Income Tax Appellate Tribunal - Chennai
Young Men'S Christian Association, ... vs Department Of Income Tax on 10 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P.GEORGE , ACCOUNTANT MEMBER
AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
ITA No. Appellant Respondent Assessment
year
294/Mds/2012 Joint Commissioner of M/s. Young Men's 2008-09
Income Tax(OSD) Christian Association,
(Exemptions) II 223, NSC Bose Road,
Aayakar Bhavan, Annexe Esplanade, Chennai-1.
Building 3rd floor, PAN: AAATY0296N
Chennai-34.
1661/Mds/2012 Dy.Director of Income M/s. Young Men's 2009-10
Tax. (Exemptions- II) Christian Association,
Chennai-34. Chennai-1
2002/Mds/2012 Dy.Director of Income M/s. Young Men's 2008-09
2003/Mds/2012 Tax. (Exemptions- II) Christian Association, 2009-10
2004/Mds/2012 Chennai-34. Chennai-1 2009-10
1888/Mds/2012 M/s. Young Men's Joint Commissioner of 2009-10
Christian Association, Income Tax(OSD)
Chennai-1 (Exemptions) II
Chennai-34
Revenue by : Dr. Moharana, CIT &
Mr. Guru Bashyam, JCIT
Assessee by : None
Date of Hearing : 10th April, 2013
Date of Pronouncement : 29th April, 2013
ORDER
Per Challa Nagendra Prasad, JM :
This is a bunch of six appeals. Out of six appeals, five are filed by the Department and one is filed by the assessee against various orders of Commissioner of Income Tax (Appeals) for the assessment years 2008-09 and 2009-10. 2 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012 As the issues are common, these appeals are disposed of by this consolidated order for the sake of convenience.
2. The above appeals came up for hearing on 10.4.2013. Nobody appeared on behalf of the assessee. But, the assessee filed a petition for adjournment seeking time stating that Authorized Representative will be on audit tour from 3.4.2013 to 14.4.2013. As the reason for seeking adjournment is not justifiable one, the petition for adjournment of these appeals is rejected and the appeals are taken up for disposal on merits, on hearing learned DR.
ITA Nos. 294 and 2004/Mds/2012 (A.Y. 2008-09 & 2009-10):-
3. The effective ground of appeal in both these appeals is that the Commissioner of Income Tax (Appeals) erred in holding that the assessee is entitled to the benefit of section 11 of the Act. The Assessing Officer while completing the assessments for the assessment years 2008-09 and 2009-10 denied exemption under section 11 to the assessee's association on the ground that the assessee is doing business by exploiting its properties by giving them on rent.
The assessee advanced monies to other trusts and this is in 3 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 violation of section 13(1)(d) of the Act. The Assessing Officer further treated `14,60,000/- and `1,16,18,000/- as unexplained credits while completing the assessment of the assessee for the above assessment years respectively. On appeal, the Commissioner of Income Tax (Appeals), as far as the rental income received by the assessee is concerned , held that it is not a business income and is to be assessed as income from house property, therefore, the assessee is entitled for exemption under section 11. In so far as the issue of advancing monies to other trusts is concerned, the Commissioner of Income Tax (Appeals) held that since the trusts to whom the assessee advanced monies are also registered under section 12A and having similar objects, there is no violation under section 13(1)(d) of the Act. As far as the cash credits are concerned, the Commissioner of Income Tax (Appeals) for the assessment year 2008-09 held that `14,60,000/- cannot be considered as unexplained cash credits within the meaning of section 68 since these cash loans were obtained from General Secretary of the assessee Mr. G. Ebinesan and the same were repaid to Mr. Ebinesan 4 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 which was also confirmed by Mr. Ebinesan and therefore the same cannot be considered as income from other sources. In so far as the cash credits of ` 1,16,18,000/- for the assessment year 2009-10 is concerned, the Commissioner of Income Tax (Appeals) held that out of the said `1,16,18,000/-, ` 16,18,000/- cannot be considered as cash credit as this amount was obtained from General Secretary Mr. Ebinesan and the same was also repaid to Mr. Ebinesan which was also confirmed by him. Therefore, the Commissioner of Income Tax (Appeals) held that this amount cannot be considered as income from other source. However, the Commissioner of Income Tax (Appeals) held that the cash loans to the extent of ` 1.00 crore received by the assessee from unknown persons have to be considered as unexplained credits and shall be assessed as income from other sources.
4. The Departmental Representative submits that the assessee is deriving substantial income from letting out of its auditorium, Esplanade hall, rooms at Vepery and Royapettah ground. The Departmental Representative submits that by letting out these properties, the assessee is carrying on 5 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 business activity systematically and earning substantial income and therefore the Assessing Officer is justified in denying exemption under section 11 treating the income from these properties as income from business, as against the assessee's claim that this income is from house property eligible for exemption under section 11 of the Act. The Departmental Representative also submits that the assessee has violated provisions of section 11(4A) of the Act as no separate books of accounts were maintained by the assessee. The Departmental Representative submits that on a plain reading of section 11(4A), it is clear that any business activity conducted by the assessee shall forfeit section 11 unless separate books of accounts are maintained. The Departmental Representative in support of his contentions relied on the following decisions:-
i) CIT Vs. Goel Builders (331 ITR 344)
ii) CIT Vs. Anand Rubber & Plastics (178 ITR 301)
iii) CIT Vs. Halai Nemon Association, (243 ITR 439)
iv) CIT Vs. Associated Building Co. Ltd., (137 ITR 339) 6 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012
5. We have perused the orders of lower authorities and materials available on record. The Assessing Officer denied exemption under section 11 of the Act to the assessee on the ground that the assessee's activities in letting out various properties in a systematic way is in the nature of business and the income from such properties is to be assessed as business income and not income from house property as claimed by assessee and therefore, the assessee is not entitled for exemption under section 11 of the Act. The Assessing Officer is also of the view that since the assessee is advancing monies to other associations/trusts, in violation of section 11(1)(d) / 11(5) of the Act. The Assessing Officer also held that the assessee has obtained loans from the General Secretary and also from unknown persons and therefore this is in violation of section 11of the Act. He treated these loans obtained by the assessee as cash credits of the assessee under section 68/69 of the Act. The Commissioner of Income Tax (Appeals) in his order after considering the submissions of the assessee and the case law relied on held that the assessee has complied with the 7 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 provisions of section 11 / 12 / 12A / 12AA of the Act. The Commissioner of Income Tax (Appeals) also observed that there is no violation under section 13(1) / 13(3) of the Act. As far as the letting out of properties was concerned, the Commissioner of Income Tax (Appeals) held that the rental income derived by the assessee is only a property income of the assessee assessable under the head ' income from house property' and not under the head 'business income'. The Commissioner of Income Tax (Appeals) was of the view that the assessee has let out these properties to the members and non-members temporarily and it cannot be held that such letting out of properties is business activity of the assessee. The Commissioner of Income Tax (Appeals) further held that since the rental income from the property is assessable as income from house property only, the question of violation of provisions of section 11(4A) i.e. maintenance of separate books of accounts does not arise. In respect of the allegation of the Assessing Officer that there is a violation under section 13(1)(d) as the assessee advanced monies to other trusts/associations, the Commissioner of Income Tax 8 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 (Appeals) observed that the trusts/associations to whom monies advanced are also charitable organizations registered under section 12A claiming exemption under section 11, therefore, there is no violation under section 13(1)(d) of the Act.
