The ITO, Ward 8(2), Ahmedabad V. Softouch Hygeine Products(Mkt.) Ltd, Ahmedabad

ITA 929/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7815 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 26-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KASHYAPDR
• Assessee Lawyers: G S PATEL
• Keywords: Bonafide belief; Reasonable cause
• Section: 143(1); 271D; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BEN CHES C BENCH: AHMEDABAD (BEFORE S/SHRI MAHAVIR SINGH, JM AND A N PAHUJA, AM ) ITA NO. 929/AHD/2009 A Y: 2004-05 INCOME TAX OFFICER,WARD 8(2), 4 TH FLOOR AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD, AHMEDABAD VS SOFTOUCH HYGIENE PRODUCTS (MKTG.) LTD.,294/1, HANSOL, P.O. SARDANAGAR,AHMEDABAD [PAN: AACCS 9973P] APPELLANT RESPONDENT C.O. NO.85/AHD/2009 (IN ITA NO. 929/AHD/2009) SOFTOUCH HYGIENE PRODUCTS (MKTG.) LTD.,294/1, HANSOL, P.O. SARDANAGAR AHMEDABAD PA NO. AACCS 9973P VS INCOME TAX OFFICER,WARD 8(2), 4 TH FLOOR AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD, AHMEDABAD CROSS OBJECTOR RESPONDENT REVENUE BY SHRI SANJEEV KASHYAP,DR ASSESSEE BY SHRI G. S. PATEL, AR ORDER A N PAHUJA: THIS APPEAL BY THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE AGAINST AN ORDER DATED 28-01-2009 OF T HE LEARNED CIT(A)-XIV, AHMEDABAD, RAISE THE FOLLOWING GROUNDS: ITA NO.929/AHD/2009 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-X IV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO DELET E PENALTY U/S 271 D OF THE I. T. ACT OF RS.2,25,710/- LEVIED BY THE A . O. FOR CONTRAVENTION OF PROVISIONS OF SECTION 269SS. ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX (A)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . COMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDABAD MAY BE SET-ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. C. O. NO.85/AHD/2009 1. (I) THE RESPONDENTS SUBMITS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF U/S. 271D PASSED BY THE AD DL. CIT ON 22-09-2008 WHICH IS TIME BARRED U/S 275(1)(C) OF I. T. ACT. (II) THE RESPONDENTS SUBMIT THAT THE SHOWCAUSE NOTI CE WAS ISSUED BY THE AO DATED 13-02-2006 AND ACCORDINGLY T HE ORDER U/S 271D SHOULD HAVE BEEN PASSED BEFORE 30-09 -2006 AS PER TIME LIMIT PROVIDED U/S 275(1)(C). HOWEVER, THE ADDL. C I T PASSED THE ORDER U/S 271D ON 22-09-2008 WHICH IS TIME BARRED AS PER SECTION 275(1)(C) AND HENCE BE CANCELLED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE RESPONDENTS SUPPORT THE ORDER OF THE LD CIT(A) DATED 28-01-2009 CANCELLING THE PE NALTY OF RS.225710/- LEVIED BY THE ADDL. CIT U/S 271D. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS. 65,515/- FILED ON 31-10-2004 WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). SUB SEQUENTLY, THE ASSESSMENT REOPENED U/S 147 OF THE ACT,WAS COMPLETED VIDE ORDE R DATED 20-11-2007 DETERMINING TOTAL INCOME OF RS.18,91,871/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO IN SHORT] NO TICED THAT THE ASSESSEE OBTAINED THE FOLLOWING LOANS IN CASH FOR A SUM EXCE EDING RS. 20,000/- EACH, IN VIOLATION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. 1. SHRI K. A. TAKHTAWALA : RS. 1,80,500/- 2. SHRI S. K. TAKHTAWALA : RS. 23,210/- 3. SHRI B. K. TAKHTAWALA : RS. 22,000/- IN THE AUDIT REPORT IN ANNEXURE G RELATING TO PARTI CULARS OF LOAN OR DEPOSITS ACCEPTED, THE AUDITORS POINTED OUT THAT THE AFORESA ID LOANS/DEPOSITS WERE RECEIVED OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE/DRA FT IN VIOLATION OF THE ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 3 PROVISIONS OF SECTION 269SS OF THE ACT. ON RECEIPT OF COMMUNICATION FROM THE AO, THE ADDL. CIT INITIATED PENALTY PROCEEDINGS U/S 271D OF THE ACT ON 18-3- 2008. IN RESPONSE, THE ASSESSEE SUBMITTED VIDE REPL Y DATED 28-3-2008 THAT THE AFORESAID THREE PERSONS WERE DIRECTORS OF THE COMPA NY AND WERE OPERATING CURRENT ACCOUNTS IN THE COMPANY. THEREFORE, THESE AMOUNTS WERE NOT LOANS/DEPOSITS. AS REGARDS CASH RECEIPT OF RS.1,80, 500/- FROM THE MANAGING DIRECTOR, SHRI K. A. TAKTAWALA , THE ASSESSEE EXPLA INED THAT THE MD WAS ACTING AS AN INTERMEDIARY OF THE COMPANY FOR TRANSFERRING THE AMOUNT FROM HDFC BANK, AHMEDABAD TO DELHI BRANCH OF THE COMPANY, FOR OPENI NG A BRANCH THERE. THERE WAS NO FACILITY AVAILABLE TO THE COMPANY IN THE HD FC BANK FOR TRANSFERRING THE AMOUNT FROM AHMEDABAD TO DELHI, THE FACILITY BEING AVAILABLE IN THE INDIVIDUAL ACCOUNTS. IN THIS CASE, THE COMPANY HAD CREDITED AN AMOUNT OF RS.1,58,000/- IN THE BANK ACCOUNT OF THE MD AT AHMEDABAD, WHICH WAS WITHDRAWN IN CASH BY SHRI K. A. TAKTAWALA AT DELHI AND RETURNED TO THE COMPAN Y. THE ASSESSEE ALSO ENCLOSED COPIE OF RELEVANT LEDGER ACCOUNTS.FOR THE BALANCE AMOUNT OF RS.3000,RS.4,500/- AND RS. 15,000/- THE ASSESSEE EX PLAINED THAT THE SAID AMOUNT WAS INCURRED IN CASH BY THE MD FOR MEETING THE EXPENSES.THUS, THERE WAS NO QUESTION OF ANY PAYMENT OF DEPOSIT OR LOAN B Y MANAGING DIRECTOR TO THE COMPANY. AS REGARDS AMOUNT OF RS.23,210/- RECEIVED FROM MS. S. K. TAKHTAWALA, THE ASSESSEE EXPLAINED THAT THE SAID AM OUNT WAS GIVEN TO DELHI OFFICE BY MS. S.K. TAKHTAWALA AS REVEALED FROM THE FOLLOWING ENTRIES IN THE LEDGER ACCOUNT NO.000103: CR. 13 DT. 18-06-03 FOR RS. 5,000/- CR. 14 DT. 04-07-03 FOR RS. 1,700/- CR. 15 DT. 08-07-03 FOR RS. 4,000/- CR. 18 DT. 18-07-03 FOR RS. 7,000/- CR. 20 DT. 29-07-03 