Income Tax Appellate Tribunal ( ITAT ) upheld the addition for exceeding the limit of cash transactions under section 269SS of Income Tax Act, 1961 made by the Assessing Officer (AO).
The authorities of Vijay Pal Rao (Judicial Member) and Ramit Kochar (Accountant Member) observed that the private limited company and director were different persons.
The AO observed that the assessee had accepted a cash loan of Rs. 1,10,000 from Hemant Kumar Sindhi on various dates, in violation of the provisions of Section 269SS of the Income Tax Act, and for this default the assessee is liable to be penalised.
This constitutes the condensed version of the facts that were discovered during the assessment proceedings conducted by the AO under Section 143(3) read with Section 143(2) of the Income Tax Act for the impugned assessment year in the case of the assessee.
Hemant Kumar Sindhi, the director of the assessee company, deposited Rs. 60,00,000 in the assessee’s bank account on September 26, 2011, and on October 4, 2011, respectively, totaling Rs. 10 lac and Rs. 50 lac submitted Praveen Godbole C.A., the counsel for assessee before the bench.
Further, Hemant Kumar Sindhi also paid cash on November 4, 2011, totaling Rs. 50,00,000 and Rs. 2000, to purchase stamp paper for the assessee company, which was then used by the assessee company to register the purchased property of the company.
It was also submitted that the amount of Rs. 1,10,02,000/- was received in cash from the Director of the assessee company which was not a loan.
The bench observed the statutory provisions of section 269SS, section 271D and section 273B were introduced as a measure to counter check evasion of taxes, which are in fact anti tax-evasion measures.
The tribunal further acknowledged that the language used to define loan or deposit in Section 269SS is of the widest amplitude, and even exemptions are provided in the first and second provision to Section 269SS, which, incidentally, do not cover Directors of Private Limited Companies.
As a result, Directors of Private Limited Companies will be subject to the strict requirements of Section 269SS of the Income Tax Act, and for violation thereof, penalty consequences as specified under Section.
In the instant case, the tribunal held that no reasonable cause or urgency is shown by the assessee for having accepted cash aggregating to Rs. 1,10,02,000 on different occasions from Hemant Kumar Sindhi, Director.
Furthermore, it was not possible to demonstrate why the transactions could not be carried out in accordance with the modes specified under section 269SS of the Income Tax Act. Additionally, the Private Limited firm and the Director are entirely different entities under the terms of Section 2(31), thus there can be no disagreement on this point.
The bench upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] that the penalty of Rs. 1,10,02,000 levied under Section 271D of Income Tax Act.
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