6. In respect of cash credits of `14,60,000/- for the assessment year 2008-09, the Commissioner of Income Tax (Appeals) held that these loans were taken from the General Secretary and the said loans were repaid to General Secretary, therefore, the same cannot be assessed as cash credits. The Department has not filed appeal on this issue. In respect of cash credits assessed at ` 1,16,18,000/- for the assessment year 2009-10, the Commissioner of Income Tax (Appeals) held that `16,80,000/- was again borrowed from General Secretary Mr. Ebinesan and the same was repaid to him and therefore, cannot be assessed as cash credit. However, since the assessee has received ` 1.00 crore from unknown persons and since the assessee could not provide details of persons from whom these amounts were received, the Commissioner of Income Tax (Appeals) held that the 9 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 Assessing Officer is justified , in treating the said amount as cash credits and assessable under the head " income from other sources". No doubt, the association was established as a charitable association and carrying on charitable activities and at the same time, it appears that the assessee is also earning some income from its properties. What is to be seen here is whether the assessee is earning this income as incidental to the activities of the assessee or whether the assessee is really engaged in the business activities is to be seen. Neither of the lower authorities have examined this aspect of the matter i.e. whether the assessee is earning this income as incidental to its objects or it is altogether a separate business carried on by the assessee. In the circumstances, we are of the view that this matter should go back to the Assessing Officer to examine afresh on these lines.
7. In so far as the contention of the Assessing Officer that the assessee has advanced monies to other associations/trusts, therefore, there is a violation under section 13(1)(d) is concerned, we are not in agreement with 10 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 the Assessing Officer since monies advanced by the assessee were to the other charitable organizations which were registered under section 12A and having similar objects. We find that the co-ordinate Bench of this Tribunal in the case of ACIT Vs. Mamallan Educational Trust in ITA No.456/Mds/2012 dated 10.5.2012 had considered a similar situation where the assessee a charitable organization registered under section 12A advanced money to another charitable institution, which was also registered under section 12A and whether in such circumstances the money advanced by one institution to other can be said to be in violation of provisions of section 13(1) and consequently the exemption under section 11 can be denied. The Tribunal also held as under:-
" 3. In its appeal before CIT(Appeals), argument of the assessee was that Section 13(1)(c)(ii) could be invoked only when any part of the income was used for the benefit of trustees, or other persons mentioned in Section 13(3) of the Act. As per the assessee, the term "concern"
mentioned in Section 13(3) of the Act did not include another charitable Trust. Sivaraja 11 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 Ramalinga Trust was a charitable Trust and therefore, any payments made to the said Trust could not be considered as a violation of Section 13(1) of the Act. Reliance was also placed on the decision of co-ordinate Bench of this Tribunal of this Tribunal in the case of Jeppiaar Educational Trust (supra). The CIT(Appeals) was appreciative of these contentions. According to him, the money given by the assessee was to a "concern" mentioned in Section 13(3) of the Act. Therefore, the decision of co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust (supra) squarely applied. He held that the assessee could not be denied exemption under Section 11 of the Act and directed the A.O. to grant such exemption.
4. Before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that it was an accepted position that M/s Sivaraja Ramalinga Trust and assessee-Trust were having some common trustees. Relying on Section 13(3) of the Act, learned D.R. submitted that any concern in which any trustee, who had substantial interest, would fall with the mischief of Section 13(1)(c) of the Act. Assessee-Trust had placed part of its funds with another Trust in which the trustees had substantial interest and therefore, the trustees had directly or indirectly derived benefit. According to him, CIT(Appeals) fell in error in allowing the assessee exemption under Section 11 of the Act.
12 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
5. Per contra, A.R. strongly supported the order of CIT(Appeals).
6. We have perused the orders and heard the rival submissions. There is no dispute that M/s Sivaraja Ramalinga Trust, to which assessee had given money, was a Trust registered under Section 12AA of the Act. The A.R. has placed a copy of order under Section 12AA of the Act granting registration to such Trust. Two things are very clear. One is that M/s Sivaraja Ramalinga Trust was a Trust and second is that some of the trustees were common. However, in our opinion, trustees hold the property of the Trust in a fiduciary capacity and not as owners. The owners of the Trust property were always its beneficiaries and trustees were holding the property and income therefrom for the benefit of beneficiaries and not for themselves. We cannot say that just because two Trusts are having common trustees, they are related concerns. Trust will not fall within the concept of "concern" mentioned in clause (e) of sub-section (3) of Section 13 of the Act. Invocation of Section 13(1), in such a situation, was not at all warranted. CIT(Appeals) was justified in relying on the decision of co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust (supra) and holding that assessee was eligible for exemption under Sections 11 and 12 of the Act. We find no reason to interfere with the order of CIT(Appeals)."
13 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
8. In view of the above decision of this Tribunal, we hold that the monies advanced by the assessee to the other trusts which are registered under section 12A and having similar objects cannot be said to be in violation of provisions of section 13(1) of the Act. Therefore, we direct the Assessing Officer to examine whether other organizations to whom the assessee has lent monies are registered under section 12A and in case, such organizations are registered under section 12A, the exemption under section 11 cannot be denied on this ground.
9. As far as violation under section 11(4A) is concerned, the same can be applied only in case the assessee is engaged in business activities. It is the contention of the assessee that income from letting out of the properties is income from house property and therefore such income is exempt under section 11 of the Act. Application of section 11(4A) arises only when the assessee carries on business. Therefore the question of maintaining separate books of accounts comes only when the assessee is carrying on business activity. Hence, it is the contention of the assessee 14 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 that it is not carrying on any business activity and the income earned on letting out of property is only incidental and is income from property and exempt under section 11 of the Act. Therefore, the question of maintaining separate books of account does not arise when the assessee is earning income from letting out of property and when such income is exempt under section 11 of the Act, as income from house property. Since we have already directed the Assessing Officer to examine the nature of activity and its income i.e. whether the income is derived as incidental to the objects of the assessee or as a separate business, this can be examined by the Assessing Officer in the light of our above observations.