FOR RS. 1,500/- CR. 21 DT. 06-08-03 FOR RS. 4,000/- CR. 37 DT. 17-02-04 FOR RS. 5,710/- TOTAL RS.28,910-5,700=23,910/- REGARDING RS.22,000/- FROM MRS. B. K. TAKHTAWALA, THE ASSESSEE SUBMITTED THAT UNDER SIMILAR CIRCUMSTANCES, AN AMOUNT OF RS.15,000 /- AND RS.7,000/- RECEIVED ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 4 FROM MRS. B. K. KAKHTAWALA WERE GIVEN TO THEIR DELH I BRANCH FOR ESTABLISHMENT EXPENSES PURPOSE. HOWEVER THE ADDL. CIT DID NOT ACC EPT THE AFORESAID EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THES E CIRCUMSTANCES NARRATED BY THE ASSESSEE, WERE NOT SUPPORTED BY ANY EVIDENCE. A CCORDINGLY, THE ADDL. CIT LEVIED PENALTY OF RS. 2,25,710/- U/S. 271D OF THE A CT. 3. ON APPEAL, THE LEARNED AR ON BEHALF OF THE ASSES SEE RELIED UPON THE DECISIONS IN THE CASE OF ASHWINKUMAR VS. ITO 118 TT J 483 (DELHI), SHARDA EDUCATIONAL TRUST VS. ACIT (AGRA) REPORTED IN BCAJ VOL.39-APART-1 AND KESHU RAMSAY VS JCIT, 5 SOT 9 (MUM) IN SUPPORT OF THEIR C ONTENTIONS THAT SINCE NO PROCEEDINGS WERE PENDING WHEN PENALTY WAS INITIATED U/S 271 D OF THE ACT, THE INITIATION OF PENALTY ITSELF WAS BAD IN LAW. HOWEVE R, THE LD. CIT(A) REJECTED THESE CONTENTIONS IN FOLLOWING TERMS: 2.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE A R. HOWEVER, I AM NOT CONVINCED WITH THE ARGUMENTS OF THE A R. AND AS I FIND THAT INITIALLY THE ITO WA RD 8(2) ISSUED A LETTER ON 13-2-1006, COPY OF WHICH HAS BEEN FILED BY THE A. R . AT PAGE 9 OF THE PAPER BOOK. IT IS NOTICED THAT IN THE SAID LETTER T HE APPELLANT WAS ASKED TO CONFIRM WHETHER THE RECEIPT OF MONEY WAS IN CASH AN D NOWHERE IN THE SAID LETTER THE A.O. HAS MENTIONED THE PROVISIONS OF SEC TION 271D OF THE ACT NOR THE APPELLANT WAS ASKED TO SHOWCAUSE WHY PENALTY SH OULD NOT BE LEVIED, THEREFORE, IT CAN NOT BE SAID THAT THE SAME WAS A S HOWCAUSE NOTICE NOR IT CAN BE SAID THAT PENALTY PROCEEDINGS U/S 271 (1) (D ) WERE INITIATED BY THAT LETTER DATED 13-2-2006. THE SHOWCAUSE NOTICE WAS IS SUED BY THE ADDL. CIT ON 18-03-2008 AS MENTIONED IN PARA 2 OF THE IMP UGNED ORDER. THEREFORE I HOLD THAT THE ORDER OF PENALTY PASSED U /S. 271D WAS WITHIN THE TIME LIMIT PRESCRIBED AS PER PROVISIONS OF I. T. AC T AND NO INTERFERENCE WHATSOEVER IS CALLED FOR. THIS GROUND OF THE APPELL ANT IS DISMISSED. AS REGARDS THE CONTENTION OF THE A. R. THAT NO PROCEED INGS WERE PENDING WHEN THE PENALTY PROCEEDINGS U/S. 271D WERE INITIAT ED, THE CASE LAWS CITED BY THE A. R. ARE ON DIFFERENT FACTS. IN THE C ASE OF SHARDA EDUCATIONAL TRUST V. ACIT (AGRA), THE ITAT OBSERVED THAT PENALT Y PROCEEDINGS SHOULD HAVE BEEN INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR SOME OTHER