P.P.S Janarthana Raja, J.:— The present appeal is filed under section 260A of the Income-tax Act, 1961 by the Revenue, in I.T.A Nos. 1187.Mds/1998 dated July 13, 2004, passed by the Income-tax Appellate Tribunal, Madras “B” Bench, raising the following formulated substantial question of law.
“Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty levied under section 271D of the Income-tax Act, even though the Supreme Court held that section 269SS is constitutionally valid in law?”
2. The assessee is running a company in the name of M/s. Idhayam Publications Private Limited for publication of books. The relevant assessment year is 1992-93. In the assessment proceeding, the Assessing Officer noted that the assessee had accepted a cash loan of Rs. 2,94,000 from M/s. Manian Creations, a sister concern, in violation of the provisions of section 269SS of the Act. With the above information, the Deputy Commissioner of Income-tax initiated penal proceedings under section 271D and issued a show-cause notice dated September 19, 1997, to the assessee. In response, the assessee filed a letter dated September 27, 1997, stating that the transaction between the assessee and Mr. S.V.S Manian, Proprietor of Manian Creation, was current account in nature and was not a loan or deposit. The Deputy Commissioner of Income-tax rejected the contention and was of the view that there was a clear violation of the provisions of section 271D and levied a penalty of Rs. 2,94,000 under section 271D of the Act.
3. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that even though there was reasonable cause to hold that there was a violation of the provision under section 269SS which attracted penalty under section 271D, he has referred the Madras High Court judgment in the case of Kumari A.B Shanthi (alias) Vennira Adai Nirmala v. Assistant Director of Inspection, Investigation reported in [1992] 197 ITR 330, which declared that section 269SS is unconstitutional. Aggrieved by that order, the Revenue filed an appeal before the Income-tax Appellate Tribunal and contended that the Supreme Court (Asstt. Director Of Inspection Investigation v. A.B Shanthi, [2002] 255 ITR 258 (SC)) has reversed the decision of the Madras High Court judgment in [1992] 197 ITR 330 and held that section 269SS is constitutionally valid and therefore the penalty levied by the Assessing Officer ought to be considered. The Tribunal, on hearing the arguments, held that, on the merits, the transaction does not fall within the meaning of loan or advance and hence there is no violation of section 269SS.
4. We heard the arguments of learned counsel for the Revenue. We have perused the materials available in record. Admittedly Mr. S.V.S Manian was one of the directors. Therefore the order of the lower authority clearly shows that there was a running current account in the books of account of the assessee in the name of Mr. S.V.S Manian. Mr. S.V.S Manian used to pay the money in the current account and used to withdraw the money also from the current account. The Revenue should establish that what was received by the assessee is a loan or deposit within the meaning of section 269SS. The deposit and the withdrawal of the money from the current account could not be considered as a loan or advance. Further it was also found that the assessee filed a letter dated September 29, 1997, and in that letter he explained that the amount received from Mr. S.V.S Manian had been shown as “unsecured loan from directors” in the balance-sheet. As per the Companies Act, under the Companies (Acceptance of Deposits) Rules, 1975, under rule 2(b)(ix), deposit does not include any amount received from a director or a shareholder of a private limited company. Therefore the transaction between the appellant and the director cum shareholder is not a loan or deposit and it is only a current account in nature and no interest is being charged for the above transaction.
5. In the foregoing conclusions, we are of the view that since the said transaction does not fall within the meaning of loan or advance, there is no violation of section 269SS of the Income-tax Act. We find no error in the order of the Tribunal and the same requires no interference. Hence, no substantial question of law arises for consideration of this court. Accordingly, we dismiss the above tax case. No costs.