, THE COMPANY HAD AUTHORIZED SHARE CAPITAL OF RS. 30 LAKHS COMPRISING OF 30,000 EQUITY SHARES OF RS. 100/- EACH. THE ASSE SSING OFFICER FURTHER NOTICED THAT THE ISSUED, SUBSCRIBED AND PAID UP SHARE CAPIT AL WAS ALSO RS. 30 LAKHS COMPRISING OF 30000 EQUITY SHARES OF RS. 100 EACH. ACCORDING TO ASSESSING OFFICER, THE AUTHORIZED SHARE CAPITAL WAS FULLY SUB SCRIBED. HOWEVER, SHARE APPLICATION MONEY AMOUNTING TO RS. 5 LAKHS HAS ALSO BEEN SHOWN AS RECEIVED DURING THE YEAR FROM THE FOLLOWING THREE PERSONS:- S.NO. NAME AMT (RS.) DATE 1 SMT. ANJU CHAWLA 2,00,000/- 21.5.2007 2 MRS REEVA CHAWLA 1,00,000/- 21.5.2007 3 MRS. ASHA CHAWLA 2,00,000/- 15.2.2008 THE ASSESSING OFFICER NOTICED THAT THE AFORESAID SH ARE APPLICATION MONEY WAS RECEIVED IN CASH AND ALL THE ABOVE PERSONS ARE DIRE CTORS / SHARE HOLDERS OF THE COMPANY. ACCORDING TO ASSESSING OFFICER, AS PER T HE INFORMATION SUBMITTED BY THE ASSESSEE COMPANY TO THE REGISTRAR OF COMPANIES FOR THE YEAR UNDER CONSIDERATION AND THE SUBSEQUENT YEARS WHICH WAS OB TAINED BY HIM FROM THE OFFICIAL WEBSITE OF REGISTRAR OF COMPANIES SHOWED T HAT AUTHORIZED SHARE CAPITAL OF THE COMPANY WAS AT RS. 30 LAKHS. NO APPLICATION FOR INCREASE IN VARIOUS SHARE CAPITAL WAS FILED WITH THE REGISTRAR OF THE C OMPANIES. THE ASSESSING 3 OFFICER CONFRONTED THE ASSESSEE WITH THE ABOVE OBSE RVATIONS VIDE HIS LETTER DATED 3.12.2010 AND ASKED THE ASSESSEE TO SHOW CAUSE AS T O WHY A SUM OF RS. 5 LAKHS RECEIVED BY THE COMPANY DURING THE YEAR UNDER CONSI DERATION UNDER THE HEAD SHARE APPLICATION SHOULD NOT BE TREATED AS UNEXPL AINED DEPOSITS RECEIVED FROM THESE PERSONS AND BE NOT CONSIDERED FOR LEVY OF PE NALTY U/S 271D OF THE ACT, SINCE THE AMOUNT IN QUESTION HAS BEEN RECEIVED IN C ASH EXCEEDING THE LIMIT OF RS. 20,000/- FROM EACH PERSON, IN VIOLATION OF PRO VISIONS OF SECTION 269SS OF THE ACT ATTRACTING THE LEVY OF PENALTY U/S 271D OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED FOR LEVY OF PENALTY U/S 2 71D OF THE ACT, THE ASSESSEE SUBMITTED THAT AT THE TIME OF ACCEPTING SHARE APPLI CATION MONEY, THERE WAS NO INTENTION OF THE COMPANY TO TAKE THE AMOUNT OF RS. 5 LAKHS AS UNEXPLAINED DEPOSITS AS THE COMPANY WAS ALREADY IN HUGE LOSSES AND WAS NOT IN A POSITION TO BEAR THE BURDEN OF INTEREST. IT WAS STATED THAT AT THE RELEVANT TIME, THE ASSESSEE RECEIVED SUBSIDY FROM THE GOVERNMENT AND IT WAS DEC IDED THAT NO FURTHER SHARES SHOULD BE ALLOTTED BY INCREASING THE AUTHORIZED CAP ITAL OF THE COMPANY AND THE AMOUNT IN QUESTION WAS RETURNED TO THE PARTIES THRO UGH ACCOUNT PAYEE CHEUQES IN THE SUBSEQUENT YEARS. ALTERNATIVELY, IT WAS CONTEND ED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS IN QUESTION WERE JUST FAMILY TRANSACTIONS BETWEEN THE INDEPENDENT ASSESSEES, AND SUCH GENUINE TRANSACTION DOES NOT ATTRACT PENALTY U/S 271D OF THE ACT . FOR THIS PROPOSITION THE ASSESSEE HE RELIED ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163 (P&H). THE ASSESSEE ALSO R EFERRED TO THE PROVISIONS OF RULE 2 (B)(IX) OF