CIT vs Sree Krishna Promoters and Builders

The revenue has preferred this appeal against the order passed by the Tribunal, which has held that the amount received by the assessee as temporary advance does not fall within the phrase loan or deposits and therefore, there is no violation of 269SS r/w section 271D of the Act. The facts are not in dispute.

The assessee firm and the lender firm M/s. M.A. Krishna Nayak & Co., are sister concerns. There are two common partners at the relevant period in both the firms. Sri M.A. Nayak is a common partner in both the firms and is managing the affairs of both the firms. The case of the assessee is that they took the money from the sister concern to make urgent payment. There was no intention to avoid taxes. Both the firms are regularly assessed to income tax. When it is the case of providing temporary accommodation to one sister concern to another sister concern it does not amount to transaction of loan or deposit and therefore, it is outside the purview of section 269SS of the Act. The assessing authority did not accept the said contention and found that there is violation of such provision and imposed penalty u/s 271D of the Act. Aggrieved by the same, assessee preferred an appeal. However, the Appellate Commissioner confirmed the demand. It is against these orders, the assessee preferred an appeal to the Tribunal.

The Tribunal relying on the judgments in the case of (2002) 80 ITD 484 Cochin Bench of the Tribunal in Muthoot M. George Bankers v. Asstt. CIT (1993) 46 ITD 10 the judgment of Hon''ble Madhya Pradesh High Court in the case of Patriam Jain and also the Mumbai B Bench in the case of Karnataka Ginning & Pressing Factory v. Jt. CIT (2001) 77 ITD 478 (Mum B-Trib), have set aside the penalty imposed. Aggrieved by the said order the revenue is in appeal.

Heard the learned counsel for the parties.

From the aforesaid material, it is clear that the deposits are received by one sister concern from another concern to meet the exigencies of the situation. It is not the case of borrowing of the loan or receipt of the deposit, as understood in taxation law. In fact only on five occasions the amount received is above Rs. 20,000, otherwise it is less than Rs. 20,000.

Section 273B provides that the imposition of penalty is not automatic. If there is a reasonable cause then no penalty shall be imposed. It is in this circumstances in view of law read in the aforesaid judgments, the Tribunal was of the view that the cause shown by the assessee constitutes reasonable cause and therefore the penalty u/s 271D is not attracted. In that view of the matter, we do not find that there is any merit in this appeal. Accordingly, it is dismissed. The substantial question of law is answered in favour of the assessee and against the revenue.