M/s Salsar Food (P) Ltd, Sambalpur V. The Addl. CIT, Sambalpur

ITA 85/CTK/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4277 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 10-03-2010
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Keywords: Reasonable cause
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE HONBLE SHRI D.K.TYAGI, JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER . / I.TA.NO . 85/CTK/2010 STAY PETITION NO.12/CTK/2010 / ASSESSMENT YEAR 2006 - 07 M/S.SALSAR FOOD (P) LTD., NUAKHIRGAON,SASON,SAMBALPUR. PAN AAHCS 8543 C - - - VERSUS - . THE ADDL.COMMISSIN ER OF INCOME - TAX, RANGE 2, SAMBALPUR. / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI S.K.TULSIYAN/M.L.JHUNJHUNWALA,ARS FOR THE RESPONDENT : SHRI S.C.MOHANTY, DR / ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THE STAY PETITION AND THE APPEAL FILED BY THE ASSESSEE ARE BEING CONSIDERED TOGETHER. 2. THE ASSESSEE IN APPEAL HAS RAISED THE FOLLOWING GROUNDS. 1. THAT THE ORDER OF THE LD. ADDI. COMMISS IONER OF INCOME TAX, RANGE - 2 , SAMBALPUR AND THAT OF THE CIT(A), CUTTACK IMPOSING A PENALTY UNDER SECTION 271D AMOUNTING TO RS.50,00,000 AND CONFIRMING THEREOF ARE ARBITRARY, UNWARRANTED, WITHOUT ANY BASIS AND HENCE BAD IN LAW. 2. THAT THE LD. ADDL . COMMI SSIONER OF INCOME TAX AS ALSO THE CIT(A) FAILED TO APPRECIATE THE IMPUGNED SUM OF RS.50.OO LAKHS RECEIVED FROM SHRI ADITYA JAJODIA WAS NEITHER A LOAN NOR A DEPOSIT ATTRACTING PROVISION OF SECTION 269 - SS READ WITH SECTION 271D OF THE INCOME TAX ACT, 1961. 3. THAT THE LD. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 2, SAMBALPUR AND THAT OF THE CIT(A), CUTTACK FAILED TO APPRECIATE THAT SHRI ADITYA JAJODIA, BEING THE MANAGING DIRECTOR, MAINTAINED A CURRENT ACCOUNT IN THE COMPANY WHEREIN THE SAID AMOUNT WAS LYING. 4. THAT THE BACKGROUND OF THE AMOUNT LYING TO HIS CREDIT IN THE BOOKS OF THE COMPANY ALTHOUGH EXPLAINED HAVING BEEN NOT FULLY APPRECIATED, THE ACTION OF THE LD. ADD L . COMMISSIONER OF INCOME TAX, RANGE - 2, SAMBALPUR AS ALSO THE CIT(A), CUTTACK IMPOSING AND CONFIRMING THE PENALTY UNDER SECTION 271D IS UNWARRANTED. / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 2 5. THAT THE ORDERS OF THE LD. ADD L . COMMISSIONER OF INCOME TAX, RANGE - 2, SAMBALPUR AND THAT OF THE CIT(A), CUTTACK BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 6. THAT FURT HER GROUND(S) OF APPEAL MAY BE SUBMITTED ON OR BEFORE THE DATE OF HEARING. 