R.V. Easwar, J.M. - (1.) THIS appeal by the assessee is directed against the levy of penalty of Rs. 1,00,000 under Section 271D of the Act for violation of the provisions of Section 269SS.
(2.) During the relevant account year, the assessee took three cash loans from M/s Mehta Construction, a sister concern, as under : JUDGEMENT_11457_TLIT0_19990.htm Since taking of cash loans was in violation of the provisions of Section 269SS of the Act, the AO initiated penalty proceedings under Section 271D of the Act. To the show-cause notice issued, the assessee stated that the amount of Rs. 1,00,000 was withdrawn in cash from M/s Mehta Construction and given to the assessee, that by oversight the amount was shown as a loan, that no interest was paid on the said amount and the same was introduced as capital and, therefore, the provisions of Section 269SS were not attracted. The AO rejected the explanation as an afterthought and, therefore, imposed a penalty of Rs. 1,00,000.
(3.) BEFORE the CIT(A), the assessee furnished a different explanation by letter dt. 15th Sept., 1994. After giving the names of the common partners, it was submitted that the amounts were introduced in the assessee-firm by the family members out of withdrawals made for Mehta Construction. It was pointed out further that Mehta Construction was considering a proposal to borrow from banks, that if the partners drew monies from Mehta Construction it would not show a happy position in the balance sheet and, therefore, the funds were first transferred to the assessee-firm and the partners drew the monies from the assessee-firm, instead of Mehta Construction. The details of the withdrawals were also furnished in the letter. It was thereafter explained that the transfer of funds in the manner indicated above was done under the advice of the accountant and under a bona fide belief that such arrangement would not have any adverse repercussions. It was, therefore, submitted that the assessee's explanation being bona fide, no penalty should be levied.;