The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the loan to the Director due to urgent need of finance in the Company which is duly reflected in the journal entries will not be a violation of section 269SS of the Income Tax Act, 1961 and therefore, penalty under section 271D will not be sustained.
The assessee, Analytical Technologies Ltd is a company engaged in the business of manufacturer of Pharma Instruments. The return filed by the assessee was rejected by the Assessing Officer by holding that while perusing the documents and bank statement, there was cash deposit in the bank account of Rs. 1,00,000/- on 25.11.2016 which is contravention of the provisions of Section 269SS (b) of the Act and therefore a proposal was referred to the Joint CIT for levying penalty u/s. 271D of the Act.
The assessee contended that there is no contravention of Section 269SS of the Act relating to the loan transactions made through banking channel, the same are availed by the Director and passed to the assessee company through ‘journal entry’ wherein penalty u/s. 271D cannot be levied.
A bench of Shri Waseem Ahmed, Accountant Member and Shri T.R. Senthil Kumar, Judicial Member observed that the assessee clearly established that the loan availed by the Director Sivaprasad Patnam is transferred to the assessee company because of its company is urgent need of cash/finance.
“The same were being availed by way of loan from various banks and directly credited into the account of the assessee company and necessary journal entries have been made in the book of the assessee company. Thus, there is no violation of Section 269SS of the Act. Therefore, no question of levying penalty u/s. 271D of the Act relating to the journal entry amounting to Rs. 1,20,54,566/-. Thus, the finding made by the Ld. CIT(A) purely factual in nature, which does not require any interference and the same is hereby upheld,” the Tribunal said.
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