PROCEEDINGS. IN THE CASE OF KESHU RAMSAY CITE D BY THE A. R., IT WAS A CASE OF PROCESSING OF RETURN U/S. 143(1) AND THER E WAS NO SCRUTINY ASSESSMENT, THUS NO PROCEEDINGS WERE PENDING. IT HA S BEEN HELD IN THAT CASE THAT SOME PROCEEDINGS REFERRED IN SECTION 275 OF THE I. T. ACT NEED NOT BE ASSESSMENT PROCEEDINGS AS THE LEGISLATURE HA S NOT USED THE WORDS ASSESSMENT PROCEEDINGS. IT HAS BEEN HELD BY THE C OURTS THAT APPEAL ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 5 PROCEEDINGS ARE CONTINUATION OF ASSESSMENT PROCEEDI NGS AS IT HAS BEEN HELD SO IN OMPRAKASH BAGARIA 287 ITR 523 (MP). HENC E AS APPEAL PROCEEDINGS WERE PENDING IN THIS CASE, IT CAN NOT B E SAID THAT NO PROCEEDINGS WERE PENDING AT THE TIME OF INITIATION OF PENALTY U/S. 271D OF THE I. T. ACT. HENCE THIS CONTENTION OF THE A. R. I S REJECTED. 4. AS REGARDS MERITS, THE LD. CIT(A) CANCELLED TH E PENALTY HOLDING AS UNDER: 3.2. THE AR OF THE APPELLANT, DURING THE COURSE OF APPELLATE PROCEEDINGS SUBMITTED THAT THERE WAS NO BREACH OF SECTION 271D R. W. S. 269SS OF THE ACT AS THE SAID ACCOUNTS OF THE DIRECTORS WERE NEIT HER DEPOSIT ACCOUNTS NOR LOAN ACCOUNTS BUT WERE CURRENT ACCOUNTS AND THI S FACT HAS NOT BEEN CONTRADICTED BY THE ADDL. CIT. THE ADDL. CIT ACCORD ING TO THE A. R. HAS NOT DISPUTED THE FACTS OF THE LETTERS DATED 13-3-20 06 & 28-3-2008 FILED BY THE APPELLANT AND HAS NOT CONTROVERTED THE FACT THA T THOSE ACCOUNTS WERE CURRENT ACCOUNTS AS CLAIMED BY THE APPELLANT. THE A R. ALSO SUBMITTED THAT THE COMPANY AND THE DIRECTORS ARE ONE AND THE SAME PERSON AND NOT THIRD PARTIES AND SINCE THE ACCOUNTS WERE CURRENT ACCOUNT S, THE APPELLANT BONAFIDELY BELIEVED THAT PROVISIONS OF SEC. 269SS W ERE NOT APPLICABLE IN ITS CASE AND THIS WAS A REASONABLE CAUSE. HENCE, TH E A. R. SUBMITTED THAT PENALTY LEVIED U/S. 271D WAS ILLEGAL AND BE CANCELE D. FOR THE CONTENTION THAT THE COMPANY AND THE DIRECTORS ARE ONE AND THE SAME PERSON AND HENCE RECEIPT FROM A DIRECTOR CANNOT BE CONSIDERED AS A DEPOSIT OR LOAN U/S.269SS, TH8E A. R. RELIED UPON THE FOLLOWING DEC ISIONS: I) SHARDA EDUCATINAL TRUST 2005-06) BCAJ-VOL-39A-PA RT-1-16)AGRA) II) EBERS PHARMACEUTICALS LTD. V. ACIT (2004) BCAJ- VOL-37-PART 4- 375(MUM) III) MANGALA BUILDERS PVT. LTD. 9 SOT 23 (BANG) (UR O) IV) PREMIER ART SILK PROCESSOR PVT. LTD. (2004) AHD . C. A. JOURNAL, VOL- 27-PART-11-627 (AHD) FOR THE CONTENTION THAT UNDER THE COMPANIES (ACCEPT ANCE OF DEPOSITS) RULES 1975, UNDER RULE 2(B)(IX) DEPOSITS DO NOT INC LUDE ANY AMOUNT RECEIVED FROM A DIRECTOR, THE A. R. RELIED UPON DEC ISION OF CIT V. IDHYAM PUBLICATIONS LTD. -285 ITR 221 (MAD). IT WAS FURTHER SUBMITTED THAT THE A. O. HAS VERIFIE