10. In the result, the appeals of the Department in ITA Nos. 294 & 2004/Mds/2012 are allowed for statistical purposes.
ITA No.1888/Mds/2012 (A.Y. 2009-10 - Assessee's appeal):-
11. The only issue in the appeal of the assessee is that the Commissioner of Income Tax (Appeals) erred in enhancing the income of the assessee by directing the Assessing Officer 15 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 to treat the cash credits of ` 1.00 crore as income from other sources. While completing the assessment, the Assessing Officer held that the assessee has obtained loans to the extent of `1,16,18,000/- and since the assessee could not explain the credit, the same were treated as unexplained cash credits. The Assessing Officer observed that out of `1,16,18,000/-, `1.00 crore was received from unknown persons and the balance of `16,18,000/- was received from Mr. Ebinesan, the General Secretary of the assessee. However, the Assessing Officer while computing the income, the said cash credits were not added to the income of the assessee though in the body of the assessment order held that cash credits of ` 1,16,18,000/-is assessed under the head "income from other sources". In the course of appellate proceedings, the Commissioner of Income Tax (Appeals) proposed to consider this loan of ` 1 crores received in cash as unexplained credits and assessable as 'income from other sources' for which the assessee has submitted its reply stating that the assessee had received `1.00 crore from unknown persons and `16,18,000/- from General Secretary 16 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 Mr. Ebinesan and it had repaid `16,18,000/- to Mr. Ebinesan. It was also submitted that out of ` 1.00 crore obtained by the assessee, it had in fact, repaid ` 50.00 lakhs. The assessee could not provide names from whom the loans were taken as these loans were obtained by General Secretary Mr. Ebinesan on behalf of the assessee for repayment of loan of `1.5 crores taken by the assessee from M/s. India Cements Ltd. It was the submission of the assessee that the names of the persons from whom loans were taken was known only to General Secretary Mr. Ebinesan who expired later in the course of assessment proceedings, therefore, the names could not be furnished. It was the submission of the assessee that cash of `1.00 crore received was deposited on 2.4.2008 into bank account to honor the cheque issued to M/s. India Cements Ltd. However, the Commissioner of Income Tax (Appeals) sustained this addition of ` 1.00 crore as unexplained cash credits under section 68 assesable under the head 'income from other sources' as the credits were not proved as genuine.
17 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
12. The DR strongly relied on the orders of Commissioner of Income Tax (Appeals) in sustaining the addition.
13. Heard the Departmental Representative. Perused the orders of the lower authorities. The Commissioner of Income Tax (Appeals) while sustaining the addition held as under:-
"7) Enhancement of assessment and income:-
The Assessing Officer, in body of the assessment order, mentioned that an amount of `1,16,18,000/- introduced by way of cash loans for which no details as available was treated as unexplained cash credits u/s.68 of the Act and brought to tax under the head "income from other sources" as under:-
"The cash credits of ` 1,16,18,000/- from unexplained and unidentified sources received in cash during the year has not been proved for the credit worthiness and genuineness of transaction. Hence, this sum is taken to be the income of the society u/s.68 of the Act and is assessed under the head "income from other sources".
However, the Assessing Officer, perhaps due to oversight, failed to include the same while computing the taxable income of the assessee for the year. In fact, the Assessing Officer himself realized that this is a mistake apparent from records and issued a notice u/s.154 of the Act, to the assessee proposing rectify the same. This proposed action of the Assessing Officer is apparently pending as on date.
Since the above amounts of Rs.1,16,18,000/-, introduced by way of cash loans for which no details as available, were already treated by the Assessing Officer as an unexplained cash credits u/s.68 of the Act and liable for tax under the head 18 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 "income from other sources" the undersigned has proposed to include the same in the total assessed assessable income by enhancing the assessment. In this regard, this office, vide the order sheet noting dated 04.07.2012, required the assessee to explain as to why the above mentioned sums ofRs.1,16,18,000j- should not be brought to tax as a unexplained cash creditsujs.68 of the Act, assessable under the head "income from other sources".
The assessee, vide its written submissions, furnished its explanations and claimed that though the said loans are genuine but due to the sudden death of the then General Secretary Shri Ebinesan on 16.09.2009, the society is not in a position to file the details. Considering the facts the assessee submitted that no addition u/s.68 of the Act is warranted.
The assessee's submissions are considered carefully. As discussed in the' foregoing paragraph no.6, loans to the extent of Rs.16, 18,000/-, were received from Shri Ebinesan and were also repaid to him only, as could be seen from the repayment vouchers are signed 'by Shri Ebenesan. Further, for the reasons narrated therein, it is held that these loans (to the extent of Rs.16,18,000/-) can not constitute unexplained cash credits within the meaning of sec.68 of the Act. However, regarding the other loan of Rs.l,00,00,000/-, claimed to have been received by way of cash during the F.Y.2008- 09 and also claimed to have been partly repaid (Rs.50,00,000/-) in cash, the assessee organization has no details, of whatsoever, regarding the names and addresses of the persons from whom the loans were received. In the absence of such details it is to be presumed that the said amount represents unexplained cash credits assessable u/s.68 of the Act.
In view of the above discussions, the Assessing Officer. has rightly held that the amounts of Rs.1,00,00,000/- introduced in to the assessee's books of accounts, as "cash credits from unknown persons", stands to be unexplained cash 19 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 credits within the meaning of sec.68 of the Act, as the assessee has no details, of whatsoever, of the names / addresses of the persons from the loans have been received, their credit worthiness etc. Hence the amount of Rs.1,00,00,000/- is unexplained cash credits u/s.68 of the Act and assessable to tax under the head income from other sources. Therefore, the Assessing Officer is directed to assess the said Rs. 1,00,00,000/- under the head income from other sources, while computing the total taxable of the assessee for the financial year 2008-09.
It is also important to mention here that the regular income derived from the property held by the trust is eligible for exemption u/s. ll of the Act. Whereas, the above amount of ` l,00,00,000/- which is not derived from the property held by the trust, but from the unknown/unexplained and unaccounted sources and hence not eligible for exemption u/s.l1 of the Act. In other words, the regular income of the assessee is eligible for exemption u/s.11 of the Act and the deemed income of `1,00,00,000/- brought to tax u/s.68 of the Act and under the head "other sources"
is not eligible for exemption. Hence the said income of Rs.1,00,00,000/-, from unexplained cash credits u/s.68 of the Act, alone is to be brought to tax at maximum marginal rate.
As a result, the taxable income of the assessee society is increased by Rs.1,00,00,000/- and assessment enhanced."