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 18.12.2003 WITH FIVE PROMOTERS AND DIRECTORS WHICH INTER ALIA HAD SHRI ADITYA JAJODIA AS ITS DIRECTOR. SHRI ADITYA JAJODIA RESIGNED FRO M THE DIRECTORSHIP OF THE COMPANY WITHIN 4 - 5 MONTHS OF THE COMMERCIAL PRODUCTION WHICH WAS COMMENCED ON 1.6.2004 I.E., DURING THE FINANCE YEAR 2004 - 05 RELEVANT TO THE ASSESSMENT YEAR 2 005 - 06. SHRI ADITYA JAJODIA HAI LS FROM THE FAMILY OF JAJODIA S AT SASON OWNING THE FIRST RICE MILL IN ORISSA, NAMELY M/S.SHREE HANUMAN RICE MILL IN WHICH HE WAS A PARTNER. SHRI ADITYA JAJODIA ADVANCED A SUM OF RS.50,00 ,00 0 IN CASH ON THE FOLLOWING DATES DATE OF MONEY ADVANCED AMOUNT 27.5.2005 RS. 5,00,000 30.5.2005 RS. 5, 00,000 11.6.2005 RS. 5,00,000 13.06.2005 RS.10,00,000 14.06.2005 RS.10,00,000 15.06.2005 RS.10,00,000 25.09.2005 RS. 5,00,000 AS NOTED BY THE ASSESSING OFFICER. AFTER ADVANCING THE MONEY, SHRI JAJODIA AS MANAGING DIRECTOR EFFECTED CREDIT SALES OF RICE INCLUDING PAYMENT BY CHEQUE TO M/S.SHR EE HANUMAN RICE MILL DURING THE PERIOD 6.6.2005 TO 6.2.2006 AMOUNTING TO RS.81,02,012 BY ISSUING PROPER TAX INVOICES UNDER VAT ACT AND AFTER COLLECTION OF THE DUE VAT ON SALE OF RICE WHICH HE REFLECTED IN THE SALE S TAX RETURNS. AT THE END OF THE FY AS ON 31.3.2006 THERE REMAINED A CREDIT BALANCE OF RS.50 LAKHS IN THE NAME OF SHRI ADITYA JAJODIA CURRENT ACCOUNT AND DEBIT BALANCE OF RS.78,56,773 IN THE NAME OF M/S.SHREE HANUMAN RICE MILL AS SUNDRY DEBTOR ON ACCOUNT O F SUPPLY OF RICE ETC. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON ALL THESE UNDISPUTED FACTS , THE ASSESSING OFFICER PROCEEDED TO CONSIDER THE CASE OF THE ASSESSEE OF HAVING RECEIVED AMOUNT IN CASH IN VIOLATION OF SECTION 269SS OF THE INCOME - TAX ACT,1961. / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 3 THE ASSESSING OFFICER HAD NOTED IN HIS ASSESSMENT ORDER PAGE 3 THAT IN VIEW OF THE SE FACTS PENALTY PROCEEDINGS U/S.271D WERE TO BE INITIATED. IN THE COURSE OF HEARING OF THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING O FFICER THAT THESE TRANSACTIONS WERE NOT DEPOSIT OR LO ANS IN TERMS OF SECTION 269SS OR SECTION 269 T . THE ASSESSEE BEING THE MANAGING DIRECTOR OF THE COMPANY HAD CURRENT ACCOUNT WHICH THEREFORE WAS MISMANAGED BY THE COMPANY AND THE TRANSACTIONS RECORDED IN T HE COMPANY WERE GENUINE AND SO FAR THE IDENTITY, CREDITWORTHINESS AND THE GENUINENITY OF THE TRANSACTIONS WERE UNDISPUTED. HE POINTED OUT THAT THE ASSESSING OFFICER WAS APPRISED OF THE VARIOUS CAS E LAWS AND THE CIRCULARS RELATING TO THE IMPOSING OF PENALTY U/S.271D ON THE BASIS OF TRANSFERRING AMOUNT U/S.269SS AND 269 T . HE POINTED OUT THAT IN ORDER TO IMPOSE PENALTY U/S.271D, THE ONUS LIED ON THE REVENUE TO ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE WAS LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 26 9SS WHICH IN CASE OF THE ASSESSEE BEING A COMPANY WAS GOVERNED BY THE PROVISIONS OF C OMPANIES (ACCEPTANCE OR DEPOSIT) RULES 1975 WHICH SATISFY RULE 2(B)(IX) THAT A DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHARE HOLDER OF PRIVATE LI MITED COMPANY. IT WAS HELD THAT A TRANSACTION BETWEEN THE ASSESSEE AND DIRECTOR/SHARE HOLDER WAS NOT A LOAN OR DEPOSIT BUT ONLY A CURRENT ACCOUNT IN NATURE AND NO INTEREST WAS CHARGED TO THE SAID TRANSACTION