Case Law Details
CA Sandeep Kanoi
Issue – Assessee is a private limited company engaged in the business of manufacturing of Casting. During the course of assessment proceedings AO noticed that Assessee has received cash loans on various days aggregating to Rs 8,89,000/- from Shri Ramusingh Badoria, the Director, of the Assessee. AO was of the view that the acceptance of loan in cash was in contravention of provisions of s. 269SS. The submissions of the assessee with respect to business exigencies was not found acceptable and accordingly he initiated penalty proceedings u/s 271D of the Act and thereafter vide order dated 16/17.6.2011 levied penalty of Rs 8,89,000/-.
Contention Raised by the Assessee- Ld. A.R. submitted that the year under consideration was the first year of its operation. The construction of factory building and installation of plant was in progress. Assessee had applied for a loan from Bank of Baroda which was sanctioned by the bank on 28.9.2007 and the first disbursement of the loan was received on 16.10.2007. In the meantime, Assessee had to make payments to the machinery suppliers and therefore there was urgent need of funds. To make the payments to the suppliers, the Director of the company, Shri Ramusingh Bhadoria deposited the amount in the bank account of the Assessee directly and which in turn was used to make the payments to the suppliers. The transaction were bonafide and out of business exigency. He further placed on record at page 7 of the paper book the copy of the bank account as appearing in its books of accounts. From the aforesaid account he pointed to the fact that the aggregate loan of Rs 1,89,000/- received on 13.9.2007 and 18.9.2007 (Rs 1 lac and Rs 89,000 respectively) was used to make the payment immediately on 19.9.2007. Similarly, the aggregate loan of Rs 5 lacs (Rs 1 lac received on 20.9.2007 and Rs 4 lac received on 21.9.2007) was also used to make the payment to suppliers on 24.9.2007, 25.9.2007 and 26.9.2007. He therefore submitted that due to urgent requirement of funds and business exigency the amounts were borrowed. He further submitted that no unaccounted money was involved in the transaction, the transaction has been held to be genuine and the receipt of loan in cash can at the most be termed to be a technical breach. He also placed reliance on the decision in the case of Chandra Cement Ltd Vs DCIT (2000) 68 TTJ (Jp) 35, Virambhai Ramabhai Patel (ITA No 2230/Ahd/2012 order dated 22.3.2013 and various other decisions. He thus submitted that the penalty levied be deleted.
Held by Honorable ITAT :-
We have heard the rival submissions and perused the material on record. It is an undisputed fact that Assessee has obtained cash loans from its Director, Shri Ramusingh Bhadoria. It is also a fact that the amounts were utilised for the purpose of making the payment to the suppliers of machinery. The copy of the bank book as furnished also reveals that the balance in the bank account before the receipt of the amounts from the Director was only Rs 7500/- and after the receipts, the payments were made to the suppliers within 1 to 5 days of the receipt of amounts. The submission of the Assessee that it had applied for loan from Bank of Baroda and the same was disbursed on 16.10.2007 has not been controverted by Revenue. It is not the case of the Revenue that transaction entered by the Assessee is not genuine or the supplier of the machinery to whom the payments have been made were not genuine and the transaction of purchase is in doubt. Further there is no finding of the the AO that the transaction in breach of the aforesaid provisions made by the assessee was mala fide and with the sole object to disclose the concealed or undisclosed money.
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