14. As could be seen from the order of the Commissioner of Income Tax (Appeals) that the assessee has introduced ` 1.00 crore in its books of accounts as credits from unknown persons. As the assessee could not explain the source for the said credits or the persons from whom the loans were 20 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 taken, the same were treated as unexplained credits assessable under the head 'income from other sources'. The Commissioner of Income Tax (Appeals) also held that the said `1.00 crore introduced by the assessee as credits also cannot be considered as application of income since this amount is not received by the assessee by way of any donation. This income is treated as deemed income under section 68 of the Act.
15. On going through the above observations of the Commissioner of Income Tax (Appeals), we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) in sustaining the addition. In the result, grounds of the assessee on this issue are rejected.
16. In the result, the appeal of the assessee is dismissed. ITA Nos. 1661 & 2003/Mds/2012 (A.Y. 2009-10):-
17. The only issue in these two appeals of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting penalty levied under section 271D / 271E of the Act.
18. The Assessing Officer while completing the assessment for the assessment year 2009-10 assessed ` 1.00 crore as 21 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 unexplained credit being cash received from unknown persons as stated in the above appeal for the assessment year 2009-10. The Assessing Officer levied penalty under section 271D for violation of provisions of section 269SS of the Act on the addition made towards unexplained credits. Since these loans were received in cash by the assessee in excess of the limit specified under section 269SS of the Act.
19. Similarly, the Assessing Officer also levied penalty under section 271E on the repayment of loans to the extent of ` 50.00 lakhs by the assessee, since according to the Assessing Officer, this is in violation of section 269T of the Act. On appeal, the Commissioner of Income Tax (Appeals) held that since the Assessing Officer has treated the said amount of cash loans of ` 1.00 crore as unexplained credits under section 68, the Assessing Officer cannot again invoke the provisions of section 269SS / 269T for levying penalty under section 271D / 271E of the Act. Against this order, the Department is in appeal before us.
22 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
20. The Departmental Representative supported the order of the Assessing Officer in levying penalty under section 271D / 271E of the Act.
21. We have perused the orders of lower authorities. The Assessing Officer while completing the assessment assessed the cash loans as unexplained credit under section 68 of the Act. The Assessing Officer also invoked the provisions of section 269SS / 269T and levied penalty under section 271D / 271E for receiving the cash loans in excess of loans prescribed and also for repaying the said loans. The assessee made elaborate submissions before the Commissioner of Income Tax (Appeals) explaining the circumstances under which these loans were taken and it was also contended that when once the Assessing Officer has treated the cash loans as unexplained credits under section 68, the provisions of section 269SS / 269T cannot be invoked. The submissions of the assessee are as under:-
"1. The Appellant is an Association incorporated in the year 1980, vide Certificate of Incorporation dated 26.08.1890 and registered under section 12A of the Income-tax Act, 23 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 1961, with its main objects, the details of which in brief are:-
i) To promote and provide for the development of human personality of young people.
ii) To promote the physical, social, intellectual and spiritual being of young people.
iii) To establish and maintain centres, refreshment rooms, hostels, boarding houses, tourist homes, homes for the destitute children, libraries, canteen, gymnasia, social service centres, educational institutions which may be necessary for the purpose of the objects.
iv) To promote cooperation and coordination among Christian brotherhood.
v) To establish and maintain study centres, literature, arts & science, research centres, industrial & art exhibition, art galleries, cinema, television and dramatic performances, sports and generally any undertaking for the spiritual, mental, moral or physical improvement of the members.
vi) To borrow money on the security of the property.
vii) To aid charitable institutions.
2. The day-to-day affairs of the Appellant Association are managed by the General Secretary appointed by the Board of Directors of the Association.
3. The Appellant has been regularly assessed to Income-tax under section 11 of the Income-tax Act, 1961. For the Assessment Year 2009-10, the Appellant had filed the Return of Income on 17-12-2009, admitting NIL income. Pending assessment Under Section 143 (3) of the Income-tax Act, before the Joint Commissioner of Income-tax (OSD) (Exemptions) - If, the Joint Director of Income-tax (Exemptions) has initiated penalty proceedings Under Section 271 D of the Act and has passed penalty order dated 23-12-2011, levying a penalty of Rs.1,00,00,000/ -, ignoring the information and explanation offered by the Appellant, for the reasons:
24 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
(i) that the source of the cash credit in the books of account of the assessee were not explained.
(ii) that the assessee has not proved that there were compelling circumstances necessitating the mobilization of cash advances for the repayment of loan obtained from M/ s.
India Cements Limited.
The General Secretary of the Appellant during the year under consideration has mobilized cash advances of `1,00,00,000/-, on 02-04-2008, to meet pressing payment of M/ s. India Cements Limited. The said cash advances mobilized were deposited in the bank account of the Appellant on the same day to honour the cheques issued on the following dates for discharging the liability of M/ s. India Cements Limited.
Date Cheque No. Amount (Rs.)
28-03-2008 272361 50,00,000
28-03-2008 272362 49,25,473
The Joint Director of Income-tax
(Exemptions), by his above dated order, has levied a penalty of Rs.1,00,00,000/-, Under Section 271D, for the alleged contravention of Section 269SS of the Income-tax Act, 1961, ignoring the information furnished and explanation offered in this regard.
4.It is submitted that the temporary advances were obtained by Late. Shri G.Ebinesan, the then General Secretary of the Association and the details of the persons from whom these advances were mobilized were known to him only and since he passed away on 16-09-2009, the Appellant is not aware of the persons from whom these advances were mobilized during the course of the penalty proceedings. It is also not known to the Appellant and its present management that whether these advances were mobilized from third parties or arranged from his own sources.
5. It is submitted that in the instant case, the Appellant has issued two cheques, dated 28-03-2008 to M/ s. India Cements Limited, anticipating other receipts, in order to abide by the repayment terms 25 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 agreed with them, as the loan was already overdue. As the repayment was already delayed, the then General Secretary had to initiate necessary steps to honour the cheques issued to M/ s.
India Cements Limited. Hence, the then General Secretary has raised short
term cash advances of Rs.1,00,00,000/- on 02-04-2008 and deposited the same in the bank account of the Appellant to honour the cheques, that were issued on 28-03-2008.
6. It is submitted that, as the cheques were already issued, Late. Shri. G.Ebinesan, the then General Secretary had to mobilize cash advance for not dishonouring the payments thereby safeguarding the integrity and credit worthiness of the Appellant, which is a charitable orqanisation of international repute and affiliation and in existence for more than 120 years. Late. Shri. G.Ebinesan, the then General Secretary, had to mobilize temporary cash advances, the sources of which are known only to him, to avoid embarrassment on dishonour of the cheques already issued, as he was the person instrumental, by his letter dated 10-
12-2007, in obtaining the loan for the Appellant from M/ s. India Cements Limited, for meeting the capital expenditure.