THE COMPANIES (ACCEPTANCE OF DEPO SITS) RULES, 1975 WHICH PROVIDES THAT DEPOSITS DOES NOT INCLUDE ANY AMOUN T RECEIVED FROM A DIRECTOR OR A SHARE HOLDER OF A PRIVATE LIMITED COMPANY. ACCO RDINGLY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE CASH TRANSACTIONS BETWEEN THE ASSESSEE AND DIRECTORS / SHARE HOLDERS WERE NOT A LOAN OR DEPOSIT, AND THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE ASSESSE E RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. IDHAYAN PUBLICATION 4 LIMITED (2006) 285 ITR 221 (MAD.) WHEREIN THE HON' BLE HIGH COURT OBSERVED THAT AS PER THE COMPANIES ACT (ACCEPTANCE OF DEPOSI TS) RULES, 1975 UNDER RULE 2(B)(IX), DEPOSITS DOES NOT INCLUDE ANY AMOUNT RECE IVED FROM A DIRECTOR OR A SHARE HOLDER OF A PRIVATE LIMITED COMPANY. THE HON' BLE HIGH COURT RULED THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND DIRECTOR CUM SHARE HOLDER WAS NOT A LOAN OR DEPOSIT AND IT WAS ONLY CURRENT ACCOUNT IN NATURE AND NO INTEREST BEING CHARGED IN THE ABOVE TRANSACTIONS. THE HON'BL E HIGH COURT CONCLUDED THAT THUS THERE WAS NO VIOLATION OF PROVISIONS OF SECTIO N 269SS OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE REPLY / EXPLAN ATION OF THE ASSESSEE ON THE GROUND THAT THE AMOUNT OF RS. 5 LAKHS WAS RECEIVED IN CASH, NO SHARES WERE ALLOTTED AGAINST THIS MONEY AND NO ENHANCEMENT OF A UTHORIZED CAPITAL WAS EVER SOUGHT TO BE MADE BY THE ASSESSEE BEFORE THE REGIST RAR OF THE COMPANIES. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE H AD VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT BY RECEIVING AFORESAID AMO UNT OF RS. 5 LAKHS IN CASH AND, THUS WAS LIABLE FOR PENALTY U/S 271D OF THE AC T. CONSEQUENTLY, THE ASSESSING OFFICER IMPOSED PENALTY OF RS. 5 LAKHS U/ S 271D OF THE ACT BEING THE AMOUNT EQUAL OF LOAN /DEPOSIT RECEIVED IN CASH BY THE ASSESSEE IN CONTRAVENTION TO THE PROVISIONS OF SECTION 269SS OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE CIT( A) CONFIRMED THE PENALTY STATING THAT THE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED THAT THE AMOUNT IN QUESTION RECEIVED BY IT FROM ITS DIRECTORS/S SH ARE HOLDERS WAS ON ACCOUNT OF SHARE APPLICATION MONEY. AT THE SAME TIME THE CIT(A ) HAS ALSO HELD THAT THE ASSESSEE ALSO FAILED TO SHOW ANY REASONABLE CAUSE I N ACCEPTING THE LOAN OR DEPOSIT IN CASH. ACCORDINGLY, THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5 4. NOW THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) BEFORE THIS BENCH OF THE TRIBUNAL. I HAVE HEARD SHRI SUDHIR SEN GAL, LD. COUNSEL FOR THE ASSESSEE AND SHRI S.K.MITTAL THE LD. DR AT LENGTH A ND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI SUDHIR SEHGAL L D. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES. IT IS APPARENT FROM THE RECORDS THAT THE REVENUE AUTHORITIES DID NOT AC CEPT THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS. 5 LAKHS RECEIVED BY THE ASSESSEE FROM ITS DIRECTOR AND SHARE HOLDERS WAS TOWARDS SHARE APPLI CATION MONEY. IT IS AN ADMITTED FACT THAT SMT. REEVA CHAWALA IS ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. SHRI ANJU CHAWLA IS THE WIFE OF SHRI RAKE SH CHAWLA, DIRECTOR OF THE COMPANY, WHO CONTRIBUTED RS. 2 LAKHS AS A SHARE HOL DER OF THE ASSESSEE COMPANY. IT IS ALSO AN ADMITTED FACT THAT SMT. ASHA CHAWLA IS WIFE OF SH. MADAN CHAWLA, WHO IS DIRECTOR OF THE COMPANY IS ALSO A SH ARE HOLDER OF THE ASSESSEE COMPANY. AT THIS STAGE, I MAY REFER TO THE DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORKS (P ) LTD V CIT (2005) 275 ITR 399 (JHARKHAND), WHEREIN IT HAS BEEN HELD BY THE HO N'BLE JHARKHAND HIGH COURT THAT THE SHARE APPLICATION MONEY PARTAKES THE CHARA CTER OF DEPOSITS. THERE ARE CONTRARY DECISIONS OF OTHER HIGH COURTS, WHEREIN IT HAS BEEN HELD THAT THE AMOUNT RECEIVED IN CASH FOR ALLOTMENT OF SHARE DID NOT AMOUNT TO EITHER LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS, A ND THEREFORE, NO PENALTY CAN BE LEVIED U/S 271D OF THE ACT. THESE DECISIONS ARE AS UNDER:- CIT V I.P. INDIA (P) LTD (2012) 343 ITR 353 (DELHI) CIT V RUGMINI RAM RAGAV SPINNERS P. LTD. (2008) 30 4 ITR 417 (MAD.) CIT V M/S IQBAL INN & HOTELS LTD IN ITA NO. 256 OF 2014 JUDGMENT DATED 21.9.2015 (P&H) 5. IN MY OPINION, THE ISSUE AS TO WHETHER THE SHARE APPLICATION MONEY RECEIVED IN CASH WOULD BE EXEMPT FROM THE PROVISION S OF SECTION 269SS OF THE 6 ACT OR NOT IS A DEBATABLE ISSUE AND THERE ARE CONTR ARY DECISIONS OF VARIOUS HON'BLE HIGH COURTS ON THIS ISSUE. THE NEXT QUESTIO N ALSO ARISES AS TO WHETHER IN THE ABSENCE OF BOARDS RESOLUTION, THE ASSESSEE COM PANY HAS INCREASED AUTHORIZED SHARE CAPITAL OR NOT? IN MY OPINION, TH IS ISSUE IS NOT FREE FROM DEBATE. WITHOUT PREJUDICE TO ABOVE, AS AN ALTERNATI VE CONTENTION, SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE AMOUNT IN QUESTION IS NOT ACCEPTED AS SHARE APPLICATION MONEY, THEN THERE WAS A REASONABLE CAUSE FOR THE FAILURE TO COMPLY WITH THE PROVISIONS OF SECTIO N 269 SS OF THE ACT. SECTION 269SS OF THE ACT (APPLICABLE AT THE RELEVANT PERIOD ) PROVIDES THAT NO PERSON SHALL, AFTER 30.6.1984, TAKE OR ACCEPT FROM ANY OTH ER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE DRAFT, IF (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMO UNT OF SUCH LOAN OR DEPOSIT; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FR OM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT), T HE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR C) THE AMOUNT OR THE A GGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH AMOUNT OR THE AGGREGAT E AMOUNT REFERRED TO IN CLAUSE (B) IS RS. 20,000/- OR MORE W.E.F. 1.4.1989. FOR F AILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269SS, THE PENALTY IS LEVIABL E U/S 271D OF THE ACT WHICH EMPOWERS THE JT. CIT TO IMPOSE PENALTY TO ANY PERSO N WHO TAKES OR ACCEPT ANY LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269 SS OF THE ACT. THE PENALTY UNDER THIS SECTION IS LEVIABLE IN A SUM EQUAL TO THE AMOUNT OR LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. THE