P. BASKAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee has come up on appeal as against the order of the Income-tax Appellate Tribunal, Chennai "A", Bench dated January 14, 2004, in I. T. A. No. 787/Mds/1996 raising the following substantial questions of law :

(2.) The assessee is doing the business of purchase and selling of yarn in the name and style of Senthil Andavar Yam Stores. For the assessment year 1994-95, the assessee had cheque discounting loan facilities with the financiers. The Assessing Officer found that 72 items of cash loans on various dates from various parties were in contravention of section 269SS of the Income-tax Act, 1961 (hereinafter called as "the Act"). After going through the objections of the accounts (assessee ?), the assessing authority pointed out that even though 72 items of cash loans were contrary to the provisions, yet there were certain cash loans which were for short accommodation. After eliminating short accommodations and the smaller amounts of loans taken out for business needs, the assessing authority confirmed his proposal in respect of 16 transactions to impose penalty under section 271D of the Income-tax Act in respect of the violation done under the provisions of section 269SS of the Income-tax Act. Aggrieved by the said penalty, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The assessee succeeded before the Commissioner of Income-tax (Appeals), who accepted the case of the assessee/appellant herein that the amounts were taken on requirement of liquidity position and the peculiar nature of trade of the assessee-company and allowed the appeal.

(3.) Aggrieved by the same, the Revenue went on appeal before the Tribunal. The assessee contended that the cheques in favour of the appellant-company was given to the financier, who got them discounted and paid the money in cash to the assessee. For this, the assessee had issued post-dated cheques to the financier assuring repayment. The Tribunal referred to the decision of the apex court in the case of Asst. Director of Inspection (Investigation) v. Kum. A. B. Shanthi, 2002 255 ITR 258 upholding the provisions of section 269SS or section 271D or section 276DD and allowed the Revenue's appeal.