ORDER
K.K. Boliya, A.M.
These two appeals filed by the assessee are disposed of by this common order as the facts are common.
Appeal No. 3009
2. This appeal arises from the order dated 23-3-2000 of Commissioner (Appeals)-I, Mumbai, confirming levy of penalty of Rs. 1,15,000 under section 271D of the Income Tax Act. The facts may be stated in brief. During the course of assessment proceedings for the assessment year 1997-98, the assessing officer noted that as per the remarks of the auditors, the assessee received a loan of Rs. 1, 15,000 in cash from M/s Regal Impex (P) LTD. (RIPL) and thus the provisions of section 269SS were violated. The assessing officer, therefore, issued a show-cause notice to the assessee, proposing levy of penalty under section 271D of the Income Tax Act. The assessee, in its defense, contended before the assessing officer that the company neither received nor repaid any loan or deposit in cash during the previous year relevant to the assessment year 1997-98 and that the remark in the tax audit report does not depict a correct factual position. It was explained that in the loan account of M/s RIPL, there was an opening credit balance of Rs. 10,50,000 brought forward as on 1-4-1996. Mr. S. Ganguly, who is the director in the assessee- company was also a director in RIPL, which company had its principal place of business at Kolkata. Shri Ganguly was looking after the business affairs of RIPL at Mumbai and, therefore, he was required to incur expenses on behalf of that company from time to time. For this purpose, Shri Ganguly was always having cash with him on behalf of the said company and during the year, the cash of Rs. 1,15,000 was handed over to the cashier of the assessee-company, for safe custody with a view to take back the cash for meeting the expenses of RIPL as and when required. Thus, the aforesaid amount of Rs. 1,15,000 belonged to RIPL. However, when the auditors of the assessee- company were scheduled to visit for verification of cash, stock, etc., the cashier of the assessee, by mistake, entered the aforesaid cash of Rs. 1,15,000 in the loan account of RIPL. In these circumstances, the auditors commented that a cash loan of Rs. 1,15,000 was received by the assessee. The assessing officer rejected the explanations submitted by the assessee-company on the ground that there was no evidence or material to support the claims made. He, therefore, levied the impugned penalty of Rs. 1,15,000 under section 271D which has been confirmed by the learned Commissioner (Appeals) for similar reasons.
3. The learned counsel for the assessee contended before us reiterating the same explanation and invited our attention to copies of relevant extracts from books of account compiled in the paper book. Copy of the relevant cash book page is at page 17 of the paper book. From the entries made in the cash book, it is seen that cash receipt of Rs. 1,15,000 is recorded in the name of RIPL on 6-5-1996. The opening cash balance is Rs. 7,64,689 and there are expenses of Rs. 53,836 in cash and thus when the cash of Rs. 1,15,000 is shown as received on 6-5-1996, the assessee-company was already having a cash balance of around Rs. 7,11,000. In the loan account of RIPL, copy of which is at page 23 of the paper book, the aforesaid sum of Rs. 1,15,000 is reflected on the credit side as cash receipt. The opening balance is Rs. 10,50,000 and on the debit side, on 31-3-1997, cash payment of Rs. 74,192 is shown, which, the learned counsel has submitted, represents the expenses incurred during the year by Shri Ganguly on behalf of RIPL from time to time. A further sum of Rs. 41,600 is debited by way of journal entry passed on 31-3-1997. The learned counsel for the assessee argued that on 6-5-1996, the assessee was already having a cash balance of around Rs. 7,11,000 and, therefore, there was no need to take any cash loan from RIPL. It is only on account of bona fide mistake of the cashier that the entry was made which was squared up on 31-3-1997, partly on account of reimbursement of cash to Shri Ganguly and partly through a journal entry. It is submitted that the assessee had no intention of taking any loan or deposit and as a matter of fact no such loan was taken. It is submitted that in these circumstances, levy of penalty is not justified. Reliance is placed on the following cases:
(i) ADI (Investigation) v. Kum. A.B. Shanthi (2002) 255 ITR 258 (SC).