WAS EXPLAINED TO THE ASSESSING OFFICER. THE LEAR NED COUNSEL FOR THE ASSESSEE POINTED OUT ON PAGE 3 OF THE PENALTY ORDER THAT HE HAD ACCEPTED THE FACT THAT THIS AMOUNT WAS IN THE NATURE OF ADVANCE AND NOT A LOAN WHICH WORD HE ADDED OF HIS OWN. THEREAFTER HE PROCEEDED TO INDICATE THAT ON THE ASSESSEES EXPLANATION THESE TRANSACTIONS IN THE NATURE OF CURRENT ACCOUNT WERE TO BE FOR PAYMENT OF SALE OF RICE TO SHRI HANUMAN RICE MILLS WAS BONAFIDELY ESTABLISHED WHEN THE BILLS WERE RAISED BY ON THE ASSESSEE COMPANY TO BE ADJUSTED AGAINST THE ADVANCE CASH DULY LEDGERISED . HOWEVER, THE ASSESSING OFFICER TRIED TO DERIVE MEANING IN THE TRANSACTIONS BY ESTABLISHING THAT THE AMOUNT GIVEN NEITHER HAD ANY COMPELLING REASONS OR BUSINESS EXIGENCIES IN ORDER TO ACCEPT CASH IN VIOLATION OF THE PROVISIONS OF SECTION 269SS,. HE RELIED ON THE DECISION OF THE ITAT, PUNE BENCH IN THE CASE OF PLASTIBENDS INDIA LTD ., V.ITO (94 ITD 295). THE LEARNED ASSESSING OFFICER THEREAFTER PROCEEDED TO HOLD THAT THE ONUS ON THE ASSESSEE TO PROVE BEYOND A SHADOW OF DOUBT THERE EXISTED A REASON ABLE CAUSE FOR NOT COMPLI NG WITH THE / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 4 PROVISIONS OF SECTION 269SS, THE RESULTANT INVOKING PROVISIONS OF SECTION 271D WAS INEVITABLE. HE FURTHER CONSIDERED THE APEX COURTS DECISION IN THE CONTEXT OF SECTION 40A(3) RENDERED BY THE APEX COURT IN THE CASE OF A TTAR SINGH GURUMU KH SINGH V. ITO (191 ITR 667) BY HOLDING THAT IT WAS NOT THE GENUINENESS OF THE TRANSACTION WHICH WAS TO BE CONSIDERED FOR LEVY OF PENALTY U/S.271D. BRUSHING ASIDE ALL THE ARGUMENTS PLACED BEFORE HIM, THE LEARNED ASSESSING OFFICER IMPOSED THE PENALTY OF RS.50 LAKHS ON THE ASSESSEE U/S.271D. 5. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND REITERATED THE FACTS OF THE ASSESSEE AND ALSO THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER IN HIS ORDE R WHEN HE NOTED THAT THE CASH BOOK AND LEDGER SHOWED THAT THE MONEY WAS RECEIVED IN CASH AND DESCRIBED THE RELEVANT AMOUNT ADITYA JAJODIA CURRENT ACCOUNT. SHRI JAJODIA HAS ALSO CONFIRMED THE TRANSACTION U/S.131 OF THE ACT ON 24.12.2008 IN THE PRESENCE OF THE AR OF THE ASSESSEE OF THE ASSESSEE. APART FROM THE DEPOSIT MONEY BY THE MANAGING DIRECTOR WITH THE COMPANY, THE AUTHORITIES TRIED TO ADJUDICATE ON THE BASIS OF THE TRANSACTIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT(A) ON THE APPEAL FILED BY THE ASSESSEE ON THE LEVY OF PENALTY NOTED THAT THE ASSESSEE HAD TAKEN A LOAN FROM SHRI ADITYA JAJODIA OF RS.50 LAKHS AND IN ORDER TO AVOID PENALTY U/S.271D OF THE ACT WAS COMING UP WITH LAME EXCUSES. HE HAS DRAWN HIS OWN VERSION FROM THE WELL KNOWN FACTS OF THE ASSESSEE AND THEREFORE AFTER PUTTING VARIOUS ALLEGATIONS ON THE ASSESSEE , REASONED MORE ON THE BASIS OF TRYING TO DISTINGUISH THE CASE LAWS CITED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND T HE