D ALL THE TRANSACTIONS AND ACCEPTED THE SAME AS GENUINE. THE A. R. RELIED UPON THE FOLLOWING ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 6 DECISIONS FOR THE CONTENTION THAT PENALTY SHOULD NO T BE LEVIED ON GROUND THAT THE TRANSACTIONS ARE GENUINE, AND THERE IS BON AFIDE BELIEF AND REASONABLE CAUSE; I) SHREENATH BUILDERS V. DCIT (AHD) 111 TAXMAN MAG 142 II) STAR ELECTROPLATERS V. ITO 15 SOT 28 (AHD) III) OMEC ENGINEERS V. CIT 294 ITR 599 (JHARKHAND) IV) CIT V. LAXMI TRUST CO. 303 ITR 99 (MAD) V) CIT V. BHAGWATI PRASAD BAJORIA 263 OTR 487 (GAU) VI) ADDL. CIT V. M/S. MAHA DEVELOPERS (AHD) DATED 7 -7-2006 IN I.T.A. NO.1113/AHD/2002. IT WAS SUBMITTED THAT THERE WAS NO FINDING IN THE O RDER THAT THE EXPLANATION OFFERED BY THE APPELLANT WAS FALSE OF NOT BONAFIDE AND THERE WAS ALSO NO FINDING IN THE ORDER THAT THOSE ACCOUNTS WERE EITHE R DEPOSIT ACCOUNTS OR LOAN ACCOUNTS AND THERE WAS BREACH OF PROVISIONS OF SEC. 269SS R. W. S. 271D OF THE ACT. IN SUPPORT OF THIS CONTENTION, THE A. R. RELIED UPON THE DECISION OF MOTILAL & CO. V. ITO REPORTED IN 102 TA XMAN 108 (AHD). THE AR THEREFORE, CONTENDED THAT THE APPELLANT HAD NOT COMMITTED ANY DEFAULT OR VIOLATION OF SEC. 269SS, WHICH ATTRACTS LEVY OF PENALTY U/S. 271D OF THE ACT AND THEREFORE, THE PENALTY LEVIED MAY BE DELETE D. 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AS WELL AS THE SUBMISSIONS OF THE A. R. OF THE APPELLANT AND T HE VARIOUS CASE LAWS RELIED UPON. IT IS A FACT THAT THE APPELLANT RECEIV ED AMOUNTS ON VARIOUS DATES FROM THREE DIRECTORS. HOWEVER, AS EXPLAINED B Y THE A. R. OF THE APPELLANT, THERE WAS NO OTHER COURSE OF ACTION THAN TO WITHDRAW THE MONEY FROM THE INDIVIDUAL ACCOUNT OF THE DIRECTOR WITH HD FC BANK AT AHMEDABAD AND DEPOSIT THE SAME IN HIS ACCOUNT AT DELHI BRANCH , SO AS TO OPEN A BRANCH AT DELHI, AS THERE WAS NO PROVISION WITH HDF C BANK IN THE CASE OF THE COMPANY FOR TRANSFERRING THE AMOUNTS FROM AHMED ABAD TO DELHI. IT IS FURTHER SEEN THAT THE OTHER AMOUNTS RECEIVED FROM T HE DIRECTORS WERE ON VARIOUS DATES IN SMALL AMOUNTS FOR MEETING THE EXPE NSES FOR STAFF AT NAGPUR, BOMBAY AND GOA OFFICES. FURTHER, THE APPELL ANT HAS ALSO FURNISHED THE DETAILS OF AMOUNTS RECEIVED FROM OTHE R TWO DIRECTORS ON VARIOUS DATES. I FIND FORCE IN THE CONTENTION OF TH E APPELLANT THAT THE ACCOUNTS MAINTAINED BY THE DIRECTORS ARE CURRENT AC COUNTS AND THE ADVANCES RECEIVED ARE NOT LOANS/DEPOSITS SO AS TO A TTRACT PROVISIONS OF SECTION 269SS OF THE I. T. ACT. FURTHER THE APPELLA NT HAD BONAFIDE BELIEF THAT PROVISIONS OF SECTION 271D ARE NOT APPLICABLE. BY FOLLOWING THE CASE LAWS, RELIED UPON BY THE A. R., I AM OF THE VIEW T HAT