7. In the similar facts in the case of ITO vs. Akik Titles Private Limited (2005) 96 TTJ (Ahd) 670, the funds were accepted in cash under the compelling circumstances to honour the cheque already issued otherwise the cheque issued by the assessee would have dishonoured. If the cheque gets dishonoured, the assessee had to face the consequences of Section 138 of the Negotiable Instrument Act. Therefore there was a reasonable cause for accepting the cash deposit.
8. It is submitted that the intention of the legislature for enacting the provisions of Section 269SS, as explained in Circular No.387, dated 6th July, 1984, was to curb the transaction of black money. The relevant part of the circular is as under:-
"Unaccounted cash found in the course 26 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 of searches carried out by the Income-tax Department, is often explained by tax payer as representing loan taken from or deposits made by various persons. Unaccounted income also brought in the books of account in the form of such loans and deposits and tax payers are also able to get confirmatory letters from such persons in support of their explanation".
9. Keeping the above circular in view, the Hyderabad Bench of the Tribunal in the case of Industrial Enterprises v. Dy. CIT (2000) 68 TTJ (Hyd) 373: (2000) 73 ITD 252 (Hyd) in para 17.2 of its order held as under:-
'Provision of Section 269SS, were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX-B of the IT Act, 1961 which reads requirements as to mode of acceptance, payment or repayment in certain cases to counteract. "Evasion of Tax'. Legislative intention in bringing Section 269SS in the IT Act was to avoid certain circumstances of tax evasion whereby huge transactions are made outside the books of account by way of cash. As far as the case on hand before us is concerned, there is no case against the assessee firm that these transactions had anything to do with evasion of tax or concealment of income. As rightly pointed out by the Commissioner of Income Tax (Appeals)A)himself, it may be a case of negligence. But a negligent person does not have any intention or mens rea to purposely violate any provision of law, so as to be visited with stringent punishment of heavy penalty'.
10. It is submitted that, in view of the facts of the case, it is evident from the acts of the then General Secretary, Shri. G.Ebinesan, that he had to mobilize cash advances, only for the purpose of honouring the cheques issued earlier and there is no guilt of mind or bad intent in doing so.
11. It is submitted that in view of the fact that, the Appellant is a charitable organization and the then General Secretary 27 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 had mobilized cash advances and the identity of the persons and their addresses from whom these temporary advances were mobilized were not known to the Appellant, the default if any, is of technical and venial nature, and the invocation of Section 271D of the Income-tax Act, 1961, is uncalled for.
12. It is submitted that Section 271D read with Section 273B, would clearly show that the contravention of the provisions of the Section 271D due to reasonable cause would absolve the Appellant from the liability of penalty. Specifically Sections 271D have evidently been encompassed in Section 2?qB. In the view of the specific mentioning of Section 271D in Section 273B, penalty is not leviable Under Section 271D, in obtaining loans/ deposits in excess of the limit prescribed therein, in case there is reasonable cause for offending Section 269SS of the Act
13. It is submitted that in the letter dated th 25 March, 2004, F No. 415/ 6/2000 - IT (Inv. I), issued by Under Secretary, Ministry of Finance to Chief Commissioner of Income-tax and Director General of Income-tax, the Central Board of Direct Taxes has advised that penalties Under Section 271-D and 271-E, for violation of the provisions of Section 269SS and 269-
T, respectively should not be indiscriminately imposed. The provisions of section 273-B, should be taken in view before imposing the penalties.
14. It is submitted that for a transaction to be termed as loan or- deposit within the meaning of Section 269SS of the Act, there should be two entities or persons namely lender and borrower or depositor and recipient In the instant case since the identity of the lenders were not known, these transactions cannot be termed as loans or deposits, hence outside the purview of Section 269SS of the Income-tax Act, 1961. If the transaction does not fall within the meaning of loan or deposit, there is no violation of Section 269SS of the Income-tax Act, 1961. (CIT vs. Idhyam Publications Ltd.
(2006) 285 ITR 221 (Mad). It is
28 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012
pertinent to mention here that the
Assessing Officer in the order levying penalty has categorically stated at para 3.1, 4 and 5 of the penalty order that the identity of the lenders / depositors and their sources were not explained / furnished.
15. The Mumbai "B Bench of the Tribunal in the case of Karnataka Ginning & Processing Factory v. .n. CIT (2001) 72 TTJ (Mumbai) 307: (2001) 77ITD 478 (Mumbai), at p. 487, held as follows:-
"Quite apart from the question of existence of reasonable cause, we are not sure whether the amounts received by the assessee from VE can be termed as "loans" or "deposits".
The words are not defined in the Expln. (iii) below Section 269SS except saying that "loans" or "deposits" means loan or deposit of money. The terms "loan" and "deposit" are not mutually exclusive there are a number of common features between the two. It was held by the Madras High Court in Abdul Hamid Sahib u. Rahmat Bi AIR 1965 Mad 427, that a loan is repayable the moment it is incurred while it is not so with the deposit In a deposit, unlike a loan, there is no immediate obligation to repay.
Normally a deposit is for fixed tenure. The amounts taken by the assessee in the present case from VE are temporary advances and there is no evidence that there was any stipulation as to the period or any stipulation for interest. It is, therefore, a matter of grave doubt as to whether the amount received from VE can be characterized as loans or deposits. In our view, they can be more appropriately referred to as temporary advances. Such temporary advances are outside the purview of Section 269SS. Thus in our considered opinion and in view of the various judicial pronouncements on this matter, we hold that the transaction of this case on hand cannot be considered as "loan" so as to attract Section 269SS and Section 271D of the Act".
29 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012 Applying the ratio of the above decision in the Appellant's case, the temporary advances mobilized by the then General Secretary cannot be termed as loan or deposit so as to attract Section 269SS and Section 271D of the Act.
16. It is submitted that the Assessing Officer, while assessing the income of the Appellant for the Assessment Year 2009-10, Under Section 143 (3) read with section 1480f the Act, has categorically stated in the assessment order that the temporary advances mobilized by the then General Secretary are in the nature of unexplained cash credits and liable to be assessed Under Section 68 of the Income-tax Act, 1961. The relevant portion of the order is extracted hereunder:-
"The cash credit of Rs.1, 16, 18,000/ -
from unexplained and unidentified sources received in cash during the year has not been proved for the credit worthiness, and genuineness of transaction.
Hence, this sum is taken to be the income of the Society Under Section 68 of the Act and is assessed under the head "income from other sources".
