CIT Vs. M/S CHANDRA CEMENT LTD

JUDGEMENT

(1.) The instant two appeals under Section 260-A of the Income Tax Act, 1961 were admitted by this Court vide order dated 8.2.2012 on the following question of law. It relates to the assessment years 1992-93 and 1993-94:-

(2.) Brief facts noticed for disposal of these two connected appeals where penalty under Section 271-D of the Act is an issue, are that the respondent assessee is a Limited Company and was setting up a Mini Cement Plant in Village Paniyala, Tehsil Kotputli, District Jaipur. It was noticed by the Assessing Officer during the course of scrutiny that balance-sheet of the respondent company indicated unsecured loans from the Chairman-cum-Managing Director, namely R.P. Goyal and on further verification of the accounts it transpired that the respondent had received cash through the said Managing Director on various occasions and majority of the cash deposits was exceeding Rs.20,000/- and certain amounts were even to the extent of Rs.4,05,960/-, Rs. 2,50,000/-, Rs. 1,75,000/-, Rs. 2,70,000/-, Rs.3,00,000/- etc. The AO was of the, prima facie, view that the said cash deposits were in violation of provision of Section 269-SS of the Act as the assessee was precluded from accepting any amount over and above Rs.20,000/-.

(3.) Accordingly, a show-cause notice was issued, the assessee respondent, however, submitted reply, inter alia, contending that there was no banking facility in the radius of 25 km. of the site of Village Paniyala, where the Cement Plant was being set up, of which the project cost was of Rs.1.60 crore and that there was a delay in getting sanction from the financial institutions of the term loan and, therefore, the Promoter-Director decided to give funds from his own resources. Further, no money had been accepted by the assessee company in cash and the money had been directly disbursed for the sake of payments towards constructional activities or/and setting up of the Plant and that it was neither a loan nor a deposit. However, the AO did not agree to the contentions raised by the assessee and while imposing penalty, the AO observed that the company as well as Managing Director (R.P. Goyal) who had deposited by cash, were having account in the same bank and when R.P. Goyal can withdraw money from his own account by cash, there was no reason not to transfer the money from his account to that of the company by cheque.