THERE WAS A REASONABLE CAUSE IN ACCEPTING AMOUNTS OTHER THAN BY A/C. PAYEE CHEQUE/DRAFT, AND THE APPELLANT HAD BONAFIDE BELIEF THAT THE PROVISIONS OF SEC. 271D ARE NOT APPLICABLE, BECAUSE THE AMOUNTS H AVE BEEN RECEIVED BY THE COMPANY FROM THE DIRECTORS BY WITHDRAWING TH E SAME FROM THEIR ACCOUNTS MAINTAINED WITH HDFC BANK, DELHI. FURTHER THE DEFAULT IF ANY IS ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 7 OF TECHNICAL AND VENIAL NATURE. IN THE LIGHT OF THE ABOVE DISCUSSIONS, I HOLD THAT THE APPELLANT DID NOT COMMIT ANY DEFAULT WHILE ACCEPTING THE AMOUNT IN CASH FROM THREE DIRECTORS OF THE COMPANY, SO AS TO ATTRACT PENALTY U/S. 271D OF THE I. T. ACT, HENCE I DIRECT THE A. O. TO DELETE THE PENALTY LEVIED IN THIS CASE TO THE TUNE OF RS.2,25,710/-. 4. THE REVENUE IS NOW IN APPEAL AGAINST THE FORESAI D FINDINGS OF THE LEARNED CIT(A) IN PARA 3.3 OF THE IMPUGNED ORDER WHILE THE ASSESSEE IN HIS CO RAISED GROUNDS AGAINST THE FINDINGS OF THE LD. CIT(A) IN P ARA 2.1 OF THE SAID ORDER. AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE ASSESSEE, W HILE SUBMITTING A COPY OF DECISION IN THE CASE OF CIT VS. IDHAYAM PUBLICATION S LTD. (2006) 285 ITR 221 (MAD) POINTED OUT THAT THE AMOUNTS RECEIVED FROM TH E MANAGING DIRECTOR/DIRECTORS OF THE COMPANY, BEING NOT LOANS OR DEPOSITS, DO NOT COME UNDER THE PURVIEW OF PROVISIONS OF SECTION 269SS OF THE ACT. ON THE OTHER HAND, THE LEARNED DR DID NOT DISPUTE THESE SUBMISSIONS OF THE LEARNED AR. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON . BEFORE PROCEEDI NG FURTHER, WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF SEC. 269SS OF THE ACT, WHICH READ AS UNDER: ' NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRE D TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PA YEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF,- (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGRE GATE AMOUNT OF SUCH LOAN AND 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 FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HA S FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B), IS TWENTY THOUSAND RUPEES OR MORE: .. ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 8 EXPLANATION: FOR THE PURPOSE OF THIS SECTION, (III) 'LOAN OR DEPOSIT' MEANS LOAN OR DEPOSIT OF MO NEY.' 5.1 THE AFORESAID PROVISIONS OF S. 269SS SAY T HAT IF THE STIPULATED AMOUNT OF LOAN OR DEPOSIT IS OTHERWISE THAN BY CROSSED CHEQUE OR ACCOUNT PAYEE BANK DRAFT, THERE IS A VIOLATION OF THE SAID PROVISIONS. IN TH E CASE UNDER CONSIDERATION, THE LD. CIT(A) CONCLUDED AS REGARDS AMOUNT OF RS. 1,58,000 /- RECEIVED FROM THE MD THAT THERE WAS NO OTHER COURSE OF ACTION