The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the provision of Section 269SS and 269T of the Income Tax Act, 1961 imposed statutory liability and cannot be stated as a mere technical violation.
During the scrutiny proceedings of the assessee company, the Assessing Officer noted that the assessee company had received cash of Rs.6,29,000/- from Anwar Jalil Ahmed Khan, Rs. 7,30,000/- from Sofia Praveen Khan, both directors of the assessee-company and Rs.27,244/- from M/s. Softech Solutions Pvt. Ltd.
The assessee at first instance claimed before the Assessing Officer that the assessee company had not accepted any cash deposit and in support submitted a cash book where there was no mention of receipts of the above amounts. The Assessing Officer treated the said cash book as unauthentic as it was not prepared as per accounting principles.
The Assessing Officer held that the assessee had received the money in cash in violation of Section 269SS of the Income Tax Act and repaid the same in cash in violation of Section 269T of the Income Tax Act and imposed a penalty of Rs.13,86,244/- under Section 271D and Rs.2,95,500/- under Section 271E of the Income Tax Act. The Commissioner of Income Tax Act [CIT(A)] confirmed the penalty orders passed by the Assessing Officer.
The Authorized Representative submitted that out of bona fides and being unaware of the state of the law with regard to the extent to which cash amount can be transacted the two Directors who are NRI had given the cash loan which was also repaid.
He has relied upon the judgment of the Supreme Court of India in the case of Hindustan Steel Ltd. vs. State of Orissa to submit that as the nature of proceedings are Quasi-criminal proceedings it is required to ascertain if there was a deliberate act of defiance of the technical provisions.
The Departmental Representative submitted that the violation is not technical but of substantive provisions that are meant to curtail undisclosed income transactions.
The Two-member bench comprising of M. Balaganesh (Accountant member) and Anubhav Sharma (Judicial member) held that the violation was of Section 269SS of the Income Tax Act which deals with the modes of accepting certain loan deposits and specified sums and Section 269T of the Income Tax Act which deals with the modes of repayment of certain loans for deposits are violation which are not to be examined from the perspective the person who has given the loan or to whom the loan was returned but from the perspective of the recipient of the loan.
Thus, the innocence pleaded on account of ignorance of the law of Directors who are claimed to be non-residents is insignificant. There is no question of any benefit to the assessee company on the basis of the claim of bona fides of the Directors. The provisions of Section 269SS and 269T of the Income Tax Act imposed statutory liability and cannot be said to be held to be mere technical violations in the case of companies. Therefore, the appeal of the assessee was dismissed.
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