CIT(A) WHICH CASE LAWS ARE S QUARELY APPLICA BLE ON THE FACTS OF THE ASSESSEES CASE IN FAVOUR OF THE ASSESSEE. IN THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. IDHAYAM PUBLICATIONS LTD ., (2 85 ITR 221) ONE OF THE DIRECTORS HAVING CURRENT ACCOUNT IN THE ASSESSEE COMPA NY USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND WITHDRAW THE SAME WHEN THE REVENUE COULD NOT ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS. THE AMOUNT HAD BEEN SHOWN AS UNSECURED LOAN FROM THE DIRECTOR WHICH DEPOSIT OR LOAN WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF COMPANIES ( ACCEPTANCE AND DEPOSIT) RULES,1975. IT WAS HELD THAT THE SAID TRANSACTIONS DID NOT FALL WITHIN THE MEANING OF LOANS OR ADVANCE AND THEREFORE, A / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 5 FINDING OF FACT BY THE T RIBUNAL WAS UPHELD. IN ANOTHER DECISION RENDERED BY THE ITAT, J AIPUR BENCH IN THE CASE OF CHANDRA CEMENT LTD., V. DCIT [68 TTJ (JP) 35] IN A SIMILAR SITUATION, A MANAGING DIRECTOR FOUND THAT THE COMPANY WAS NOT ABLE TO UTILIZE THE RESOURCES AVAILABLE OR WH ICH WERE TO BE RECEIVED LATER FOR A PRESENT WORK, HE DECIDED TO INVOLVE HIS OWN MONEY IN CONSTRUCTION WORK; THAT THERE WAS NO COMPELLING REASONS OR COMPELLING FORCE ON THE ASSESSEE BEING A COMPANY WHO WOULD HAVE BEEN EXPOSED TO INVITE LOAN DEPOSITS WHICH T HE DIRECTOR ADVANCED IN CASH. HE POINTED OUT THAT AN UNILATERAL ACT CANNOT RESULT IN A CONTRACT FOR WHICH EXISTENCE OF TWO PARTIES ARE REQUIRED. WHETHER THE LOAN OR DEPOSIT ARE BOTH ARE CONTRACTS ONLY, ORIGINATED FROM A BILATERAL ACT. HERE THE AMOUNT ADVAN CED WAS MONEY BROUGHT BY THE DIRECTOR FROM HIS OWN RESOURCES FROM TIME TO TIME FOR MEETING THE EXPENSES OF THE COMPANY WHICH REMAINED DISPUTED FACT NOTED BY BOTH THE AUTHORITIES BELOW THEREFORE WERE UNILATERAL TRANSACTION NOT LOAN OR DEPOSIT ATTRACTING THE PROVISIONS OF SECTION 269SS OF THE ACT AND THE PENALTY U/S.271D COULD NOT BE LEVIED. IN ANOTHER DECISION BY THE ITAT, COCHIN BENCH IN THE CASE OF MUTHOOT M. GEORGE BROTHERS V. ACIT (46 ITD 10) THE VALIDITY OF SECTION 271D WAS CONSIDERED FOR TRANSACTIONS B ETWEEN SISTER CONCERN OF THE ASSESSEE ARE TO BE EXAMINED WHEN THE TRANSFER OF FUNDS FROM ONE OF THE SISTER CONCERNS TO ANOTHER , THERE WAS NO EVIDENCE TO ESTABLISH THAT MONEY WAS GIVEN ON LOAN OR KEPT DEPOSITED FOR A FIXED PERIOD AND REPAYABLE ON DEMAND. TH E SISTER CONCERN HAD A COMMON DEBTORS AND CREDITORS THEREFORE HAVING A COMMON PERSON COULD NOT BE SAID TO BE IN DISCHARGE OF A CONTRACT WITH ONESELF. FROM THE COPIES OF THE ACCOUNTS FURNISHED IT COULD BE GATHERED THAT THE FUNDS WERE TRANSFERRED TO AND FRO IN SETTLEMENT OF BUSINESS TRANSACTIONS. THEREFORE, IN ORDER TO ESTABLISH THAT THE AMOUNT IS A LOAN OF DEPOSIT TO ATTRACT THE PROVISIONS OF SECTION 269SS, IT WAS NECESSARY TO CONSIDER THE INTENTION , WHETHER WAS TO EARN INTEREST OR WHETHER WAS