HON'BLE SUPREM E COURT IN THE CASE OF ASST. DIRECTOR OF INSPECTION (INVESTIGATION) VS. KUM. A.B . SHANTHI (2002) 255 ITR 258 (SC) HAS OBSERVED THE OBJECT OF INTRODUCING OF SECTION 269 SS OF THE ACT, WHICH READS AS UNDER:- THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSU RE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION F OR HIS UNACCOUNTED MONEY, OR IF HE MAKES SOME FALSE ENTRIE S, HE 7 SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR TH E SAME. DURING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UN EARTHED AND THE TAXPAYER WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELATIVE S OR FRIENDS AND IT IS EASY FOR THE SO-CALLED LENDER ALS O TO MANIPULATE HIS RECORDS TO SUIT THE PLEA OF THE TAXP AYER. THE MAIN OBJECT OF SECTION 269SS WAS TO CURB THIS MENAC E OF MAKING FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIVING AN EXPLANATION FOR THE SAME. 6. THE HON'BLE SUPREME COURT FURTHER OBSERVED THAT SECTION 273B OF THE ACT FURTHER PROVIDES THAT IF THERE IS A GENUINE AND BON AFIDE TRANSACTIONS AND THE TAX PAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PA YEE CHEQUE OR DEMAND DRAFT FOR SOME BONAFIDE REASON, THE AUTHORITY VESTED WITH THE POWER TO IMPOSE PENALTY HAS A DISCRETIONARY POWER NOT TO LEVY PENALTY. S ECTION 273B OF THE ACT PROVIDES THAT IF ASSESSEE PROVES THAT THERE WAS A R EASONABLE CAUSE, THE ASSESSEE IS NOT SUBJECT TO LEVY OF PENALTY. FOR THE ARGUMENT SAKE, IN THIS CASE IF IT IS ACCEPTED THAT ASSESSEE DID NOT RECEIVE THE SHARE AP PLICATION MONEY BUT IT WAS A DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE ACT, THEREFORE, THE QUESTION ARISES AS TO WHETHER THERE WAS A REASONABLE CAUSE I N ACCEPTING THE DEPOSITS IN CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE ACT? 7. IT IS AN ADMITTED FACT THAT THE CASH WAS DEPOSIT ED BY THREE PERSONS. SMT. REEVA CHAWLA IS ONE OF THE DIRECTORS OF THE COMPANY . SMT. ANJU CHAWLA AND SMT. ASHA CHAWLA ARE SHARE HOLDERS OF THE COMPANY. THERE IS NO DISPUTE THAT THE SOURCES OF THE AMOUNT OF RS. 5 LAKHS IS COMPLETELY FROM EXPLAINED SOURCES, THE EVIDENCE OF WHICH WAS FURNISHED BEFORE THE ASSESSIN G OFFICER. IT IS ALSO APPARENT FROM THE RECORDS THAT THE EVIDENCE FURNISHED BY THE COMPANY WAS ALSO VERIFIED BY THE ASSESSING OFFICER. THE CONTENTION OF SHRI S UDHIR SEHGAL, LD. COUNSEL FOR 8 THE ASSESSEE IS THAT THE MONEY IN CASH WAS INTRODUC ED IN THE COMPANY AS THE COMPANY WAS INCURRING HUGE LOSSES AND WAS NOT IN A POSITION TO BEAR THE BURDEN OF INTEREST. THIS FACT IS APPARENT FROM THE ASSESS MENT ORDER ITSELF THAT THE ASSESSEE SUBMITTED ITS RETURN OF INCOME ON 29.9.200 8 DECLARING A LOSS OF RS. 4,98,480/- FOR THE YEAR UNDER CONSIDERATION. AS I H AVE ALREADY OBSERVED HEREIN ABOVE THAT THE ASSESSEE WAS INCURRING HUGE LOSSES A ND THE CASH FLOW POSITION HAD CRIPPLED DURING THAT TIME. FURTHER, BECAUSE OF BUS INESS OF EXIGENCY WARRANTING IMMEDIATE DISCHARGE OF CERTAIN LIABILITIES, A DECIS ION WAS TAKEN BY THE PROMOTERS