Advance Received from Promoters in Cash through Current Accounts not violation of S. 269SS: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai has held that no penalty can be imposed for receiving advances from the promoters in cash through their respective current accounts.

Assessee engaged in the business of real estate was served with a notice under Section 271D of the Income Tax Act by the Assessing Officer citing a violation of Section 269SS of the Income Tax Act on the ground that the assessee had received cash loans/advances from certain persons. It was also observed that the cash receipts received from the promoters of the assessee company also in violation of the above provision.

The Tribunal opined that there was sufficient evidence available with the lower authorities, which clearly indicated that sums received from M.R. Jayalakshmi, S. Manohar, M. Anandan and K. Padma were nothing but advances against the sale of flat. Section 269SS of the Act was substituted by Finance Act, 2015 w.e.f. 01.06.2015.

“Nothing has been brought on record by the Revenue to show that the receipts were superfluous in nature and not for the business of the assessee. Had it been so, it would have come out in the scrutiny assessment done for the impugned assessment year. Admittedly, there were no adverse findings in such scrutiny. Hon’ble Jurisdictional High Court in the case of Idyayam Publications Ltd, (supra), has clearly held that cash transactions in the current account of a company with its promoters, where such current account was a running one, could not be considered as loan or advances. There is no case for the Revenue that assessee had not produced ledger before ld. Assessing Officer during the course of assessment proceedings or that the accounts of the promoters in the books of the assessee were not in the nature of funds introduced for the running of its business. Hence, considering the judgment of Hon’ble Jurisdictional High Court in the case of Idyayam Publications Ltd (supra), we are of the opinion that advances received from the promoters in cash through their respective current accounts could not be considered as loan or advances coming within the ambit of Section 269SS of the Act,” the Tribunal said.