If assessee accepts loan to meet certain business contingencies no penalty could be imposed under s 271D for violation of s 269SS — as held by GujHC in CIT v Volpak Securities Ltd — In favour of: The Assessee ; Tax Appeal Nos. 401, 402 of 2010
CIT v Volpak Securities Ltd.
High Court of Gujarat
Tax Appeal Nos. 401, 402 of 2010
Akil Kureshi and Sonia Gokani, JJ
Decided on: 22 June 2011
Counsel appeared:
Mrs Mauna M Bhatt for the appellant
None for Opponent
Oral Order
(Per: Akil Kureshi, J)
These Appeals have been filed by the Revenue, seeking to challenge the common judgment of the
Tribunal dated 13th August 2009. Factual background leading to these Appeals is as under:-
2.The assessee had accepted certain cash loans from three different persons in the assessment
year in question totalling to Rs. 10,76,000/. Revenue contending that such acceptance was in
violation of section 269SS of the Income-tax Act, 1961, instituted penalty proceedings u/s. 271D
of the Act. The Assessing Officer, after hearing the assessee, imposed penalty of Rs. 10,76,000/.
This order was carried in appeal. CIT [A] granted substantial relief by deleting penalty of Rs.
9,05,000/ but confirmed the penalty to the extent of Rs. 1,71,000/. This order of CIT [A] gave rise
to the filing of two appeals before the Tribunal – one for deletion of penalty by the Revenue and
another by the assessee to the extent CIT [A] confirmed the order of penalty made by the
Assessing Officer. Both these appeals were disposed of by a common judgment, which is
impugned in this Appeal. Tribunal deleted the entire penalty. Resultantly, dismissed the
Revenue's appeal and allowed the assessee's appeal. Thereupon, the Revenue has presented these
Appeals before us, raising the following question for our consideration:-
“Whether the Appellate Tribunal is right in law and on facts in reversing the order
passed by CIT [A] and thereby deleting the penalty the penalty of Rs. 10,76,000/
levied under section 271D of the Act though the assessee had contravened the
provisions of section 269SS by accepting the loans from three persons in cash ?”
3. We have perused the orders on record with the assistance of learned counsel for the Revenue.
We find that CIT [A] had given detailed reasons for deleting penalty to the extent of Rs. 9,05,000/
which was in turn upheld by the Tribunal, observing that the assessee had sufficient reasons for
accepting the loan in cash.
4. With respect to the portion of penalty, which the CIT [A] confirmed, the same was deleted by
the Tribunal observing that the assessee was liable to make payment of Rs. 1,53,000/ on 23rd June
1997 in respect of mark-to-market settlement for which purpose Rs. 1,50,000/ was accepted from
Shri Ashok Patel, Director in cash. However, since some funds were available in the books on
that date, only Rs. 75,000/ was deposited in the Bank on 23rd June 1997 and the balance, after
meeting certain other payments, was returned to the Director. The Tribunal was, therefore, of the
opinion that these facts which are not disputed would demonstrate that the assessee had accepted
the loan to meet with certain contingencies. The Tribunal found that the explanation of the
assessee was broadly acceptable of meeting with the business requirements, and to avert a
particular situation, cash loan was accepted from the Director. Similar explanation was rendered
by the assessee for receipt of Rs. 40,000/; Rs. 10,000/ and Rs. 24,000/ respectively which were
also accepted by the Tribunal.
5. We find that no substantial question of law arises. Tribunal, on the basis of evidence on record,
found explanation of the assessee acceptable, deleted the penalty imposed u/s. 271D of the Act.
In the result, Tax Appeals are dismissed.
CIT v Volpak Securities Ltd.
High Court of Gujarat
Tax Appeal Nos. 401, 402 of 2010
Akil Kureshi and Sonia Gokani, JJ
Decided on: 22 June 2011
Counsel appeared:
Mrs Mauna M Bhatt for the appellant
None for Opponent
Oral Order
(Per: Akil Kureshi, J)
These Appeals have been filed by the Revenue, seeking to challenge the common judgment of the
Tribunal dated 13th August 2009. Factual background leading to these Appeals is as under:-
2.The assessee had accepted certain cash loans from three different persons in the assessment
year in question totalling to Rs. 10,76,000/. Revenue contending that such acceptance was in
violation of section 269SS of the Income-tax Act, 1961, instituted penalty proceedings u/s. 271D
of the Act. The Assessing Officer, after hearing the assessee, imposed penalty of Rs. 10,76,000/.
This order was carried in appeal. CIT [A] granted substantial relief by deleting penalty of Rs.
9,05,000/ but confirmed the penalty to the extent of Rs. 1,71,000/. This order of CIT [A] gave rise
to the filing of two appeals before the Tribunal – one for deletion of penalty by the Revenue and
another by the assessee to the extent CIT [A] confirmed the order of penalty made by the
Assessing Officer. Both these appeals were disposed of by a common judgment, which is
impugned in this Appeal. Tribunal deleted the entire penalty. Resultantly, dismissed the
Revenue's appeal and allowed the assessee's appeal. Thereupon, the Revenue has presented these
Appeals before us, raising the following question for our consideration:-
“Whether the Appellate Tribunal is right in law and on facts in reversing the order
passed by CIT [A] and thereby deleting the penalty the penalty of Rs. 10,76,000/
levied under section 271D of the Act though the assessee had contravened the
provisions of section 269SS by accepting the loans from three persons in cash ?”
3. We have perused the orders on record with the assistance of learned counsel for the Revenue.
We find that CIT [A] had given detailed reasons for deleting penalty to the extent of Rs. 9,05,000/
which was in turn upheld by the Tribunal, observing that the assessee had sufficient reasons for
accepting the loan in cash.
4. With respect to the portion of penalty, which the CIT [A] confirmed, the same was deleted by
the Tribunal observing that the assessee was liable to make payment of Rs. 1,53,000/ on 23rd June
1997 in respect of mark-to-market settlement for which purpose Rs. 1,50,000/ was accepted from
Shri Ashok Patel, Director in cash. However, since some funds were available in the books on
that date, only Rs. 75,000/ was deposited in the Bank on 23rd June 1997 and the balance, after
meeting certain other payments, was returned to the Director. The Tribunal was, therefore, of the
opinion that these facts which are not disputed would demonstrate that the assessee had accepted
the loan to meet with certain contingencies. The Tribunal found that the explanation of the
assessee was broadly acceptable of meeting with the business requirements, and to avert a
particular situation, cash loan was accepted from the Director. Similar explanation was rendered
by the assessee for receipt of Rs. 40,000/; Rs. 10,000/ and Rs. 24,000/ respectively which were
also accepted by the Tribunal.
5. We find that no substantial question of law arises. Tribunal, on the basis of evidence on record,
found explanation of the assessee acceptable, deleted the penalty imposed u/s. 271D of the Act.
In the result, Tax Appeals are dismissed.
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