TO INTRODUCE FUNDS WHICH WAS DEPOSITED BY THE DIREC TOR AND THE SHARE HOLDERS OF THE COMPANY. THE REVENUE HAS NOT DOUBTED THE SOURCE S OF DEPOSITS MADE BY SMT. REEVA CHAWLA, ONE OF THE DIRECTORS OF THE COMP ANY. SIMILARLY, THE REVENUE HAS ALSO NOT DOUBTED THE DEPOSITS MADE BY S MT. ANJU CHAWLA W/O SHRI RAKESH CHAWLA, DIRECTOR OF THE COMPANY AND SMT. ASH A CHAWLA W/O SHRI MADAN LAL CHAWLA ANOTHER DIRECTOR OF THE COMPANY. I T IS ALSO RELEVANT TO STATE HERE THAT SMT. ANJU CHAWLA AND SMT. ASHA CHAWLA ARE SHARE HOLDERS OF THE ASSESSEE COMPANY. THE AMOUNT OF RS. 5 LAKHS INTRODU CED BY THE ABOVE THREE PERSONS HAS NOT BEEN TREATED AS CASH CREDITS U/S 68 OF THE ACT. IN OTHER WORDS, IT IS NOT THE CASE OF THE REVENUE THAT THE AMOUNT O F RS. 5 LAKHS REPRESENTED THE INCOME OF THE ASSESSEE FROM SOME UNDISCLOSED SOURC ES. FROM THE FACTS OF THE PRESENT CASE, IT IS CLEAR THAT THE TRANSACTIONS MAD E BETWEEN THE COMPANY AND ITS DIRECTOR AND SHARE HOLDERS CANNOT BE DOUBTED BY ANY STRETCH OF IMAGINATION. IN OTHER WORDS, THE TRANSACTIONS ARE GENUINE. IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163 (P&H), IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THAT CASH TRANSACTIONS WITH SISTER CONCERNS WHICH H AD NO TAX EFFECT, ESTABLISHED REASONABLE CAUSE U/S 273B OF THE ACT. THEREFORE , NO PENALTY U/S 271D AND 271E IS LEVIABLE. THE RELEVANT OBSERVATIONS MADE BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE ABOVE CASE ARE AS UNDER:- FURTHERMORE, THERE IS NO DISPUTE ABOUT THE FACT TH AT THE INSTANT CASH TRANSACTIONS OF THE RESPONDENT ASSESSE E WERE 9 WITH THE SISTER CONCERN AND THAT THESE TRANSACTIONS WERE BETWEEN THE FAMILY AND DUE TO BUSINESS EXIGENCY. A FAMILY TRANSACTION, BETWEEN TWO INDEPENDENT ASSESSEES, BAS ED ON AN ACT OF CASUALNESS, SPECIALLY IN A CASE WHERE THE DI SCLOSURE THEREOF IS CONTAINED IN THE COMPILATION OF ACCOUNTS AND WHICH HAS NO TAX EFFECT, IN OUR VIEW ESTABLISHES ' REASON ABLE CAUSE' UNDER SECTION 273B OF THE ACT. SINCE THE RESPONDENT ASSESSEE HAD SATISFACTORILY ESTABLISHED ' REASONABLE CAUSE' UNDER SECTION 273B OF THE ACT HE MUST BE DEEMED TO HAVE ESTABLISHED SUFFICIENT CAUSE FOR NOT INVOKING THE P ENAL PROVISIONS (SECTIONS 271D AND 271E OF THE ACT) AGAI NST HIM. 8. SIMILARLY, IN THE CASE OF CIT VS. MAHESWARI NIRM AN UDYOG (2008) 302 ITR 201 (RAJ.), THE ASSESSEE WAS A CONTRACTOR DOING BUSINESS IN A REMOTE AREA OF NOKHA TEHSIL. THE ASSESSEE COMPANY WAS REQUIRED TO MAKE SPOT PAYMENTS TO THE LABOURERS ETC. AND FOR THAT THE COMPANY NEEDED CASH . THE COMPANY BORROWED MONEY FROM ITS SISTER CONCERN AT THE WORK SITE. TH E ASSESSING OFFICER LEVIED THE PENALTY U/S 271D OF THE ACT FOR VIOLATING THE PROVI SIONS OF SECTION 269SS OF THE ACT. THE HON'BLE RAJASTHAN HIGH COURT CONFIRMED TH E ORDER OF THE TRIBUNAL IN DELETING THE PENALTY LEVIED U/S 271-D OF THE ACT HO LDING THAT THE SISTER CONCERN OF THE ASSESSEE WAS OWNED BY THE SAME FAMILY GROUP OF PEOPLE WITH A COMMON MANAGING PARTNER WITH CENTRALIZED ACCOUNTS