The Income Tax Appellate Tribunal (ITAT), Bangalore deleted penalty as the cash loan under Section 269SS of the Income Tax Act, 1961 given by Executive Directors to meet urgent financial needs of company.
The assessee company is JICE Academy for Excellence Pvt. Ltd. is incorporated. under the Indian Companies Act, 2013. The objective of the company is to provide training and couching facilities to the aspirants such as IAS, IPS etc.
During the scrutiny proceedings, the Assessing Officer noted the cash loan received from the 2 Directors viz. Akhil Anand Biraj of Rs. 14,62,470 and K V Kanaghavi of Rs. 27,00,000. Hence, as per Section 271D of the Act, the Joint Commissioner of Income Tax, initiated penalty proceedings u/s 271D of the Act for contravention of Sec. 269SS of the Act. The penalty proceeding u/s 271D of the Act was subsequently transferred to National Faceless Assessment Centre.
In response the assessee company filed the reply explaining that the company in cash for urgent exigency of the company wherein the above said Directors were holding management affairs of the company. The said directors are responsible for the day-to-day affairs of the company.
The Counsel for the assessee made a submission that Sec. 269SS of the Act is not applicable for a cash transaction between the Directors and Company, as the Directors are not any other person but they are the persons managing the whole affairs of the Company and also the Assessee Company is under the genuine belief that Sec. 269SS of the Act is not applicable for running transaction between the Director and Company.
A Coram Consisting of N V Vasudevan, Vice President and Chandra Poojari, Accountant Member observed that “the transaction between assessee company and its Executive Directors is on account to meet the urgent financial requirements of the company. Accordingly, it cannot be considered and there exist reasonable causes for accepting the money in cash from the Executive Directors of the company who are responsible for day-to-day affairs of the company. In our opinion, in this case, levy of penalty u/s 271D of the is unwarranted.”
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