However in the computation of total income, inadvertently the said sum of Rs.1, 16, 18,000/ -, has been omitted. To rectify the said mistake apparent on the record, the Assessing Officer, has initiated proceedings Under Section 154 of the Income-tax Act, 1961.
17. It is submitted that where the amount of alleged loan/ deposit is treated as income Under Section 68 of the Income-tax Act, 1961, penalty Under Section 271D cannot be levied. This was the ratio of the decision held in the case of
(a) Diwan Enterprises vs. CIT (2000) 246 ITR 571 (Del)
(b) ACIT vs. M.L. Vijay (2000) 16 DTC 542 (Jb Tribunal)
(c) ITO vs. Sunil M. Kashliwal (2003) 80TT J (Pune Tribunal)
(d) Bajaranq Textiles vs. Addl.CIT (2009) 122 TTJ 190 (Jodh Tribunal) 30 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012
(e) DCIT vs. G. S. Entertainment 109 TT J 54 (Mumb Tribunal)
(f) CIT vs Standard Brands Ltd. 285 ITR 295 (Del).
18. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the Joint Director of Income-tax (Exemptions), Chennai-600 034, may be set aside and pass such orders as the Hon'ble Commissioner of Income-
tax (Appeals) - XII, Chennai, may deem fit on proper appreciation of the facts and circumstances of the case and render justice."
22. After considering the submissions of the assessee, the Commissioner of Income Tax (Appeals) deleted the penalty observing as under:-
"Thus, from the above it is clear that the Assessing Officer came to clear conclusion that the amount of ` 1,00,00,000/- claimed by way of loan, whose names are not known (or at least neither incorporated in the books, nor furnished before the department) was assessee's own money from unexplained and unidentified sources, before bringing to tax u/s.68 of the Act. The provisions of sec.68 and sec.269SS of the Act generally operate in opposite directions. They are mutually exclusive. If there is a loan received by way of cash and Assessing Officer feels that such cash receipt (of loan) is a violation u/s.269SS of the Act, it amounts to certifying the loan transaction. In such a case, it may not be 31 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 justified, if the said loan is considered as unexplained cash credit u/s.68 of the Act.
Similarly, if an amount claimed by way of loan is treated as an unexplained cash credit u/s.68 of the Act and brought to tax, the presumption is that the amount represents assessee's own income from unexplained/unknown sources. In such a case, the entire concept of loan ( or claim of loan from others) gets demolished. This is so because the very presumption, in bringing the sums to tax as unexplained cash credit, is that the amount actually belongs to the assessee but brought into books by way of loans from others. Thus, when the receipt of loan (claimed by the assessee) itself is disbelieved and discarded by the revenue the other (secondary) ingredients of the said loans are of no consequence. In other words, if a particular claim of loan of the assessee is rejected and brought to tax as an unexplained cash credit u/s.68 of the Act, the other issues like - whether the amounts are shown as received by cash or cheque etc. are of no consequence, as the said sums have already been treated as the assessee's own money.
Therefore, in the instant case of the assessee, as the above mentioned amount of ` 32 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 1.00 crore has already been treated as assessee's own income from unexplained and unidentified sources and brought to tax u/s.68 of the Act, the amount is deemed to the income of the assessee. Once it is treated as assessee's own income, the same cannot be treated as a loan. Hence, the question of receipt of such loan by cash or cheque also will not arise, as the said amount was assessee's own money. Therefore, the Assessing Officer, having treated the above said amount of ` 1,00,00,000/- as assessee's own income from unexplained and unidentified sources and brought to tax u/s. 68 of the Act, is not justified in treating the same as a loan received in cash in violations of sec.269SS of the Act, before levying penalty u/s.271D of the Act. Hence, the penalty levied by the Assessing Officer u/s.271D r.w.s. 269SS of the Act, is deleted. The assessee succeeds in its appeal.
In the result, the appeals of the assessee is allowed."
23. On going through the submissions of the assessee and the order of the Commissioner of Income Tax (Appeals), we find there is no good reason to interfere with the order of the 33 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D / 271E especially when the Assessing Officer has treated the cash loans as unexplained credits and at the same time, invoking the provisions of section 269SS / 269T of the Act. This view is also supported by the Hon'ble Delhi High Court in the case of CIT Vs. Standard Brands Ltd., (285 ITR 295), wherein the Hon'ble High Court has held that "when the cash deposits were treated as undisclosed income of the assessee, the Assessing Officer could not resort to proceedings under section 269SS read with section 271D of the Act."
24. The Hon'ble Delhi High Court in the case of Diwan Enterprises Vs. CIT., ( 246 ITR 571) has held as under:-
"That the Assessing Officer had discarded the theory of the assessee having taken any loan. He accepted the surrender of the amount and assessed it as income of the assessee. It was open to the Assessing Officer not to accept the surrender, treat the amount as loan and then hold the assessee liable to penalty under section 271D for non-compliance with section 269SS. The Assessing Officer could not be permitted to treat 34 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 the amount of loan as income for the purpose of assessing tax thereon while framing the assessment and at the same time to treat it as a loan for the purpose of section 269SS read with section 271D and subject the transaction to penalty. For non-compliance with the provisions of section 269SS, the genuineness of the transaction as loan was doubted by the Assessing Officer and so the amount was surrendered by the assessee. The surrender was accepted by the Assessing Officer as income of the assessee, it ceased to be a loan and, therefore, the very foundation for initiating the proceedings for and levying penalty under section 271D was lost. Therefore, penalty imposed under section 271D read with section 269SS could not be sustained."
25. In view of the above, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D / 271E of the Act in respect of the addition made towards unexplained credits by the Assessing Officer.
26. In the result, both the appeals of the Revenue are dismissed.
35 ITA Nos. 294, 1661, 1888,
2002 to 2004/Mds/2012 ITA No. 2002/Mds/2012 (A.Y. 2008-09):-
27. This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XII, Chennai dated 18.07.2012 for the assessment year 2008-09.