UNDER TH E SAME ROOF AND THEREFORE, THE TRANSACTIONS INTER-SE BETWEEN THE SISTER CONCER N AND THE ASSESSEE COULD NOT PARTAKE THE NATURE OF EITHER DEPOSIT OR LOAN TH OUGH INTEREST MIGHT HAVE BEEN PAID ON THE SAME. THE HON'BLE HIGH COURT FURTHER HE LD THAT THE TRIBUNAL HAS CORRECTLY HELD THAT THE TRANSACTIONS WERE GENUINE A ND THEREFORE, EXPLANATION GIVEN BY THE ASSESSEE WAS REASONABLE FOR RECEIVING PAYMENTS IN CASH. 9. SHRI SUDHIR SENGAL, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT PENALTY U/S 271D IS NOT LEVIABLE IN RESPECT OF THE DEPOSITS RECEIVED BY THE COMPANY 10 THROUGH BANK FROM ITS DIRECTOR. IN THE CASE OF CIT V IDHAYAM PUBLICATIONS LTD (SUPRA) THE HON'BLE MADRAS HIGH COURT HELD AS UNDE R:- 4. WE HEARD THE ARGUMENTS OF LEARNED COUNSEL FOR T HE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE IN RECORD. ADMITTEDLY MR. S. V. S. MANIAN WAS ONE OF THE DIREC TORS. THEREFORE THE ORDER OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR. S. V. S. MANIAN. MR. S. V. S. MANIAN USED TO PAY THE MONEY IN THE CURRENT ACCO UNT AND USED TO WITHDRAW THE MONEY ALSO FROM THE CURRENT AC COUNT. THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS. THE DEPOSIT AND THE WITHDRAWAL OF THE MONEY FROM THE CURRENT ACCOUNT COULD NOT BE CONSIDERED AS A LOAN O R ADVANCE. FURTHER IT WAS ALSO FOUND THAT THE ASSESSE E FILED A LETTER DATED SEPTEMBER 29, 1997, AND IN THAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR. S. V. S . MANIAN HAD BEEN SHOWN AS UNSECURED LOAN FROM DIRECTORS I N THE BALANCE-SHEET. AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975, UND ER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEI VED FROM A DIRECTOR OR A SHAREHOLDER OF A PRIVATE LIMITED COMP ANY. THEREFORE THE TRANSACTION BETWEEN THE APPELLANT AND THE DIRECTOR CUM SHAREHOLDER IS NOT A LOAN OR DEPOSIT A ND IT IS ONLY A CURRENT ACCOUNT IN NATURE AND NO INTEREST IS BEING CHARGED FOR THE ABOVE TRANSACTION. 5. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW THAT SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEANI NG OF LOAN OR ADVANCE, THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME-TAX ACT. WE FIND NO ERROR IN THE ORDER OF TH E TRIBUNAL AND THE SAME REQUIRES NO INTERFERENCE. HENCE, NO SU BSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION OF THIS CO URT. ACCORDINGLY, WE DISMISS THE ABOVE TAX CASE. NO COST S. 11 SIMILARLY, THE HON'BLE CHHATTISGARH HIGH COURT IN T HE CASE OF PREETI FUELS & FLAMES (P) LTD. (2011) 330 ITR 129 HELD AS UNDER:- 6. A PERUSAL OF THE ABOVE QUOTED PROVISIONS WOULD SHOW THAT SECTION 269SS SHALL NOT APPLY TO ANY LOAN OR DEPOSI T TAKEN OR ACCEPTED FROM, OR ANY LOAN OR DEPOSIT TAKEN OR ACCE PTED BY ANY BANKING COMPANY, POST OFFICE SAVINGS BANK OR CO - OPERATIVE BANK. 7. FURTHER, RULE 2(B)(IX) OF THE COMPANIES (ACCEPTA NCE OF DEPOSITS) RULES, 1975, EXEMPTS ANY AMOUNTS RECEIVED FROM A PERSON WHO AT THE TIME OF THE RECEIPT OF THE AMOUNT WAS A DIRECTOR OF THE COMPANY, OR ANY AMOUNT