TO DIVERT OR INVEST NON - TAX PAID AMOUNTS AND NEITHER OF THESE TWO COULD BE ESTABLISHED BY THE AUTHORITIES IN THE CASE OF THE ASSESSEE. IN ANOTHER DECISION RENDERED BY THE ITAT, MUMBAI BENCH IN THE CASE OF KARNATAKA GINNING & PRESSING FACTORY V. JCIT (77 ITD 478) IT WA S HELD THAT TEMPORARY ADVANCES ARE OUTSIDE THE PURVIEW OF SECTION 269SS WHEN THE QUESTION OF EXISTENCE OF REASONABLE CAUSE IT WAS HELD THAT THE AMOUNTS COULD NOT ALWAYS BE TERMED AS LOAN OR DEPOSIT. THE WORDS ARE NOT DEFINED IN EXPLANATION (III) BELOW SEC TION / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 6 269SS EXCEPT SAYING THAT LOAN OR DEPOSIT MEANS LOAN OR DEPOSIT OF MONEY. HE SUBMITTED THAT THE AMOUNTS TAKEN BY THE ASSESSEE IN THE PRESENT CASE FROM SHRI ADITYA JAJODIA WAS TEMPORARY ADVANCE AND THERE WAS NO EVIDENCE THAT THERE WAS ANY SETTLEMENT AS TO BORROW ON INTEREST. THE AUTHORITIES BELOW, THEREFORE, ON DOUBTFUL PRESUMPTION WHETHER THESE AMOUNTS RECEIVED FROM SHRI ADITYA JAJODIA COULD BE CHAR ACTERIZED AS LOAN OR DEPOSIT TRI ED TO BRING EXTRANEOUS MATERIAL BY RELYING ON OTHER DECISIONS WHICH AR E NOT DIRECTLY ON THE PROVISIONS OF SECTION 271D. IT WAS EXPLAINED TO THE LEARNED CIT(A) PLACING RELIANCE ON THE DECISION OF APEX COURT IN THE CASE OF CHAMUNDI GRANITES (P) LTD., V. DCIT (255 ITR 288) THAT THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENS URE THAT A TAXPAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, OR IF HE MAKES SOME FALSE ENTRIES, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. THERE IS NO MATERIAL IN THE CASE OF THE ASSESSEE WHICH WAS CORROBORATED TO THE FINDINGS OF THE AUTHORITIES BELOW THAT I T WAS THE MONEY WHICH THEY FOUND DURING THE COURSE OF A SEARCH PROCEEDINGS OR THE MONEY BORROWED OR RECEIVED FROM SHRI ADITYA JAJODIA WAS TO BE BROUGHT TO TAX U/ S.68 REMAINED UNEXPLAINED .HOWEVER, EVEN IF TA KING NOTE OF ALL THESE FACTS, THE LEARNED CIT(A) HELD THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE APPELLANT BEFORE HIM ARE AN AFTERTHOUGHT TO COVER UP THE LAPSES. THE FRAGMENTATION OF THEIR OWN APPLICATION OF MIND WAS TO HOLD THAT IT WAS THE MONEY WHIC H HAD NOT BEEN SUBJECTED TO TAX THEREFORE WAS DEPOSITED IN THE ASSESSEE COMPANY WITH A MALAFIDE INTENTION. HE POINTED OUT THAT NO MALAFIDE INTENTION APPEARED TO HAVE BEEN ESTABLISHED BY THE TAXING AUTHORITIES WHEN THE ASSESSMENT OF SHRI HANUMAN RICE MILL H AS BEEN ACCEPTED AS FORMED PART OF THE BUSINESS TRANSACTIONS IN THE CASE OF THE ASSESSEE COMPANY. THE LEARNED CIT(A) THEREAFTER PROCEEDED TO CONSIDER VARIOUS SUBMISSIONS AND THE REPLIES GIVEN ON SPECIFIC QUERIES. THE SOLE PURPOSE WAS TO DENY THE ASSESSEE T O REJECT CLAIM OF THE ASSESSEE NOT GOVERNED UNDER THE PROVISIONS OF SECTION 269SS TO BE VISITED BY THE PENAL PROVISIONS OF SECTION 271D. HE RELIED ON ANOTHER DECISION OF THE ITAT, HYDERABAD BENCH IN THE CASE OF DILLU CINE ENTERPRISES (P) LTD V. ACIT ( 80 ITD 484) WHERE IN IT WAS HELD THAT TRANSACTIONS BETWEEN THE COMPANY AND ITS DIRECTOR ON THE REQUIREMENT BY THE ASSESSEE FUND S, THE DIRECTOR BRINGING FROM HIS PERSONAL ACCOUNTS AND WITHDRAWING THE SAME AS AND WHEN REQUIRED WERE DEPOSITED WERE BEYOND DOUBT GENUINE , THEREFORE THE MER E / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 7 TECHNICAL BREACH WOULD NOT ATTRACT THE PROVISIONS OF SECTION 269SS. THE TERM OTHER PERSON APPEARING IN SECTION 269SS MEANS OTHER THAN THOSE I NTIMATELY CONNECTED AND THEREFORE, RIGHTLY CONSIDERED LOAN NOT FROM A CONTRACTEE. IN ANOTHER DECISION BY THE HONBLE APEX COURT IN THE CASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD., V. STATE OF UTTAR PRADESH , THE DOCTRINE OF PROMISSORY ESTOPPELS WAS HELD TO BE NOT APPLICABLE ON THE PITH ON AN OBLIGATION OR A LIABILITY IMPOSED BY LAW. TH EREFORE, THE DOCTRINE OF PROMISSORY ESTOPPELS CANNOT BE INVOKED TO COMPEL THE GOVERNMENT OR A PRIVATE PARTY WHO HAVE BEEN PROHIBITED BY LAW. ONCE THE AUTHORITIES BELOW HAVE ACCEPTED THE TRANSACTION, IT WAS NOT TO BE CONSEQUENTIAL FOR LEVY OF PENALTY AS PRO POSED TO HAVE BEEN DONE BY THE BOTH THE AUTHORITIES BELOW. 6. CONCLUDING HIS ARGUMENTS, HE SUBMITTED THAT THE TRANSACTIONS WERE IN THE NATURE OF CURRENT ACCOUNT AND THEY DO NOT B EAR INTEREST OR INCOME AND IT IS A RUNNING ACCOUNT AND IT CANNOT BE TERMED AS LOANS. HE PRAYED THAT THE PENALTY CONFIRMED BY THE LEARNED CIT(A) BE DIRECTED TO BE DELETED. 7. THE LEARNED DR INDICATED IN THE PB , SUBMITTED BY THE LEARNED COUNSEL ON THE FACTS OF THE ASSESSEES CASE , BY INDICATING THAT THE LEDGER COPIES OF ACCOUNTS PARTI CULARLY INDICATE THAT CASH WAS RECEIVED BY THE ASSESSEE IN VIOLATION TO THE PROVISIONS OF SECTION 269SS. THE AMOUNTS WERE ADJUSTED BY RAISING DEBIT NOTE IN THE NAME OF SHRI ADITYA JAJODIA CURRENT ACCOUNT BY DEBITING SHRI HANUMAN RICE MILL, THEREFORE, WAS AN ADJUSTMENT ENTRY . UNDER THE MERCANTILE SYSTEM OF ACCOUNTING THE SAID AMOUNT CANNOT BE TERMED AS ADVANCE IN THE NATURE OF LOAN AND DEPOSIT. THE LEARNED COUNSEL HAS NOT BEEN ABLE TO EXPLAIN THE NATURE OF LIABILITY AS NOTED OUT BY THE LEARNED ASSESSING OF FICER WHE THER COULD BE CONSIDERED AS ADVANCE OR A CURRENT ACCOUNT. NO MATERIAL HAS BEEN PLACED ON RECORD TO INDICATE THE BUSINESS NEED OR COMPELLING CIRCUMSTANCES, WHICH REQUIRED THE ASSESSEE TO ACCEPT THE SAID DEPOSITS FROM THE MANAGING DIRECTOR. HE POINT ED OUT THAT THE ASSESSING OFFICER HAD CONSIDERED ALL THESE SUBMISSIONS WHEN IT WAS HELD AS AN AFTERTHOUGHT IN SO FAR AS THE COMPANY COULD NOT BE SAID TO UNAWARE TO SHRI ADITYA JAJODIA DEPOSITING MONEY WITH A MALAFIDE INTENTION EVEN AFTER THE CLOSE OF THE A CCOUNTING YEAR. EVEN BEFORE THE LEARNED CIT(A) WHEN THE ASSESSEE TRIED TO CORROBORATE HIS SUBMISSIONS BY GIVING DETAILS OF ACCOUNTS FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09, THE