28. The only issue in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting the penalty levied under section 271D of the Act. The Assessing Officer while completing the assessment under section 143(3) noticed that the assessee obtained cash loans of ` 6,00,000/- ` 8,60,000/- and ` 25,00,000/- from Mr. R.C. Samuel Swamikkan, Mr.G.Ebinesan and Smt. S.Meenakshi respectively. The Assessing Officer while completing the assessment treated the cash loans received from Mr. R.C.Samuel Swamikkan and Mr.G.Ebinesan as unexplained credits under section 68. The Assessing Officer accepted the cash loan of ` 25,00,000/- received from Smt. Meenakshi as genuine loan. This amount was not treated as unexplained credit while completing the assessment. The Assessing Officer passed order under section 271D levying penalty of ` 25,00,000/- for violation of provisions of section 36 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 269SS in accepting cash loan from Smt. Meenakshi rejecting the explanation of the assessee that the cash loan was obtained due to compelling circumstances i.e. to reduce the bank overdraft facility. It was the submission of the assessee that it had issued cheque for `1,30,96,295/- to Mr. Vishwakarma of M/s. P.M.Construction towards full and final payment of civil, electrical, plumbing and escalation for construction of Vepery Youth Centre. It was the submission of the assessee that since overdraft facility has to be reduced, it had obtained cash loans from Smt. S.Meenakshi. However, the Assessing Officer rejected the submissions of the assessee and levied penalty stating that the assessee did not prove any compelling circumstances in obtaining cash loans. He also stated that assessee has not produced evidence that the contractor had in fact pressed for payment. The Assessing Officer also observed that the assessee has not shown any evidence whether contractors had filed any police complaint or civil suit for recovery. On appeal, the Commissioner of Income Tax (Appeals) after considering the submissions of the assessee, the intention of the legislature in introducing 37 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 the provisions of section 269SS and various case laws held that there is a reasonable cause for accepting the loans from Smt. S.Meenakshi by the assessee and the transaction is held to be genuine. Against this order, the Revenue is in appeal before us.
29. The DR vehemently supported the order of the Assessing Officer in levying penalty under section 271D. He submits that the assessee has not proved any compelling circumstances for accepting the cash loans.
30. We have perused the orders of the lower authorities. The assessee has made elaborate submissions before the Commissioner of Income Tax (Appeals). The assessee submitted that the then General Secretary during the year under consideration has mobilized cash advances of `39,60,000/- to meet the pressing payment of contractors and also to reduce bank overdraft facility. It was the submission that cash advance mobilization was deposited in bank account to honour the prior commitments in order to keep up the reputation of the institution which is 120 years old. It was contended that the Assessing Officer assessed 38 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 `14,60,000/- as unexplained cash credit under the provisions of section 68 and the balance of ` 25,00,000/- borrowed from Smt. S.Meenakshi has been accepted as genuine loan. The assessee submitted that the cash loan of ` 25,00,000/- was obtained from Smt. S.Meenakshi by the then General Secretary Mr. Ebinesan on 6.12.2007 and deposited in Central Bank of India on the same day to clear long outstanding dues and overdraft facility to keep up the century old reputation of the institution and also for maintaining cordial relationship with the banker. The assessee submitted that Smt. S.Meenakshi residing at No.5, 2/500, Rajathottam, Kotivakkam is assessed to income-tax under P.A.No APJPM2497P and the assessee has borrowed the sum on interest @ 18% per annum by executing a demand promissory note and also deposited title deeds of the property of the institution situated at 27th Street, 7th Avenue, Ashok Nagar, Chennai as collateral security to the loan. The assessee also relied on the decision of the co-ordinate Bench of the Tribunal in the case of ITO Vs. P.Visalam Traders, Madurai in ITA No.1172/Mds/2010 dated 4.2.2011 and 39 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 submitted that in this case the Tribunal has deleted the penalty on identical facts of the assessee where the assessee obtained cash loans and deposited in the bank account when the overdraft facility of the assessee was running at maximum. The Tribunal while coming to the conclusion that no penalty is leviable under section 271D also relied on the jurisdictional High Court decision in the case of Kundrathur Finance and Chit company Vs. CIT (283 ITR 329). It was also submitted that if the transaction is genuine and bonafide, penalty could not be imposed particularly where there is no evasion of tax. For this proposition, the assessee relied on the following decisions:-
i) CIT Vs. Lakshmi Trust Company (303 ITR 99)
ii) CIT Vs. Balaji Traders (303 ITR 312)
iii) CIT Vs. Kundrathur Finance & Chit Company ( 283 ITR 329) It was also the submission of the assessee that there is a reasonable cause in obtaining the cash loan in order to meet the pressing demands of the contractors and bankers. The Commissioner of Income Tax (Appeals), after considering all 40 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 the submissions of the assessee and various case laws, held that there is a reasonable cause for accepting the cash loans, transactions are genuine and the transaction is covered by exceptional circumstances and hence, penalty under section 271D cannot be imposed. While holding so, the Commissioner of Income Tax (Appeals) held as under:-
"I have considered the assessee's submissions. As explained by the assessee the assessee had to resort for obtaining cash loans in order to meet the pressing demands of the contractors and also to reduce the bank overdraft facility. As the assessee had undertaken substantial construction/ developmental activities during the financial year 2007-08, there was a need for funds. As there was a delay in obtaining the bank loans and the contractors were pressurizing for payments the assessee was forced to avail cash loans. Further, as the assessee has already over exploited the bank overdraft facility, the was a pressure from the bankers too to reduce the overdraft. Under these circumstances, it cannot be held that the assessee has no exceptional circumstances forcing him to go for cash loans. In this regard, reliance is placed on the judgment of ITAT - B- bench, Mumbai, in the case of ITO Smt. T.Visalakshi, Ward II (4) vs. P. Visalam Traders, Madurai, in ITA No.1172jMdsj2010, (A.Y. 2004-05), order dated 04-02- 2011, in para '8', held as under:
"We have considered the rival submissions. A perusal of the penalty order clearly shows that the penalty has been levied Oil account of the repayment of the loans in cash to 13 persons. A perusal of the orders of the learned CIT(A) and the Assessing Officer clearly shows that the assessee has produced the account copies of the loan creditors to whom the payments have been made in cash. As we have held earlier in regard to the penalty levied u/s 271D that the reasons given by the assessee are supported by the account copies wherein she brought out the reasons why the loans have been taken and repaid. Obviously, when the overdraft facility of the assessee is running at the maximum and the ban1c has also directed for reduction of the same any deposit into the bank account would directly get adjusted against the bank overdraft and it would affect the assessee's business insofar as those 41 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 who were willing to help the assessee would stop helping the assessee if the assessee is unable to repay the loans in time or meet the financial commitments. In these circumstances, we are of the view that the finding of the learned CIT(A) on this issue is on a right footing and does not call for any inference. This view of our gets support from the decision of the Hon'ble jurisdictional High Court in the case of Kundrathur Finance and Chit Co. reported in 283 ITR 329. In the circumstances, the finding of the learned CIT(A) on this issue stands confirmed and the appeal as filed by the Revenue stands dismissed".
The Hon'ble High Court of Madras, in the case of CIT v. Balaji Traders (303 ITR 312) (Mad.), held that in the case of business exigency forcing assessee to take cash loans for purpose of honouring its cheque commitments, where the creditors were genuine persons and transactions were satisfactorily explained by assessee, there was no revenue loss to State exchequer. Hence in such situations penalty u/s.271D r.w.s. 269SS cannot be imposed.