RECEIVED FRO M ITS SHAREHOLDERS, BY A PRIVATE COMPANY, OR BY A PRIVATE COMPANY WHICH HAS BECOME A PUBLIC COMPANY. RULE 2(B)(IX) OF THE RULES, 1975, IS RELEVANT HERE AND QUOTED BELOW : '2. DEFINITIONS. (A) 'ACT' MEANS THE COMPANIES ACT, 1956 (1OF 1956) ; (B) 'DEPOSIT' MEANS ANY DEPOSIT OF MONEY WITH, AND INCLUDES ANY AMOUNT BORROWED BY, A COMPANY, BUT DOE S NOT INCLUDE .. (IX) ANY AMOUNT RECEIVED FROM A PERSON WHO, AT THE TIME OF THE RECEIPT OF THE AMOUNT, WAS A DIRECTOR O F THE COMPANY OR ANY AMOUNT RECEIVED FROM ITS SHAREHOLDERS, BY A PRIVATE COMPANY, OR BY A PRIVATE COMPANY WHICH HAS BECOME A PUBLIC COMPANY UNDER SECTION 43A OF THE ACT AND CONTINUES TO INCLUDE IN ITS ARTICLES OF ASSOCIATION PROVISIONS RELATING TO THE MATTERS SPECIFIED IN CLAUSE (III) OF SUB-SECTION ( 1) OF SECTION 3 OF THE ACT: PROVIDED THAT THE DIRECTOR OR SHAREHOLDER, AS THE C ASE MAY BE, FROM WHOM THE MONEY IS RECEIVED FURNISHES T O THE COMPANY AT THE TIME OF GIVING THE MONEY, A DECLARATION IN WRITING TO THE EFFECT THAT THE AMOUN T IS NOT BEING GIVEN OUT OF FUNDS ACQUIRED BY HIM BY BORROWING OR ACCEPTING FROM OTHERS ; EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT ANY DEPOSIT RECEIVED OR RENEWED BY A 12 COMPANY BEFORE THE COMMENCEMENT OF THE COMPANIES (ACCEPTANCE OF DEPOSITS) (AMEND MENT) RULES, 1978, SHALL CONTINUE TO BE GOVERNED BY THE RULES APPLI CA BLE AT THE TIME OF SUCH DEPOSIT OR RENEWAL, AS THE CASE MAY BE.' 8. HERE, IN THE INSTANT CASE, THE TRANSACTIONS IN Q UESTION WERE THROUGH BANK AND WERE DEPOSITED BY SOME OF THE DIRECTORS/PROMOTERS OF THE ASSESSEE-COMPANY. THEREF ORE, WE SEE NO ILLEGALITY OR IMPROPRIETY IN THE IMPUGNED OR DER DATED NOVEMBER 25, 1999 PASSED BY THE TRIBUNAL. THUS, NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL. THE APPEAL IS THEREFORE DISMISSED. 10. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT TH E CASH TRANSACTIONS OF THE ASSESSEE WERE WITH THE DIRECTORS AND SHARE HOLDERS OF THE COMPANY DUE TO BUSINESS EXPEDIENCY. NOBODY HAS DOUBTED THE GENUIN ENESS OF THE TRANSACTIONS. IN MY OPINION, THE ASSESSEE HAS PROVED THROUGHOUT WITHOUT ANY SHADOW OF DOUBT THAT THE TRANSACTIONS ARE GENUINE AND THERE IS A RE ASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT, WHICH PROVIDES THAT NO PENALTY SHALL BE IMPOSED ON PERSON OR ASSESSEE AS THE CASE MAY BE FO R ANY FAILURE REFERRED TO IN SECTION 269SS OF THE ACT, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO TAKE A LOAN OR DEPOSIT OTHERWISE THA N BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, THEN THE PENALTY SHOULD NOT BE LEVIED. ACCORDINGLY, I DO NOT SEE ANY REASON TO SUSTAIN THE PENALTY LEVI ED U/S 271D OF THE ACT. CONSEQUENTLY, THE IMPUGNED PENALTY LEVIED U/S 271D OF THE ACT IS CANCELLED. 11. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.02.2016 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 29 TH FEBRUARY, 2016 RKK 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR FIT FOR PUBLICATION SD/- (H.L.KARWA) VICE PRESIDENT