(ii) Dillu Cine Enterprises (P) Ltd. v. Addl. CIT (2002) 80 ITD 484 (Hyd).
(iii) Dy. CIT v. Shiv Nandan Kaushik (2002) 74 TTJ (Chd) 761.
(iv) Income Tax Officer v. Choudhary Co. Bhujiawala 26 Tax World 13 (Jodhpur).
(v) Motilal Co. v. Income Tax Officer (1999) 102 Taxman 106 (Ahd)(Mag).
(vi) Assistant Commissioner v. Muthoot M. George Bankers (1993) 47 TTJ (Coch) 434: (1993) 46 ITD 10 (Coch).
4. The learned Departmental Representative supported the orders of the lower authorities and contended that the assessee has completely failed to produce any material or evidence to substantiate the claim made before the assessing officer. It is also pointed out that in the month of May, 1996, the auditors could not have visited as the audit takes place after the close of the accounting year. It is argued that the cases relied upon are distinguishable on facts. It is also pointed out by the learned Departmental Representative that the assessee failed to furnish any confirmation either from M/s RIPL or from Shri Ganguly in support of its version.
5. In his rejoinder, the learned counsel for the assessee submitted that the assessee had filed detailed written submissions before the assessing officer as well as before the learned Commissioner (Appeals) wherein proper explanation was given and the assessing officer did not ask the assessee to furnish any other evidence or material or confirmation from other parties.
6. We have given a careful consideration to the rival submissions vis-a-vis the relevant facts as also the cases cited before us and have gone through the relevant provisions of law as contained in the Income Tax Act. The Hon’ble Supreme Court, in the case of Kum. A.B. Shanthi (supra) observed that the object of introducing section 269SS is to ensure that the taxpayer is not allowed to give false explanation for his unaccounted money or if he has given some false entries in his account, he shall not escape by giving false explanation for the same. During the course of search and seizures, unaccounted money is unearthed and the taxpayer would normally give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The Hon’ble Apex Court observed that the main object of section 269SS was to curb this menace. In the cases cited by the learned counsel for the assessee, it has been held that the penal provisions are not applicable to any transaction which is done in an open manner which is genuine and in which no unaccounted money is involved. Mere technical breach of the provisions should not attract provisions of section 269SS. If the facts of the present case are analysed in the light of the legal position as emerging from various cases, it becomes apparent that the penal provisions of section 271D should not be invoked in the present case. The assessee had no necessity of borrowing any loan or taking any deposit from the other company as it was already having substantial cash balance on the relevant date. It is a fact that Shri Ganguly was the common director and lie was handling the business affairs of RIPL at Mumbai and, therefore, had to incur expenses on that account. It does not seem to be improbable that Shri Ganguly was holding sufficient cash on behalf of RIPL so as to enable him to meet out necessary expenses on behalf of that company. The entire facts and circumstances support the claim that the cashier, by mistake, entered the amount in the cash loan account of RIPL. In our view, penalty under section 271D is not exigible and, therefore, the same is directed to be deleted.
Appeal No. 3013 :
7. This appeal is against the confirmation by the learned Commissioner (Appeals) of penalty of Rs. 74,192 levied under section 271E. As already discussed (supra), the sum of Rs. 74,192 was debited in the account of RIPL and the explanation is that from out of the cash of Rs. 1, 15, 000, the aforesaid amount was taken by Shri Ganguly to meet the expenses on behalf of RIPL. The balance amount was squared up by passing a journal entry on 31-3-1997. The penalty has been levied and confirmed by the learned Commissioner (Appeals) on the basis that provisions of section 269T have been violated. The arguments and submissions of both the sides are the same and, therefore, for the same reasons as indicated by us above, the penalty of Rs. 74,192 is directed to be deleted.
8. In the result, both the appeals are allowed.