In the present case also the assessee was running its bank overdraft facility at its peak levels. Further, there were pressing demands from the contractors for payments. Under these circumstances and in view of the above decisions, assessee's acceptance of cash loan of Rs.25,00,000 / - from Smt Meenakshi, is to be viewed as with a reasonable cause and exceptions. Further, the Hyderabad Bench of the Tribunal m the case of Industrial Enterprises v. Dy. CIT (2000) 73 ITD 252 (Hyd) also held that the provisions of sec.269SS are introduced to curb the circulation of unaccounted money and evasion of tax. Where the genuineness of the loans is not suspected, the provisions of sec.269SS should not be invoked. In the instant case, the loan has been accepted by the Assessing Officer as a genuine one. Reliance is also placed on the following judgments:
a) ClT v. Balaji Traders [2008] 303 ITR 312 (Mad.):
•• 8ection 271D of the Income-tax Act, 1961 - Penalty - For failure to comply with section 26988 - Assessment year 1993- 94- •• Assessing Officer found that assessee had availed cash borrowings exceeding Rs.20,000 for about 36 times during year - Considering assessee's act to be in violation of section 26988, Assessing Officer imposed penalty upon assessee under section 271D -
•• Tribunal found that there was business exigency forcing assessee to take cash loans for purpose of honouring its cheque commitments; creditors were genuine persons and transactions 42 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 were satisfactorily explained by assessee; and there was no revenue loss to State exchequer - Tribunal accordingly, set aside penalty .
•• High Court held that the Tribunal was justified.
b) CIT v. Maheshwari Nirman Udyog [2008)302 ITR 201) (Raj.) •• Where the transactions were genuine and there was reasonable cause for accepting loan in cash and, no penalty was exigible.
c) OMEC Engineers v. CIT [2007] (294 ITR 599) (Jhar.) •• 8ection 271D of the Income-tax Act, 1961 - Penalty - For failure to comply with section 26988 -
Assessee was in urgent need of money for making payment to labourers and sufficient cash not being available, it received cash deposits from different persons. Court held that in context of penalty provisions, words 'reasonable cause' would mean a cause which is beyond control of assessee. Hence penalty is not leviable.
d) DCIT v. Rupen Das [2012)49 SOT 160 (Kol.)(URO) /7 ITR(TRIB.) 55 (Kol):
•• 8ection 271D of the Income-tax Act, 1961 - Penalty - For failure to comply with section 26988 - Assessment year 2006-07.
• Assessee was engaged in business of providing security guards - He took a cash loan exceeding Rs. 20,000 to make payment of salary to his employees - Assessing Officer imposed a penalty under section 271D on assessee holding that cash loan taken by him was in contravention of provisions of section 26988. On appeal, Commissioner (Appeals) deleted penalty imposed by Assessing Officer accepting assessee's explanation that he took said cash loan due to shortage of fund and to meet emergency needs under bona fide belief that those transactions would not attract any penal provision .
•• Held: 8ince there was business exigency forcing assessee to' take cash loans for purpose of disbursing salary /wages to his employees, Commissioner (Appeals) had rightly deleted penalty imposed.
e) C.itizen Co-operative Society Ltd. v. Addl.CIT [2010] (8 TAXMANN.COM 27)(Hvd) If the assessee-society, whose income is exempt u/s 80P, acted on genuine belief that penal provisions had no application to deposits received by it and. it applied only to other kind of assesses, then there existed reasonable cause in accepting the deposits in cash and paying by cash in violation of section 269SS/269T and assessee may, therefore, be exonerated from the levy of penalty under sections 27lD & 27lE.
f) Maruti Nandan Finance Cap (P.) Ltd. v. ACIT [2009] 30 SOT 46 (Ahd.)(URO):
•• Section 271D of the Income-tax Act, 1961 - Penalty - For 43 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 failure to comply with section 268SS -
.• Assessee was a finance company - It issued cheques of Rs. 10 lakhs to its customers and on date of clearance it fell short of Rs. 5 lakhs - Under those circumstances, assessee requested one 'G' who was its director to arrange for funds - He, in turn, arranged amount from bank in cash and deposited same in assessee's account •• Assessing Officer observed that assessee had violated provisions of section 269SS as deposit of Rs. 5 lakhs was accepted in cash and, accordingly, issued show-cause notice under section 271 D for levying penalty.
Assessee contended that it had reasonable cause inasmuch as amount was received in cash to ensure that cheques given by it, if bounced, would have adverse effect on its business interests - Assessing Officer, however, levied penalty which was challenged in first appeal where it was confirmed •• Held: Since assessee was prevented by sufficient cause, penalty under section 271D was to be deleted.
In instant case, there is a reasonable cause for accepting the loans from Mrs Meenkshi and also the transaction was genuine. Hence, in view of the above judicial pronouncements, the same is covered by exceptional circumstances and hence penalty u/s.271D Call not be imposed.
Therefore, the Assessing Officer is not justified in treating the same as a loan received in cash in violations of sec.269SS of the Act, before levying penalty of Rs.25,00,000j- u/s.271D of the Act. Hence the penalty levied by the Assessing Officer u/s.271D r.w.s. 269SS of the Act is deleted. The assessee succeeds in its appeal."
31. On going through the order of the Commissioner of Income Tax (Appeals), we find that the assessee has obtained cash loan from Smt. Meenakshi, who is an assessee, the identity is proved, the genuineness of the transaction is proved, therefore, it cannot be said that the loan amount of ` 25,00,000/- is unaccounted income of the assessee. We also notice from the assessment order that the cash loans introduced by the assessee from other than Smt. 44 ITA Nos. 294, 1661, 1888, 2002 to 2004/Mds/2012 Meenakshi have been considered as unexplained credits by the Assessing Officer which shows that the cash loans obtained from Smt. Meenakshi is genuine loan and no such treatment was given to this loan of ` 25,00,000/- by the Assessing Officer while completing the assessment. We also find that the assessee was forced to avail cash loans in order to meet the requirements of payments to bank for reducing the credit limit and to honour the cheques already issued. The Department has not filed any evidence to rebut the findings of the Commissioner of Income Tax (Appeals). In the circumstances, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D of the Act and no interference is called for.
32. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on Monday , the 29th day of April, 2013 at Chennai.
Sd/- Sd/-
(Abraham P.George ) (Challa Nagendra Prasad)
Accountant Member Judicial Member
Chennai,
Dated the 29th April, 2013.
somu
Copy to: (1) Appellant (4) CIT(A)
(2) Respondent (5) D.R.
(3) CIT (6) G.F.