THAN TO WI THDRAW THE MONEY FROM THE INDIVIDUAL ACCOUNT OF THE DIRECTOR WITH HDFC BANK A T AHMEDABAD AND DEPOSIT THE SAME AT DELHI BRANCH, SO AS TO OPEN A BRANCH AT DELHI, AS THERE WAS NO PROVISION WITH HDFC BANK IN THE CASE OF THE COMPANY FOR TRANSFERRING THE AMOUNTS FROM AHMEDABAD TO DELHI. THE REMAINING AMOU NTS ARE STATED TO HAVE BEEN BROUGHT IN BY THE DIRECTORS FOR MEETING VARIOU S EXPENSES FOR STAFF AT NAGPUR, BOMBAY AND GOA OFFICES. THERE IS NOTHING ON RECORD TO SHOW THAT THESE TRANSACTIONS WERE ATTACHED WITH CERTAIN CONDITIONS OR STIPULATION AS TO PERIOD OF REPAYMENT, RATE OF INTEREST, MANNER OF REPAYMENT, E TC. SO AS TO TREAT THE SAID TRANSACTIONS AS LOAN OR DEPOSIT. REVENUE HAVE NOT P LACED BEFORE US ANY MATERIAL, REBUTTING THE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A). SINCE THERE IS NOTHING ON RECORD TO SUGGEST THAT THE TRANSACTIONS ARE IN T HE NATURE OF LOAN OR DEPOSIT, APPARENTLY, THE PROVISIONS OF SECTION 269SS ARE NOT ATTRACTED. THE MEANING OF ' DEPOSIT ' AND ' LOAN ' HAS BEEN EXPLAINED ON PAGE 8 454 OF THE CHATURVEDI AND PITHISARIA'S INCOME-TAX LAW. FIFTH EDITION, VOLUME 5, AS UNDER: ' 'DEPOSIT' AND 'LOAN'- THESE TWO ARE NOT IDENTICAL IN MEANING. - IT IS TRUE THAT BOTH IN THE CASE OF A LOAN AND IN THE CASE OF A DEPOSIT THERE IS A RELATIONSHIP OF A DEBTOR AND A CREDITOR BETWEEN THE PARTY GIVING MONE Y AND THE PARTY RECEIVING MONEY. BUT IN THE CASE OF A DEPOSIT, THE DELIVERY O F MONEY IS USUALLY AT THE INSTANCE OF THE GIVER AND IT IS FOR THE BENEFIT OF THE PERSON WHO DEPOSITS THE MONEY - THE BENEFIT NORMALLY BEING EARNING OF INTER EST FROM A PARTY WHO CUSTOMARILY ACCEPTS DEPOSITS. DEPOSITS COULD ALSO B E FOR SAFE-KEEPING OR AS A SECURITY FOR THE PERFORMANCE OF AN OBLIGATION UNDER TAKEN BY THE DEPOSITOR. IN THE CASE OF A LOAN, HOWEVER, IT IS THE BORROWER AT WHOS E INSTANCE AND FOR WHOSE NEEDS THE MONEY IS ADVANCED. THE BORROWING IS PRIMA RILY FOR THE BENEFIT OF THE BORROWER ALTHOUGH THE PERSON WHO LENDS THE MONEY MA Y ALSO STAND TO GAIN THEREBY BY EARNING INTEREST ON THE AMOUNT LENT. ORD INARILY, THOUGH NOT ALWAYS, IN ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 9 THE CASE OF A DEPOSIT, IT IS THE DEPOSITOR WHO IS T HE PRIME MOVER WHILE IN THE CASE OF A LOAN, IT IS THE BORROWER WHO IS THE PRIME MOVE R. THE OTHER AND MORE IMPORTANT DISTINCTION IS IN RELATION TO THE OBLIGAT ION TO RETURN THE AMOUNT SO RECEIVED. IN THE CASE OF A DEPOSIT WHICH IS PAYABLE ON DEMAND, THE DEPOSIT WOULD BECOME PAYABLE WHEN A DEMAND IS MADE. IN THE CASE O F A LOAN, HOWEVER, THE OBLIGATION TO REPAY THE AMOUNT ARISES IMMEDIATELY O N RECEIPT OF THE LOAN. IT IS POSSIBLE THAT IN CASE OF