CIT(A) IN HIS / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 8 ORDER DT.10.11.2009 NOTED THAT THE IMPUGNED TRANSACTIONS WER E IN THE NATURE OF LOAN TAKEN BY THE ASSESSEE COMPANY AND THUS FALLS WITHIN THE AMBIT OF SECTION 269SS. HE, THEREFORE, FULLY RELIED N THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 8. WE HAVE H E ARD THE RIVAL CONTENTIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW HAVE TRIED TO DISPUTE THE VERY SUBMISSION OF THE ASSESSEE APPELLANT BEFORE THEM AT THE THRESHOLD W HEN THE JUSTIFICATION OF GIV ING CASH AS ADVANCE AGAINST ADJUSTMENT FOR THE PARTNERSHIP UNIT OF SHRI ADITYA JAJODIA. RECEIPTS OF SALE PROCEEDS IN CASH HAVE BEEN PROVED BEYOND DOUBT BY THE ASSESSEE. THEREFORE, IT WAS ONLY A MATTER OF ESTABLISHING THE BONAFID E IN THE SUBMISSIONS OF THE ASSESSEE BY PURSUING THE AUDITED ACCOUNTS AND THE FINANCIAL STATEMENTS DULY CERTIFIED UNDER THE PROVISIONS UNDER THE COMPANIES ACT. THE ADVANCE, WHICH HAD BEEN RECEIVED WAS ADJUSTED AGAINST THE BILLS RAISED ON THE PARTNERSHIP FI RM M/S.HANUMAN RICE MILL, THEREFORE, COULD NOT BE CONSIDERED AS LOAN OR DEPOSIT IN THE HANDS OF THE ASSESSEE TO BE VISITED WITH THE PROVISIONS OF SECTION 269SS . THE CASE LAWS CITED BY THE LEARNED COUNSEL ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE IN SO FAR AS HONBLE MADRAS HIGH COURT IN THE DECISION RENDERED IN THE CASE OF CIT V. IDHAYAM PUBLICATIONS LTD., (285 ITR 221) CONSIDERED THAT THE DEPOSITS AN D WITHDRAWAL OF THE MONEY FROM A CURRENT ACCOUNT CANNOT BE CONSIDERED AS A LOAN OR ADVANCE SPECIFICALLY WHEN THE ASSESSEE HAD NOT ENTERED INTO ANY CONTRACT WITH SHRI ADITYA JAJODIA INSPITE OF ALLEGATIONS OF MISMANAGEMENT ETC., HAD BEEN THRUST UPON. ACCOUNT. IT WAS NOT A CAMOUFLAGE UNDER ANY CIRCUMSTANCES WHICH THE AUTHORITIES BELOW TRIED TO POSE BEFORE ENTE RING DEFINING THE PROVISIONS OF SECTION 269SS AS A LOAN OR A DEPOSIT. AS HAS RIGHTLY BEEN POINTED OUT THAT AN UNILATERAL ACT FOR ACCEPTING MONEY AS LOAN O R DEPOSIT CANNOT BE FACTUALLY INCOME INVOLVING THE PROVISIONS OF SECTION 269SS HAD ULTIMATELY TO BE VISITED BY PENALTY U/S.271D. WHEN ONE SINGLE INDIVIDUAL MANAGING THE AFFAIRS OF TWO CONCERNS AND THE DECISION OF TRANSFER OF FUND FROM ONE CONCERN TO ANOTHER OR REPAY THE SAME COULD NOT BE SAID TO HAVE LARGELY INTRODUCED BY THE SAME INDIVIDUAL, IT CANNOT BE SAID THAT THE TRANSACTION PARTAKE THE CHARACTER OF DEPOSIT OR LOAN. FURTHER, THE TRANSACTIONS HAVE NOT BEEN FOUND NON - GENUINE OR TAXED. THE DEPARTMENT THEREFORE CANNOT DEVIATE ON THE PRETEXT OF FINDING / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 9 GENUINENES S OF THE TRANSACTIONS BY MUD SLI NGING. D EPOSITS WHATEVER MAY HAVE BETWEEN SHRI ADITYA JAJODIA AND OTHER DIRECTORS THEY ACCEPTED THE FACT THAT THE MONEY BELONG TO SHRI ADITYA JAJODIA WAS TO BE DEPOSITED AGAINST HE OWNED THE AMOUNT IN M/S.HANUMAN RICE MILLS. THEREFORE, WHEN