Penalty u/s 271D cannot be levied in respect of cash deposited in bank by director of company for making urgent payments to suppliers of machinery:

AO found that the assessee had received loans in cash from its director which was in contravention of S.269SS and hence, he levied penalty u/s 271D. The said penalty was confirmed by CIT(A). On further appeal, Hon’ble ITAT observed that it was assessee’s first year of operation. Construction of factory building and installation of plant was in progress and the assessee had applied to a bank for loan for the same. However, the assessee was in urgent need of funds for making payments to the suppliers of machinery. To make such payments, director of the assessee deposited funds in assessee’s bank account which in turn were used to make payments to the suppliers within 1 to 5 days of receipt of such funds. Prior to such deposits, assessee had nominal bank balance. It was not the case of Revenue that such transactions were not genuine or that the suppliers of such machinery were not genuine. Transaction of purchase of such machinery was also not doubted. Also AO had not given any finding that the assessee had mala fide intention of disclosing concealed or undisclosed money. In light of the above facts, Hon’ble ITAT held that no penalty can be levied u/s 271D in the given case.

[Makewell Inducto Cast Pvt. Ltd. vs. JCIT – ITA No.2235/Ahd/2013]