DEPOSITS WHICH ARE FOR A F IXED PERIOD OR LOANS WHICH ARE FOR A FIXED PERIOD, THE POINT OF REPAYMENT MAY ARIS E IN A DIFFERENT MANNER. BUT BY AND LARGE, THE TRANSACTION OF A LOAN AND THE TRANSA CTION OF MAKING A DEPOSIT ARE NOT ALWAYS CONSIDERED IDENTICAL. ' IN THE LIGHT OF AFORESAID DISTINCTION BETWEEN LO AN AND DEPOSIT, ESPECIALLY WHEN THERE IS NOTHING TO SUGGEST THE AFORESAID TRANSACT IONS ARE IN THE NATURE OF LOAN OR DEPOSIT, WE ARE OF THE OPINION THAT PROVISIONS OF S EC. 269SS ARE NOT ATTRACTED IN THIS CASE. 5.2 WE FIND THAT HONBLE MADRAS HIGH COURT IN SIMILAR CIRCUMSTANCES, HELD AS UNDER: THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RE CEIVED 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 CO ULD NOT BE CONSIDERED AS A LOAN OR ADVANCE. FURTHER IT WAS ALSO FOUND THAT THE ASSESSEE 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' IN THE BALANCE-SHEET. AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975, UNDER RULE 2( B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SH AREHOLDER OF A PRIVATE LIMITED COMPANY. THEREFORE THE TRANSACTION BETWEEN THE APPE LLANT AND THE DIRECTOR CUM SHAREHOLDER IS NOT A LOAN OR DEPOSIT AND IT IS ONLY A CURRENT ACCOUNT IN NATURE AND NO INTEREST IS BEING CHARGED FOR THE ABOVE TRANSACT ION. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIE W THAT SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEANING OF LOAN OR ADVANCE , THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME-TAX ACT. 5.3 IN VIEW OF THE FOREGOING, WE HAVE NO HESITATI ON IN UPHOLDING THE FINDINGS OF THE LD. CIT(A) IN PARA 3.3 OF THE IMPUGNED ORDER.TH EREFORE, GROUND NO. 1 IN THE APPEAL OF THE REVENUE IS DISMISSED. 6. GROUND NOS. 2 & 3 IN THE APPEAL OF THE REVENUE, BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE ,ACCORDINGLY, DISMISSED. ITA NO.929/AHD/2009 SOFTOUCH HYGIENE PRODUCTS (MKT.) LTD. 10 7. SINCE GROUNDS RAISED IN THE CROSS-OBJECTION WER E NOT PRESSED BY THE LD. AR ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING , THEREFORE, THESE GROUNDS ARE DISMISSED AS WITHDRAWN. 8. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS-OBJECTION OF THE ASSESSEE, ARE DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 27 TH JULY, 2009. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A.N.PAHUJA) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATE : 27-7-2009 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE 2. INCOME TAX OFFICER,WARD 8(2),4 TH FLOOR AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD,AHMEDABAD 3. CIT(A)-XIV,AHMEDABAD 4. THE CIT CONCERNED 5. THE D.R. ITAT, AHMEDABAD, 6. GUARD FILE BY ORDER DR / AR, ITAT, AHMEDABAD