THE VERY TRANSACTIONS C LEARLY INDICATE THAT IT WAS NEITHER A LOAN OR DEPOSIT AND THE MONEY EXPLAINED BY SHRI ADITYA JAJODIA U/S.131 HAVING DEPOSITED AND THE AMOUNTS WERE TAX PAID AND ALSO WERE AGAINST SALES INVOICES DRAWN THEREFORE LEFT NO ROOM TO HAVE A DOUBT THAT THERE WAS MAL AFIDE INTENTION IN ROUTING UNACCOUNTED MONEY THROUGH THE COMPANY WHEN A PRUDENT BUSINESS MAN COULD NOT SPOIL HIS CHANCE TO TAX PAID MONEY TO BE CONSIDERED AS OTHERWISE. MONEY BROUGHT BY DIRECTOR FROM HIS OWN RESOURCES AND MEETING THE EXPENSES OR FOR FINANC ING OTHER ACTIVITIES WITH THE HOPE OF TAKING IT BACK BEING UNILATERAL TRANSACTION WAS THEREFORE NOT LOAN OR DEPOSIT ATTRACTING SECTION 269SS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY U/S.271D COULD NOT BE LEVIED. 9. THE AUTHORITIES BELOW THER EFORE PROCEEDED TO FIND A CASE AGAINST THE ASSESSEE BY WAITING TO HOLD THAT THE ASSESSEE MAY HIMSELF COME OUT WITH THE FACT THAT THE AMOUNT REMAINED WITH THE ASSESSEE EITHER AS LOAN OR DEPOSIT WITH SOME ALLEGED INTENTION HAVE NOT BEEN SPELT OUT IN A CONCR ETE MANNER SO AS TO INITIATE VERIFYING THE PROVISIONS. THE REASONABLE CAUSE FOR RECEIPT AND PAYMENT, THE PAYMENT OF SALES TAX AND RECORDING OF TRANSACTION ALL LEAD TO THE CONCLUSION THAT SUCH TEMPORARY ADVANCES ARE OUTSIDE THE PURVIEW OF SECTION269SS. BECA USE THE ASSESSEE DID NOT UTILIZE SOME MONEY, THE ASSESSEE CANNOT BE HELD LIABLE FOR PENALTY U/S.271D. IT WAS NOT THE CASE OF INCOME TAX AUTHORITIES THAT THESE AMOUNTS WERE NOT TAKEN FOR OTHER PURPOSES OTHER THAN WHAT HAS BEEN ESTABLISHED. NO REASON HAS BEE N BROUGHT ON RECORD BY THE DEPARTMENT TO INDUCE THAT THE ASSESSEE COULD HAVE BEEN DEPRIVED OF ITS LEGITIMATE EARNING OF INTEREST FROM A BORROWER IF THE AMOUNT HAD BEEN RECEIVED AS ADVANCE IN THE CASE OF THE ASSESSEE. THE EXISTENCE OF REASONABLE CAUSE HAS B EEN ESTABLISHED; THEREFORE, SINGLE OUT THE TRANSACTION AS LOAN OR DEPOSIT. THEREFORE, KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE CONCLUDE TO HOLD THAT THE PENALTY HAS BEEN UNJUSTIFIABLY LEVIED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE PENALTY OF RS.50,00,000 LEVIED U/S.271D IS CANCELLED. / I.TA.NO .85/CTK/2010 STAY PETITION NO.12/CTK/2010 10 11. IN VIEW OF OUR ABOVE DECISION IN THE APPEAL FILED BY THE ASSESSEE, THE PETITION FOR STAY OF THE DEMAND FILED BY THE ASSESSEE IS REJECTED BEING INFRUCTUOUS. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 30.07.2010 S D/ - S D/ - ( ), D.K.TYAGI JUDICIAL MEMBER (K.K.GUPTA), ACCOUNTANT MEMBER. DATE: 3 0 .07.2010 - COPY OF THE ORDER FORWARDED TO : / THE APPELLANT : M/S.SALSAR FOOD (P) LTD., NUAKHIRGAON,SASON,SAMBALPUR. / THE RESPONDENT : THE ADDL.COMMISSINER OF INCOME - TAX, RANGE 2, SAMBALPUR THE CIT, THE CIT(A), DR, CUTTACK BENCH GUARD FILE TRUE COPY , BY ORDER , [ ] SENIOR PRIVATE SECRETARY ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY.