K. Abbas Haji, Palakkad V. DCIT, Pathanamthitta

CO 100/COCH/2008

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5943 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-01-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 29-08-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: P RAGHUNATHAN ADV
• Keywords: Retrospective amendment; Reasonable cause; Ignorance of law
• Section: 273B; 148; 132

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJ AY ARORA, AM I.T.A. NOS. 818, 707 & 905/COCH/2008 & C.O. NOS. 10 0, 62 & 123/COCH/2008 ASSESSMENT YEARS : 2002-03 , 2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, PALAKKAD. VS. K. ABBAS HAJI, KURUMBATHUR HOUSE, THIRUVAZAMKUNNU, MANNARKKAD, PALAKKAD. [PAN:AGMPA 3831F] (REVENUE -APPELLANT) (ASSESSEE -RESPONDENT) (AND VICE-VERSA) REVENUE BY SHRI T.J.VINCENT, DR ASSESSEE BY SHRI P.RAGHUNATHAN, ADV.-AR O R D E R PER BENCH: THESE ARE A SET OF THREE APPEALS BY THE REVENUE AN D CORRESPONDING CROSS OBJECTIONS (COS) BY THE ASSESSEE, ARISING OUT OF TH E SEPARATE ORDERS BY THE COMMISSIONER OF INCOME-TAX-V, KOCHI (CIT(A) FOR SHORT) DATED 1 7.3.2008, 4.2.2008 AND 29.7.2008 FOR THE THREE CONSECUTIVE YEARS RESPECTIVELY. 2.1 AT THE VERY OUTSET IT WAS OBSERVED THAT THE A SSESSEES CROSS OBJECTIONS ARE DELAYED BY ONE DAY . THE DELAY BEING MARGINAL, THE REASON FOR WHICH AP PEARS REASONABLE, THE SAME WERE ADMITTED, AND THE HEARING PROCEEDED WITH; THE REVENUE NOT RAISING ANY SERIOUS OBJECTION THERETO. FURTHER, ALL THE APPEALS RAISING COMMON ISSUES, WERE HEARD TOGETHER AND ARE BEING DISPOSED OF VIDE A COMMON, CONSOLIDATED O RDER. 2.2 THE FACTS OF THE CASE, IN BRIEF, ARE THAT TH E ASSESSEE, AN INDIVIDUAL, WHO WAS PREVIOUSLY NOT ASSESSED TO INCOME-TAX, WAS ISSUED N OTICES U/S. 148 OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER) ON 7.2.2005, CONSEQUEN T TO HEAVY INVESTMENTS BY HIM SURFACING DURING A SEARCH ACTION U/S. 132 OF THE AC T IN THE CASE OF ONE SHRI PAZHERY ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 2 MOHAMMED SHERIEF, MANNARKKAD. RETURNS FOR THE ASSES SMENT YEARS (A.Y.S) 2001-02 TO 2004-05 WERE CONSEQUENTLY FILED ON 9.11.2004 DECLAR ING INCOME RANGING FROM ` 3+ LAKHS ` 5+ LAKHS, BESIDES AGRICULTURAL INCOME FOR EACH YEAR , VARYING BETWEEN ` 12 LAKHS TO ` 13.50 LAKHS. THE INVESTMENTS AND OTHER OUTGOINGS F OR THESE YEARS WERE, THUS, EXPLAINED PRIMARILY IN TERMS OF THE AGRICULTURAL INCOME. FUR THER, THE ASSESSEE CLAIMED RECEIPT OF CASH LOANS FROM HIS FAMILY MEMBERS AMOUNTING TO ` 70.30 LAKHS IN EXPLANATION OF HIS SAID INVESTMENTS, PER A CASH-FLOW STATEMENT, WHICH WERE STATED TO BE RE-PAID IN THE SUCCEEDING YEARS, THE RELEVANT AMOUNTS BEING AS UNDER:- (AMOUNT IN ` LAKHS) PARTICULARS (F.Y.) 2001-02 2002-03 2003-04 I) ASHRAFF 17. 25 *(10) (3) II) ABDU 13 .00 (10) (3) III) KUNJIPPA 16.7 5 (10) (3) IV) MOHAMMED 12.15 (10) (3) V) MRS. KHADEEJA 11.15 (-) (- ) TOTAL 70.30 (40) (12) [(*) AMOUNT IN BRACKETS IMPLIES OUTGOINGS/REPAYMENT S] AS ALL THE AMOUNTS RECEIVED AS WELL PAID WE RE ADMITTEDLY IN CASH, THE SAME CONTRAVENED THE PROVISIONS OF SECTIONS 269SS AND 26 9T OF THE ACT RESPECTIVELY. ACCORDINGLY, NOTICES UNDER THE SAID SECTIONS WERE I SSUED FOR ALL THE YEARS ON 17.5.2006, AND PENALTIES LEVIED IN TERMS OF THE SAID SECTIONS, I.E., FOR THE LOANS ACCEPTED AND REPAID THUS IN CONTRAVENTION OF THE SAID SECTIONS, VIDE OR DERS DATED 12.3.2007. THE ASSESSEE CARRIED THE MATTER IN APPEAL, WHEREAT THE SAME STOO D DELETED. 2.3 THE REASON FOR THE DELETION OF PENALTY U/S. 271 D, I.E., FOR CONTRAVENTION OF SS. 269SS IN RESPECT OF SHRI MOHAMMED AND MRS. KHADEEJA WAS THAT THEIR STATEMENTS WERE NOT TAKEN, SO THAT THERE WAS LACK OF EVIDENCE FOR T HE PURPOSE OF LEVY OF PENALTY. FOR THE ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 3 OTHER TRANSACTIONS, THE LD. CIT(A) FOUND THE ASSESS EE TO HAVE A REASONABLE CAUSE, HOLDING AS UNDER:- AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT A REASONABLE CAUSE INDEED EXISTED AS PER SECTION 273B . THE APPELLANT BEING AN NRI WAS DEPENDENT ON HIS BROTHERS AND MOTHER WHO ARE AGRICU LTURISTS TO MEET HIS LIABILITIES IN INDIA. THE MONEY WITHDRAWN TO MEET APPELLANTS LIAB ILITY IS MORE IN THE NATURE OF OVER DRAWINGS. THE TRANSACTIONS ARE FOUND TO BE BONAFIDE IN TERMS OF THE OBJECT OF SECTION 269SS AS THE IDENTITY OF THE PAYER AS WELL AS THE SOURCE OF INCOME IS ALSO WELL ESTABLISHED. IN THE CIRCUMSTANCES, I AM OF THE OPIN ION THAT THESE ARE BONAFIDE TRANSACTIONS AND THAT A REASONABLE CAUSE EXISTS. RELIANCE WAS ALSO PLACED BY HER ON THE DEC ISIONS IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) AS WELL AS ADI (INV.) VS. KUM. A.B. SHANTHI (2002) 255 ITR 258 (SC). 2.4 IN RESPECT OF PENALTY U/S. 271E FOR A.Y. 2003-0 4, THE SAME STOOD DELETED, ON THE BASIS THAT THE PROVISION OF S. 269T, THE VIOLATION OF WHICH ATTRACTS THE SAME, STANDS AMENDED TO INCLUDE LOANS WITH EFFECT FROM 1.6.2003 ONLY, PRIOR TO WHICH THE PROVISION EXTENDED ONLY TO DEPOSITS. AS SUCH, THE PROVISION WOULD NOT APPLY TO THE LOANS REPAID DURING THE RELEVANT PREVIOUS YEAR, I.E., FINANCIAL YEAR (F.Y.) 2002-03. AS REGARDS PENALTY UNDER SECTION 271E FOR A.Y. 2004-05, IT WAS HELD BY HER ON THE BASIS OF THE REMAND REPORT DATED 12.6.2008, CALLED FOR BY HIM, THAT THE PAYMEN T HAD IN FACT BEEN EFFECTED BY CHEQUES DRAWN IN FAVOUR OF ONE SHRI C.P.MOHANDAS ON 14.1.2004 FOR ` 12.50 LAKHS DRAWN FROM HIS NRE ACCOUNT NO. 30399 IN FEDERAL BANK LTD., ALLANEL LUR. THERE WAS, IN EFFECT, NO VIOLATION OF S. 269T; THE REPAYMENTS HAVING BEEN MA DE THROUGH THE BANKING CHANNEL. THE PENALTY, THUS, CAME TO BE DELETED UNDER THESE CIRCU MSTANCES. FOR BOTH THE YEARS, THE LD. CIT(A) ALSO OBSERVED THAT THE MATTER NEEDS TO BE VI EWED REASONABLY, IN A HOLISTIC AND PRAGMATIC MANNER, AS ADVERTED TO BY THE HONBLE MAD RAS HIGH COURT IN THE CASE OF CIT VS. LAKSHMI TRUST CO. , 303 ITR 99 (MAD.). THE AMOUNTS WERE RECEIVED AND REPAID NOT TO A THIRD PARTY BUT ONLY TO THE ASSESSEES OWN BROTHERS AND MOTHER, LIVING IN A JOINT FAMILY, AND OWNING AGRICULTURAL LANDS JOINTLY WHICH ARE BEI NG MAINTAINED BY THE BROTHERS STAYING IN INDIA, WHILE THE ASSESSEE WAS AWAY FROM INDIA. THE LOANS WERE GENUINE AND USED FOR ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 4 BONA FIDE PURPOSES. THE PENALTY HAVING BEEN DELETED THUS, TH E REVENUE IS IN APPEAL, WITH THE ASSESSEE FILING CROSS OBJECTIONS. 3. BEFORE US, THE MATTER STOOD VEHEMENTLY ARGUED BY BOTH THE SIDES. THE ASSESSEE DID NOT FILE ANY RETURNS EVEN AS HE HAD INCOME, AS APPA RENT FROM HIS RETURNS, FILED SUBSEQUENTLY, FROM REAL ESTATE BUSINESS. THE TRANS ACTIONS SURFACED ONLY IN EXPLANATION OF THE INVESTMENTS THAT WERE THEMSELVES UNEARTHED DURI NG THE SEARCH OPERATIONS. UNDER THE CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE TRANSA CTIONS WERE BONA FIDE AND GENUINE. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF KASI CONSULTANT CORPORATION VS. DY. CIT , 311 ITR 419 (MAD.) TO HOLD THAT WHERE NO REASONAB LE EXPLANATION FOR THE DEPOSITS STOOD FURNISHED, THE LEVY OF PENALTY WAS VALID. IN FACT, THE PENALTY COULD BE LEVIED FOR THE VIOLATION OF THE IMPUGNED SECTIONS EVEN IN RESPECT OF GENUINE TRANSACTIONS, I.E., IN THE ABSENCE OF A REASONABLE CAUSE, AND FOR WHICH REFERE NCE WAS MADE TO THE DECISION IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT. LTD. VS. CIT 275 ITR 399 (JHARKHAND) AND KANSRAJ & SONS VS. I.T.O. , 92 TTJ (ASR) 931. THE LD. AR, ON THE OTHER HAND, WOULD CON TEND THAT, FIRSTLY, THE PENALTY IN ALL THE CASES WAS TIME BARRED, AS THE ASSESSMENTS WERE FRAM ED AND COMPLETED ON 12.3.2006 WHILE THE PENALTIES STOOD LEVIED VIDE ORDERS DATED 12.3.2 007; THE SIX MONTH PERIOD FROM THE INITIATION OF PENALTY, BEING THE LATTER OF THE TWO TIME LIMITS, EXPIRING ON 30.9.2006. SECONDLY, THE APPARENT VIOLATION OF THE SECTIONS CO ULD NOT BE VIEWED DE HORS THE FACTS AND CIRCUMSTANCES OF THE CASE, AND WHICH YIELDED A REAS ONABLE CAUSE WITHIN THE MEANING OF S. 273B, SAVING PENALTY. REFERENCE WAS MADE BY HIM TO THE DECISION IN THE CASE OF CIT VS. HISSARIA BROTHERS , 291 CTR 244 (RAJ.) IN SUPPORT. AS FOR REPAYMENT, THE PENALTY PROVISION IS INAPPLICABLE FOR AY 2003-04, WHILE FOR A.Y. 2004-05 THE REPAYMENT IS BY WAY OF THE BANKING CHANNEL TO THE SELLER OF THE PRO PERTY, SHRI C.P.MOHANDAS, SO THAT THE SECTION IS NOT APPLICABLE. IN REJOINDER, THE LD. DR WOULD SUBMIT THAT THE PEN ALTY PROCEEDINGS STOOD INITIATED ONLY VIDE NOTICES U/S. 274 R/W SS. 271D/271E OF THE ACT DATED 17.5.2006, SO THAT THE PENALTY ORDERS ARE NOT BARRED BY TIME. ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 5 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 WE SHALL, AT FIRST, ADDRESS THE LEGAL ISSUE S RAISED BY THE ASSESSEE, AS ACCEPTANCE OF ANY OF ITS SUCH CLAIMS MAY LEAD TO THE CONFIRMATIO N OF IMPUGNED APPELLATE ORDER(S) ALLOWING THE APPEAL(S). THE FIRST ISSUE RAISED IS THAT THE PENALTY ORDERS ARE TIME BARRED. EVEN AS THE ASSESSEES CROSS OBJECTIONS CONTAIN NO SPECIFIC GROUND IN THIS RESPECT, WE ADMIT THE SAME UNDER RULE 11 OF THE INCOME TAX TRIB UNAL RULES, 1963, AS THE MATTER AGITATED GOES TO THE ROOT OF THE ISSUE, I.E., THE V ALIDITY OF THE IMPUGNED PENALTY ORDER/S, WITH THE RELEVANT FACTS BEING ON RECORD AND NOT IN DISPUTE. IN FACT, WE OBSERVE THAT THIS ISSUE STOOD ALSO RAISED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY, WHO, HOWEVER, DECIDED THE SAME AGAINST IT IN THE APPEAL FOR A.Y. 2002-03, WHILE DID NOT DEEM IT NECESSARY TO DISCUSS THE MATTER FOR THE OTHER TWO Y EARS; THE ASSESSEES APPEALS BEING ALLOWED BY HER ON MERITS. SO HOWEVER, THE RELEVANT FACTS BEING IDENTICAL FOR ALL THE YEARS, HER DECISION WOULD HOLD AND APPLY FOR THE OTHER YEA RS AS WELL. WITHOUT DOUBT, THE PENALTY PROCEEDINGS FOR ALL THE THREE YEARS STOOD INITIATED VIDE NOTICES OF EVEN DATE, I.E., 17.5.2006, WHILE THE PENALTY ORDER FOR EACH YEAR ST ANDS PASSED ON 12.3.2007. THE TIME LIMIT FOR THE SAME IS COVERED BY SECTION 275 (1)(C) , WHEREBY THE TIME LIMITATION FOR PASSING THE PENALTY ORDER/S WOULD BE 31.3.2007. TH E RELEVANT DATE/S BEING NOT IN DISPUTE, WE FIND NO MERIT IN THE ASSESSEES CLAIM(S). 4.2 THE NEXT LEGAL ISSUE RAISED IS THAT THE AMOUNT( S) BEING PAID TO THE CONCERNED PARTIES BY THE ASSESSEES BROTHERS, WHO WERE MANAGI NG AGRICULTURAL ACTIVITIES AS WELL AS THE ASSESSEES INVESTMENTS (OTHER OUTGOINGS), CANNO T BE CONSIDERED AS LOAN(S). A LOAN, IN ITS PROPER SENSE, DENOTES SOMETHING LENT. THE MONI ES HAVE BEEN PAID IN CASH TO THIRD PARTIES ONLY ON ASSESSEES BEHALF AND, FURTHER, CAR RY A REPAYMENT OBLIGATION. IT IS NOT NECESSARY THAT THE AMOUNT IS RECEIVED DIRECTLY BY T HE LOANEEE/BORROWER FOR IT TO QUALIFY AS A LOAN. IN THE PRESENT CASE, PAYMENTS HAVE BEEN MA DE TO THIRD PARTIES FOR AND ON BEHALF OF THE ASSESSEE AND, AS SUCH, THERE IS A CONSTRUCTIVE RECEIPT BY HIM, WHICH CONCEPT IS WELL- RECOGNIZED IN LAW. FURTHER, REPAYMENT WAS IN CONT EMPLATION AT THE TIME OF RECEIPT, AS EVIDENT FROM THE FACT THAT THE AMOUNT(S) STAND REPA ID IN MOST PART DURING THE FOLLOWING ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 6 TWO YEARS. IN FACT, THE ASSESSEES CASE ITSELF IS THAT THE AMOUNTS STAND ADJUSTED AS AND WHEN REQUIRED, FROM THE FUNDS AVAILABLE, SO THAT TH E REPAYMENT OBLIGATION PERTAINING TO THE RECEIPT IS ESTABLISHED. THE AMOUNTS RECEIVED, THUS, CAN ONLY BE CONSIDERED AS LOANS, AND THE LD. CIT(A) HAS IN OUR VIEW RIGHTLY REJECTED THE ASSESSEES CONTENTION IN THIS REGARD. 4.3 THE ASSESSEES THIRD CONTENTION IS THAT THE ASS ESSEE-RECIPIENT AS WELL AS HIS LOANER BROTHERS BEING AGRICULTURISTS, PROVISIONS OF 269SS AND 269T ARE NOT BE APPLICABLE. TOWARD THIS, THE LD. DR, DURING HEARING, ADVERTING TO THE RELEVANT SECTIONS, SUBMITTED THAT THERE IS NO SUCH EXCEPTION TO S. 269T. FURTHER, TH E SECOND PROVISO TO S. 269SS IS APPLICABLE ONLY WHERE BOTH THE LOANER AND THE LOANE E HAVE AGRICULTURAL INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABLE TO TAX UN DER THE ACT. THE ASSESSEE ADMITTEDLY HAS TAXABLE INCOME FOR THE RELEVANT YEARS, WHILE NO DOCUMENT TO ESTABLISH ABSENCE OF SUCH INCOME IN THE HANDS OF THE LOANERS STANDS BROUGHT O N RECORD BY THE ASSESSEE. AS SUCH, THE ASSESSEE CANNOT CLAIM EXCEPTION TO THE APPLICATION OF SECTION 269SS AS WELL. THE ARGUMENT OF THE LD. DR IS UNEXCEPTIONAL AND ALSO ST OOD NOT REBUTTED BY THE LD. AR. IN FACT, THIS ISSUE ALSO HAS BEEN DISCUSSED BY THE AUT HORITIES BELOW IN THEIR ORDERS. THE ASSESSEES CASE QUA CLAIM OF EXCEPTION VIDE PROVISO TO SECTION 269SS IS, THUS, WITHOUT MERIT, WHILE BEING INAPPLICABLE TO SECTION 269T. 4.4 NEXT, WE MAY ADDRESS THE REVENUES CASE OF T HE AMENDMENT TO S. 271E BY FINANCE ACT, 2003 W.E.F. 1/6/2003 AS BEING CLARIFICATORY AN D, THUS, RETROSPECTIVE IN NATURE. THIS IS IN VIEW OF THE PENALTY LEVIED U/S. 271E FOR A.Y. 20 03-04 HAVING BEEN DELETED BY THE LD. CIT(A) ON THE GROUND THAT THE WORD LOAN STANDS IN SERTED IN S. 271E ONLY W.E.F. 1/6/2003, SO THAT IT WAS NOT APPLICABLE TO REPAYMENTS EFFECTE D DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2003-04, I.E., F.Y. 2002-03. THE REVENUES CA SE, MADE OUT ON THE BASIS OF DECISION IN THE CASE OF ALLIED MOTORS PVT. LTD. VS. CIT (1997) 224 ITR 677 (SC), IS THAT THE SCOPE OF 269T, WHICH PROSCRIBES THE REPAYMENT OF DEPOSITS , WHERE THE AMOUNT OUTSTANDING (INCLUDING INTEREST THEREON) IS IN EXCESS OF THE SP ECIFIED LIMIT, STANDS EXTENDED TO COVER LOANS AS WELL BY FINANCE ACT, 2002 W.E.F. 1/6/2002. SECTION 271E, AS ITS TITLE SUGGESTS, IS ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 7 ONLY TOWARD LEVY OF PENALTY WHERE THE REPAYMENT IS EFFECTED IN CONTRAVENTION OF S. 269T. AS SUCH, THE CONSEQUENTIAL AMENDMENT TO S. 271E BY FINANCE ACT, 2003 IS ONLY CLARIFACTORY, AND IS, ACCORDINGLY, TO BE CONSIDERED AS APPLICABLE W.E.F. 1.6.2002. WE CAN HARDLY AGREE. THE VERY FACT THAT THE LEGIS LATURE DEEMED IT NECESSARY TO ADD THE WORD LOAN IN S. 269T, IMPLIES AN EXTENSIO N OF THE SCOPE OF THE SECTION, EVEN AS CONFIRMED BY THE CBDT PER THE CIRCULAR ISSUED FOR E XPLAINING THE AMENDMENT, I.E., AS BEING OCCASIONED BY THE JUDICIAL PRONOUNCEMENTS TO THE EFFECT THAT THE WORD DEPOSIT THEREIN COULD NOT BE STRETCHED TO INCLUDE LOAN, A ND THAT THE TWO WORDS CONVEYED DIFFERENT MEANINGS. THE SAME IS APPARENT EVEN FROM THE READING OF S. 269SS, WHICH, RIGHT FROM ITS INCEPTION (BY FINANCE ACT, 1984 W.E.F. 1.4 .1984), INCLUDES LOANS BESIDES DEPOSITS. IN OTHER WORDS, BY INSERTING THE WORD LOAN IN S. 269T, THE LEGISLATURE HAS MADE A SUBSTANTIAL AMENDMENT THERE-TO, AND LIKEWISE FOR S. 271E. THE SETTLED POSITION IN LAW IS AGAINST RETROSPECTIVITY, WHICH IS TO BE SPEC IFICALLY PROVIDED FOR BY THE EXPRESS LANGUAGE OF THE STATUTE OR BY NECESSARY INTENDMENT [REFER: CIT V. VARAS INTERNATIONAL (P.) LTD . (2006) 283 ITR 484 (SC)]. WHEN S. 269T WAS AMENDE D BY FINANCE ACT, 2002, CONSEQUENTIAL AMENDMENT TO S. 271E COULD ALSO BE MA DE, WHICH, HOWEVER, WAS NOT NOR WAS IT DONE SUBSEQUENTLY WITH RETROSPECTIVE EFFECT. THE AMENDMENT (TO S. 271E) IS WITHOUT DOUBT CONSEQUENTIAL, I.E., TO BRING PARITY BETWEEN THE CHARGING AND THE PENAL PROVISIONS. BUT THAT WOULD NOT IN ANY MANNER MAKE IT CLARIFICATORY OR OTHERWISE RETROSPECTIVE, SO AS TO BE APPLICABLE FROM AN EARLI ER DATE, BEING A PART OF, AS AFORE-NOTED, SUBSTANTIVE LAW. PENALTY PROCEEDINGS ARE QUASI-CRIMINAL AND, IN ANY CASE, PART OF THE PENAL LAW. ACCORDINGLY, THE PENAL PROVISIONS ARE TO BE STRICTL Y CONSTRUED. EVEN OTHERWISE, IT IS TRITE LAW THAT A PROVISION IMPOSING A LIABILITY CANNOT BE FRAMED FROM A RETROSPECTIVE DATE [REFER: STAR INDIA (P.) LTD. V. CIT (2006) 280 ITR 321 (SC)]. TRUE, THE ACTION FOR WHI CH THE PENALTY IS LEVIED STANDS PROHIBITED FROM AN EAR LIER DATE (1.6.2002). NEVERTHELESS, THE SCOPE OF THE SECTION IMPOSING PENALTY HAVING NOT BE EN CORRESPONDINGLY ENLARGED, THE SAME CANNOT BE A MATTER OF INFERENCE, BUT CAN ONLY BE ON THE BASIS OF THE LANGUAGE OF THE ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 8 PROVISION. THE PRINCIPLE OF HARMONIOUS CONSTRUCTIO N; THE TWO SECTIONS BEING DEFINITELY NOT IN HARMONY (FOR THE PERIOD 1/6/2002 TO 31/5/200 3) CANNOT BE IMPORTED TO IMPOSE A LIABILITY WHICH IS NOT PROVIDED FOR; THE SAME BEING ONLY TO MAKE A PROVISION, WHICH, AS IT STOOD, WORKABLE OR PREVENT AN UNINTENDED HARDSHIP. AS IS WELL-SETTLED, CAUSUS OMISSUS IS NOT TO BE READILY INFERRED, AND IT IS NOT FOR THE C OURTS OF LAW TO SUPPLY THE SAME, AS IT WOULD AMOUNT TO AMENDING THE LAW RATHER THAN INTERP RETING IT [REFER: TARULATA SHYAM & OTHRS. V. CIT (1977) 108 ITR 345 (SC)]. AS SUCH, IN OUR VIEW, T HE LD. CIT(A) HAS RIGHTLY REGARDED THE AMENDMENT TO S. 271E AS BEING APPLICAB LE TO COVER LOANS ONLY W.E.F. 1/6/2003. 4.5 WE MAY NOW PROCEED TO DISCUSS THE ASSESSEES CA SE ON MERITS, WHICH IS PRINCIPALLY ON THE FACTUAL ASPECTS, EVEN AS WE OBSERVE IT TO CO NTAIN TWO LEGAL GROUNDS AS WELL, AND WHICH WE SHALL ALSO ADVERT TO LATER. HOWEVER, AT TH E OUTSET, WE OBSERVE AND, THEREFORE, CONSIDER IT RELEVANT TO CLARIFY, THAT AS PER THE AS SESSMENT ORDER (FOR A.Y. 2002-03), A TOTAL OF ` 71 LAKHS STANDS RECEIVED BY THE ASSESSEE BY WAY OF CASH LOANS FROM HIS BROTHERS AND MOTHER, WHILE THE PENALTY ORDER STATES THE SAME TO BE AT ` 70.30 LACS. THIS IS AS THE FIGURES IN RESPECT OF SHRI MOHAMMED AND SMT. KHADIJA STATED IN THE ASSESSMENT ORDER ARE AT ` 12.50 LAKHS AND ` 11.50 LAKHS RESPECTIVELY, WHILE THE CORRESPONDING F IGURES IN THE PENALTY ORDER ARE AT ` 0.35 LAKHS LESS EACH. THE ACTUAL FIGURE BEING ONLY A MATTER OF RECORD, WE DIRECT THE AO TO, WHILE PASSING THE APPEAL-EFFEC T GIVING ORDER, ADOPT THE FIGURE/S CONSISTENT WITH THE CASH FLOW STATEMENT PREPARED AN D FURNISHED BY THE ASSESSEE TO EXPLAIN HIS INVESTMENTS. FURTHER, WE ALSO OBSERVE THAT THE AO HAS, HOWEVER, NOT ADMITTED THE ENTIRE AMOUNT DISCLOSED AS LOANS, BUT TAKEN ` 9.85 LACS AS THE ASSESSEES NON-AGRICULTURAL (TAXABLE) INCOME (FOR AY 2002-03). HOW COULD HIS INCOME, TAXABLE OR NON-TAXABLE, BE CONSIDERED AS A LOAN FROM THE FAMILY MEMBERS ? AS SUCH, TO THE EXTENT THE CASH INFLOW HAS BEEN TAKEN AND ACCEPTED AS THE ASSESSEES INCOM E, THE SAME, NOTWITHSTANDING THE ASSESSEES CLAIM OF IT BELONGING TO HIS FAMILY MEMB ERS, WHICH STOOD REPAID SUBSEQUENTLY, CAN NEITHER BE TAKEN AS A PART OF THE LOAN/S ACCEPT ED NOR, CONSEQUENTLY, REPAID BY THE ASSESSEE. EVEN AS IT APPEARS THAT THE ASSESSEE HAS NOT DISPUTED THE ASSESSMENT OF A PART OF THE SUMS ASCRIBED AS LOANS TAKEN AS INCOME, THE PRO POSITION AFORE-STATED IS UNEXCEPTIONAL, ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 9 SO THAT IT WOULD HOLD; THE ONLY DIFFERENCE BEING TH E AMOUNT OF INCOME TO BE EXCLUDED WOULD BE AS FINALLY ASSESSED. WE DECIDE ACCORDINGLY . 4.6 THE NEXT THING THAT WE OBSERVE IS THAT BOTH THE PARTIES HAVE RELIED EXTENSIVELY ON CASE LAW, WHICH WE ENUMERATE VIDE NOTE 1 TO THE ORD ER. AFTER A CAREFUL PERUSAL OF THE SAME, WE FIND THAT THE VARYING DECISIONS, I.E., FOR AND AGAINST THE ASSESSEE (OR REVENUE), ARE NOT ON ACCOUNT OF ANY AMBIGUITY IN LAW, BUT ONL Y IN VIEW OF THE FINDING OF A REASONABLE CAUSE, OR INABILITY TO SO PROVE, AS THE CASE MAY BE, IN A PARTICULAR CASE. THE FINDING AS TO THE EXISTENCE OF A REASONABLE CAUSE O R OTHERWISE IS, AND CAN ONLY BE, A MATTER OF FACT, AND WHICH ACCOUNTS FOR THE SAID VARIATION. SO, HOWEVER, IT WOULD BE RELEVANT TO CLARIFY ANOTHER ASPECT OF THE MATTER, TOWARD WHICH THE REVENUE HAS CITED THE DECISION IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT. LTD. VS. CIT (SUPRA) AND KANSRAJ & SONS VS. I.T.O. (SUPRA), I.E., THAT THE PENALTY UNDER THE RELEVANT SECTIONS WOULD HOLD IN SPITE OF THE IMPUGNED TRANSACTIONS BEING GENUINE. WE AGREE. THE PROVISION ONLY PRESCRIBES THE ADMISSIBLE MODES OF RECEIPT AND PAYMENT OF MONEY, T HE ACCEPTANCE AND REPAYMENT OF LOANS, AND NOTHING MORE. AS SUCH, WHERE THE RECEIPT ITSELF IS BEING DOUBTED, IT WOULD ONLY IMPLY CHALLENGING THE GENUINENESS OF THE TRANSACTIO N/S, AND THE APPLICATION OF THE SECTIONS BECOMES DOUBTFUL. IT IS ONLY WHERE THE LOANS ARE A DMITTEDLY RECEIVED OR REPAID THAT THE SECTIONS WOULD APPLY WHERE IN CONTRAVENTION OF THE PRESCRIBED MODE/S THEREOF, SUBJECT TO BEING SAVED BY A REASONABLE CAUSE. THE LANGUAGE OF THE SECTIONS IS CLEAR AND THERE IS NO SCOPE FOR EXCLUDING THE AMOUNTS RECEIVED OR REPAID, AS THE CASE MAY BE, OTHER THAN THROUGH THE BANKING CHANNEL, FROM THE PURVIEW OF TH E PROVISIONS OF SS. 269SS AND 269T CASTING AN OBLIGATION TO DO SO THROUGH ACCOUNT PAYE E CHEQUE OR ACCOUNT PAYEE BANK DRAFT AND, FURTHER, IN THE NAME OF A LOANEE, IN THE CASE OF REPAYMENT OF MONEY. 4.7 THE SECOND CLARIFICATION, I.E., AS REGARDS THE LEGAL ASPECT, THAT WE WISH TO ISSUE IS THAT WHICH FOUND FAVOUR WITH THE LD. CIT(A) IN RESP ECT OF THE ASSESSEES CASE FOR A.Y. 2004-05, I.E., REPAYMENT BEING EFFECTED THROUGH CHE QUE DIRECTLY TO THE THIRD PARTY, I.E., SHRI C.P. MOHAN DAS, THE SELLER OF THE PROPERTY FOR AND ON BEHALF OF HIS BROTHERS. WE DO NOT CONSIDER THE SAME AS VALID. AS, AS AFORE-NOTED, THE REPAYMENT OBLIGATION CAST BY S. ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 10 269T IS PER ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE B ANK DRAFT DRAWN IN THE NAME OF A PERSON WHO HAS GIVEN THE LOAN; I.E., FROM WHOM THE MONIES WERE RECEIVED IN THE FIRST PLACE AND WHOSE LOAN/AMOUNT IS BEING REPAID. AS SUC H, ANY REPAYMENT, EVEN IF THROUGH THE BANKING CHANNEL, OTHER THAN TO THE PARTICULAR I NDIVIDUAL WHOSE LOAN IS BEING RE-PAID, WOULD BE IN VIOLATION OF S. 269T. THE GROUND IS, TH EREFORE, PER SE , NOT MAINTAINABLE, THOUGH COULD BE CONSIDERED IN THE CONTEXT OF THE SA ME CONSTITUTING A `REASONABLE CAUSE. 4.8 THE THIRD ASPECT THAT WE OBSERVE IS THAT THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE, ON A PART OF THE LOANS, ON THE GROUND OF NON-OBTAINING OF STATEMENT/S FROM TWO LOANEES BY THE AO. WE ARE UNABLE TO UNDERSTAND OR A PPRECIATE THE SAME. THE LOAN FIGURES FROM THE DIFFERENT FAMILY MEMBERS, AS WELL AS THE R EPAYMENT THERETO IN THE SUBSEQUENT YEARS, STAND FURNISHED BY THE ASSESSEE HIMSELF PER THE CASH FLOW STATEMENT, IN EXPLANATION OF THE VARIOUS INVESTMENTS AND OTHER OUTGOINGS FOR THE RELEVANT YEARS, AND WHICH ARE NOT IN DISPUTE. THAT IS, THE PRIMARY FACTS OF THE CASE ARE NOT IN DISPUTE AND ARISE ONLY OUT OF THE INFORMATION AS TO HIS AFFAIRS SUBMITTED BY THE ASSESSEE. AS AFORE-MENTIONED, IT IS ONLY WHERE THE IMPUGNED TRANSACTIONS OF ACCEPTANCE AND/O R REPAYMENT OF LOANS/DEPOSITS ARE ADMITTED AND ACCEPTED AS GENUINE, THAT THE PENAL PR OVISIONS OF SS. 269SS AND 269T COULD APPLY. AS SUCH, WHERE IS THE SCOPE FOR INFERRING PR EJUDICE FOR NON-OBTAINING THE STATEMENT BY THE TWO LOANEES, THE ASSESSEES OWN FAMILY MEMBE RS. THE REVENUES CASE IS CONSISTENT WITH THE ASSESSEES OWN STATEMENT AS WELL AS IN AGR EEMENT WITH THE FACTS QUA THE OTHER FAMILY MEMBERS. THE SAME WOULD ASSUME RELEVANCE ON LY IN CASE OF CONTRADICTION IN THE STAND OF THE TWO PARTIES. NO SUCH INCONSISTENCY OR CONTRADICTION HAS BEEN SPECIFIED BY THE LD. CIT(A) NOR SHOWN TO US BY THE ASSESSEE. 4.9 HAVING EXAMINED VARIOUS OBJECTIONS RAISED BY TH E ASSESSEE TO THE LEVY OF PENALTY IN ITS CASE, WE PROCEED TO EXAMINE ITS PRINCIPAL CA SE, I.E., QUA REASONABLE CAUSE, WHICH SAVES PENALTY. THE REASONABLE CAUSE IS NOT DEFINED UNDER THE ACT, THOUGH HAS BEEN SUBJECT TO INTERPRETATION BY THE HIGHER COURTS OF L AW, WHICH ALMOST UNANIMOUSLY CONSIDERED IT TO MEAN A CAUSE WHICH PREVENTS A REA SONABLE MAN OF ORDINARY PRUDENCE ACTING UNDER NORMAL CIRCUMSTANCES, WITHOUT ANY INFL UENCE OR WANT OF BONA FIDES [REFER, ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 11 INTER-ALIA , CWT VS. SHRI JAGDISH PRASAD CHANDRA (1995) 211 ITR 472 (PATNA) (FB)]. THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES SHALL B E REVIEWED TO SEE IF THESE CONSTITUTE A `REASONABLE CAUSE AS JUDICIALLY DEFINED, AND WHICH ALSO LED THE APEX COURT TO UPHOLD THE CONSTITUTIONALITY OF THESE PROVISIONS ON BEING CHAL LENGED BEFORE IT [REFER: ADI (INVESTIGATION) VS. A.B. SHANTHI (SUPRA)]. 4.10.1 THE ASSESSEES CASE IS THAT HE, RESIDING A BROAD, HIS BROTHERS WERE MANAGING THE AGRICULTURAL ACTIVITIES ON JOINTLY OWNED AGRICU LTURAL LANDS, AS WELL AS HIS INVESTMENTS. THEY, MANAGING THE BUSINESS, AS AND WHEN THE INVEST MENTS ON HIS BEHALF EXCEEDED THE ASSESSEES SHARE OF INCOME, THE SHORTFALL WAS MET B Y THE BROTHERS FROM THEIR OWN MEANS. IT WAS UNDER THESE CIRCUMSTANCES THAT THE IMPUGNED LOA NS CAME TO BE TAKEN. LIKEWISE, WHEN THE ASSESSEES SHARE WAS IN EXCESS OF THE CASH REQU IRED FOR HIS PURPOSES, THE SAME WAS UTILISED TO MEET THE CASH REQUIREMENT BY THE BROTHE RS. THE ACCEPTANCE OF LOAN AS WELL AS ITS REPAYMENT WAS AS SUCH TECHNICAL AND /OR THEORET ICAL; HE BEING NOT PHYSICALLY PRESENT. IN ANY CASE, THESE TRANSACTIONS ARE GENUINE AND BONA FIDE . THE `FACT OF THE ASSESSEE RESIDING ABROAD, AS WELL AS OF THE CASH LOAN(S) ARI SING IN VIEW OF THE SHORTFALL IN THE CASH AVAILABLE, AND WHICH IS PRIMARILY FROM AGRICULTURAL OPERATIONS (EVEN AS PART OF IT HAS NOT BEEN ACCEPTED AND, CONSEQUENTLY, CONSIDERED AS THE ASSESSEES OWN INCOME), AND LIKEWISE, REPAID WHEN IN EXCESS, ARE THE REASONS F OR WHICH THE LOAN(S) WERE ACCEPTED AND REPAID, AND NOT OF THE TRANSACTIONS BEING UNDERTAKE N IN CASH , WHEREBY THE ASSESSEE, BEING IGNORANT OF LAW (AS HE CLAIMS), AND TO WHICH WE SHA LL ADVERT TO LATER, MAY STILL HAVE ACCEPTED AND REPAID THE LOAN(S) IN CASH IF HE WAS I N INDIA. PEOPLE RESIDING ABROAD RATHER HABITUALLY TRANSFER FUNDS THROUGH THE BANKING CHANN EL; BANKING BEING UBIQUITOUS, WITH THE CASH TRANSACTIONS BEING RESTRICTED TO MARGINAL TRAN SACTIONS. THE REVENUES PRINCIPAL CASE, THUS, IS WHAT PREVENTED THE ASSESSEE FROM RECEIVING THE MONEY AND REPAYING IT BACK THROUGH THE BANKING CHANNEL ? THE MONIES COULD BE EASILY DEPOSITED IN THE ASSES SEES SAVING BANK (NRO) ACCOUNT IN INDIA, AND WITHDRAWN T HERE-FROM. THE PURCHASE OF THE PROPERTIES BEING THROUGH THE BROTHERS, THEY (OR ANY ONE OF THEM) WOULD HAVE BEEN AUTHORIZED BY THE ASSESSEE FOR THE PURPOSE. AS SUCH, LIKEWISE AUTHORISATION OR POWER OF ATTORNEY COULD BE GIVEN FOR THE OPERATION OF THE BA NK ACCOUNT TO ANYONE OF HIS FAMILY ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 12 MEMBERS WHO WERE MANAGING HIS AFFAIRS . TELEGRAPHIC TRANSACTIONS ARE A COMMON FEATURE OF BANKING AND RECOURSE TO BANKING CHANNEL FOR THE PURPOSE OF TRANSMISSION OF FUNDS WOULD RIGHTLY YIELD THE INFORMATION OR BRING ON OTH ER INSTANT MODE OF TRANSACTION. 4.10.2 AS REGARDS THE ASSESSEE RESIDING ABROAD, WE FIND NO MATERIAL HAS BEEN BROUGHT ON RECORD TO EVIDENCE THE SAME, VIZ. HIS BANK ACCOU NT, HIS ADDRESS ABROAD, EMPLOYMENT, ETC. TRUE, THE REVENUE HAS ITSELF ASSESSED THE ASSE SSEE AS A NON-RESIDENT INDIAN FOR ALL THE YEARS. HOWEVER, WE OBSERVE THAT THE ASSESSEE HAS D ISCLOSED INCOME FROM COMMISSION AND BROKERAGE BETWEEN ` 3.30 LAKHS TO ` 5.70 LAKHS FOR EACH OF THE YEARS. THE SAME ONLY INDICATES THAT HE WAS UNDERTAKING THIS BUSINESS IN INDIA; THE COMMISSION AND BROKERAGE BEING EXPLAINED AS QUA REAL ESTATE BUSINESS, THE SAME REQUIRE RENDERING O F SERVICES, AND ONLY EXTENSIVELY, BEING A PERSONALISED SERVICE, WHI CH FURTHER REQUIRE AN INTIMATE KNOWLEDGE OF THE CURRENT TRENDS, PRICE, I.E., ON TH E FACTUAL INPUTS THAT GO TO THE OPERATION OF THE BUSINESS. THE BUSINESS NOT ONLY SURVIVED BUT HAS GROWN IN TIME. IN FACT, ANY BUSINESS TO SURVIVE, LEAVE ALONE GROW, CANNOT BE WI THOUT CONTINUITY OR AN ASSURANCE AS TO IT. THE SAME IS, THEREFORE, IN COMPLETE CONTRADICTI ON WITH THE ASSESSEES CASE, MAINTAINED THROUGHOUT, OF HIS RESIDING ABROAD, SO THAT HIS AFF AIRS WERE BEING HANDLED BY HIS FAMILY MEMBERS IN INDIA ALSO. THE REPAYMENT OF LOANS FOR THE THIRD YEAR, WHICH IS CLAIMED TO BE VIDE CHEQUE/S, THOUGH DRAWN IN FAVOUR OF A THIRD PA RTY, WOULD ALSO LEAD TO THE INFERENCE OF THE ASSESSEE BEING IN INDIA; THERE BEING NO REFEREN CE TO ANY AUTHORITY OR POWER OF ATTORNEY BEING GIVEN TO ANY OF HIS BROTHERS FOR OPERATION OF HIS BANK ACCOUNT. AND, IF SO, THERE IS NO REASON WHY, SIMILARLY, AMOUNTS/LOANS COULD NOT BE R ECEIVED AS WELL AS REPAID TO THE FAMILY MEMBERS . FURTHER, THIS ALSO GIVES CREDENCE TO THE OBSERVAT ION BY THE AO BEFORE THE LD. CIT(A) OF THE PRIMARY FACTS WITH REGARD TO THE ASSESSEES CLAIM OF RESIDING ABROAD AND THE BROTHERS MANAGING HIS AFFAIRS REQUIRING AN INVE STIGATION THE FACTS. 4.10.3 AS APPARENT, THE ASSESSEE IS NOT MAINTAIN ING ANY BOOKS OF ACCOUNT OR OTHER RECORD IN RESPECT OF HIS ECONOMIC ACTIVITIES, WHICH , APART FROM AGRICULTURAL OPERATIONS, EXTENDED TO REAL ESTATE INVESTMENTS AS WELL AS COMM ERCIAL TRANSACTIONS, WHILE ACTING AS BROKERAGE AGENT. THIS STATE OF AFFAIRS CONTINUES YE AR AFTER YEAR. THE BROKERAGE BUSINESS ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 13 IMPLIES PERSONALIZED SERVICES, AND AN INTIMATE KNOW LEDGE OF THE VARIOUS PROPERTIES AS WELL AS THE LAND PRICES, CURRENT AND PROSPECTIVE, O F THE AREA/S THE BROKER OPERATES IN, SO AS TO BE ABLE TO GUIDE THE CUSTOMERS. THERE IS NOTHING ON RECORD THAT THESE WERE CARRIED OUT BY HIS BROTHERS FOR AND ON HIS BEHALF, AND WHICH IS DEFINITELY NOT POSSIBLE IN RESPECT OF PROPRIETARY BUSINESS INVOLVING PERSONALIZED SKILLS AND EXPERIENCE. NONE OF THESE TRANSACTIONS IS REPORTED TO THE DEPARTMENT BY THE A SSESSEE, EVEN AS INCOME, AS WELL AS INVESTMENTS, RUN INTO SEVERAL LAKHS, AND CONTINUE Y EAR AFTER YEAR. ON THE SAME COMING TO LIGHT ON ACCOUNT OF SEARCH OPERATIONS, THE SAME ARE ATTRIBUTED TO AGRICULTURE INCOME OF THE FAMILY, WHICH IS, AGAIN, A TAXABLE ECONOMIC ACTIVIT Y IN KERALA AND, IN ANY CASE, REQUIRES BEING DISCLOSED FOR RATE PURPOSES UNDER THE ACT AS WELL. THE EXPLANATION GIVES RISE TO SEVERAL QUESTIONS, NONE OF WHICH HAVE BEEN ANSWERED . HOW WERE THE PROPERTIES ON THE ASSESSEES BEHALF PURCHASED ? WHO EXECUTED THE DOCUMENTS ON HIS BEHALF ? THE LD. CIT(A) HAS MENTIONED OF THE FUNDS BEING REQUIRED BY THE AS SESSEE FOR MEETING HIS LIABILITIES. HOWEVER, NO LIABILITIES STOOD SPECIFIED NOR FIND ME NTION IN THE CASH FLOW STATEMENT. IT IS CERTAINLY ONE THING TO HAVE A SHARE OF INCOME IN TH E FAMILYS PROPERTY, WHICH COULD BE EARNED IN A PASSIVE MANNER, AS AN INACTIVE MEMBER T HEREOF, BUT QUITE ANOTHER TO INVEST THE SAID SHARE BY TAKING LOANS FROM THE OTHER MEMBERS, WHICH CAN ONLY BE THROUGH ACTIVE PARTICIPATION, INVOLVE AS IT DOES CAPITAL AND CARRY CONCOMITANT RISK AND REWARD OF OWNERSHIP. WE COULD UNDERSTAND THE REVERSE, I.E., O F THE SHARE OF THE ASSESSEES INCOME, BEING SURPLUS, AS HAVING BEEN RETAINED BY THE FAMIL Y MEMBERS FOR THEIR PURPOSES, SO THAT THERE WAS A LOAN BY THE ASSESSEE TO THEM, WHICH STO OD REPAID, LIKE-WISE, OUT OF THEIR SHARE FOR THE SUBSEQUENT YEARS, AS AND WHEN REQUIRED BY T HE ASSESSEE, SO THAT THERE HAD BEEN ACCEPTANCE AS WELL AS REPAYMENT OF FAMILY LOANS BY THE ASSESSEES FAMILY MEMBERS THERETO. AND IN WHICH CASE THE FACTS WOULD CORRESP OND WITH THAT IN THE CASE OF CIT VS. HISSARIA BROTHERS (SUPRA). THERE ARE SEVERAL GAPS IN THE EXPLANATION , WHICH IS ITSELF COMPLETELY UNSUPPORTED BY ANY MATERIALS. IGNORANCE OF LAW ALSO CANNOT BE DEPLOYED AS AN ALIBI, AND WOULD REQUIRE BEING PROVED, BEING IN SUB STANCE ONLY A PART OF THE GROUND OF EXISTENCE OF A REASONABLE CAUSE, WHILE WE FIND IT T O BE NO MORE THAN A BALD ASSERTION. ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 14 4.10.4 SO, HOWEVER, WHAT REALLY IS OF CONCER N TO US IS THE EXISTENCE OF A REASONABLE CAUSE OR OTHERWISE IN THE ACCEPTANCE AND REPAYMENT OF LOANS IN CASH BY THE ASSESSEE FROM AND TO, AS THE CASE MAY BE, HIS BROTHERS AND MOTHER . IN THIS REGARD, IN OUR CONSIDERED VIEW, TAKING THE ENTIRETY OF THE FACTS AND CIRCUMST ANCES INTO ACCOUNT, INCLUDING THE ASSESSEES CONDUCT; TO THE EXTENT THE ACCEPTANCE OF LOANS BY THE ASSESSEE FROM HIS BROTHERS AND MOTHER IS ATTRIBUTABLE TO THEIR AGRICULTURAL IN COME, AS EVIDENCED FROM THE CASH FLOW STATEMENT/S SUBMITTED AND ACCEPTED, WE THINK THAT T HE SAME, BEING ONLY IN THE NATURE OF LOAN FROM ONE AGRICULTURIST TO ANOTHER, OR ONES WHO ARE SUBSTANTIALLY SO, THE SAME WOULD OPERATE AS A REASONABLE CAUSE AS WELL, AND MERIT CO NSIDERATION AND ACCEPTANCE. WE HAVE ALREADY CLARIFIED THAT THE LOAN AMOUNT FOR THE PURP OSE OF PENALTY, IF ANY, WOULD EXTEND ONLY TO THE AMOUNT ACCEPTED OVER AND ABOVE WHAT STA NDS ASSESSED AS THE ASSESSEES INCOME. HOWEVER, AS ALSO AFORE-NOTED, THE SAID GROU ND OR EXCLUSION BEING NOT APPLICABLE TO THE REPAYMENT OF A LOAN, IT WOULD ONLY SAVE, TO THAT EXTENT, THE PENALTY U/S. 271D FOR ACCEPTANCE IN CONTRAVENTION OF S. 269SS. THE ASSES SEES CASE AS TO EXISTENCE OF REASONABLE CAUSE QUA THE OTHER PART OF THE LOANS ACCEPTED, IF ANY, OR F OR REPAYMENT THEREOF, IS COMPLETELY UNPROVED. WE HAVE ALREADY EX PRESSED OUR CONCURRENCE WITH THE DELETION OF THE PENALTY U/S. 271E FOR AY 2003-04 ON THE BASIS OF THE PROVISION OF S. 269T BEING APPLICABLE TO LOANS ONLY W.E.F. 1/6/2003. THI S IS AS PRIOR TO THIS DATE, I.E., 1/6/2003, THE PROVISION EXTENDED ONLY TO DEPOSITS, WHICH TERM HAS A RESTRICTED APPLICATION, WHILE THE TERM `LOANS WOULD INCLUDE THE ACCOMMODATION LOANS OF THE NATURE STATED IN THE PRESENT CASE AS WELL. THE ENTIRE REPAYMENT OF ` 40 LACS DURING F.Y. 2002-03 WOULD STAND TO BE EXCLUDED. AS REGARDS THE REPAYMENT OF ` 12 LACS DURING THE F.Y. 2003-04, THE SAME IS ADMITTEDLY PER CHEQUES DRAWN IN FAVOUR OF A THIRD P ARTY, AS ALSO CONFIRMED BY THE AO VIDE HIS REMAND REPORT DATED 12/6/2008, WHICH HAVE BEEN ADJUSTED AGAINST THE EARLIER CASH LOANS TO THE ASSESSEE. THE SAME ONLY IMPLIES THAT EITHER THE ASSESSEE WAS IN INDIA OR HAD ISSUED AN AUTHORIZATION IN FAVOUR OF SOMEONE FOR TH E OPERATION OF HIS BANK ACCOUNT. THOUGH, AS AFORE-DISCUSSED, THE SAME DOES LEAD TO A DEFAULT U/S. 269T AND, CONCOMITANTLY, A PENALTY U/S. 271E, WE CONSIDER THAT THE SAME WOUL D MERIT BEING SAVED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS IS FOR THE REAS ON THAT THE SAME COULD BE CONSIDERED AS A SUBSTANTIAL COMPLIANCE OF THE PROVISION OF S. 269 T. THE EXCLUSION OF THE LOANS ACCEPTED ITA.NOS. 818,707 & 905/COCH/2008 & C.O. NOS.100, 62 & 23/COCH./2008 15 TO THE EXTENT THESE ARISE OUT OF AGRICULTURAL INCOM E OF THE PERSON PAYING THE AMOUNT, HAS ALREADY BEEN HELD BY US. THOUGH THE SAID AMOUNT FOR EACH BROTHER IS A MATTER OF RECORD (REFER: ASSESSMENT ORDER FOR AY 2002-03), IN CASE O F CONFLICT, THE AO SHALL DECIDE IT PER A SPEAKING ORDER, ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL AND THE AS SESSEES CROSS OBJECTION FOR AY 2002-03 ARE PARTLY ALLOWED. FOR AY 2003-04 & 2004-05, THE R EVENUES APPEALS ARE DISMISSED, WHILE THE ASSESSEES CROSS OBJECTIONS ARE ALLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 29TH APRIL, 2011 GJ COPY TO: 1. SHRI K.ABBAS HAJI, KURUMBATHUR HOUSE, THIRUVAZAM KUNNU, MANNARKKAD, PALAKKAD. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, PALAKKAD. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. NOTE: 1. CITED BY THE ASSESSEE: - MOTILAL PADAMPAT SUGAR MILLS LTD. V. CIT (1971) 118 ITR 326 (SC) - CIT V. SCHELL INTERNATIONAL , 278 ITR 630 (BOM.) - DIT V. ALL INDIA DEAF & DUMB SOCIETY , 283 ITR 113 (DEL.) CITED BY THE REVENUE: - DAUJ R. ZALTE V. ASST. CIT , 265 ITR 204 (BOM.) - ROOPALI R. DESAI V. ADDL. CIT , 273 ITR (AT) 109 BY ORDER