The ITO, Ward-5(3), Baroda V. Shree Krishna Sahakari Bank Ltd., Baroda

ITA 1270/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2021 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Ignorance of law; Liquidation
• Section: 273B; 271D; 271E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1270/AHD/2010 ASSESSMENT YEAR:2006-07 DATE OF HEARING:18.2.11 DRAFTED:21.2.11 INCOME TAX OFFICER, WARD-5(3), AAYAKAR BHAVAN BANK LTD. RACE COURSE CIRCLE, BARODA V/S. SHREE KRISHNA SAHAKARI BANK LTD., (TAKEN OVER BY ABHYUDAYA SAHAKARI SAHAKARI BANK LTD.), NR. SHREE KRISHNA BHAVAN, NR. CHAMPANER GATE, BANK ROAD, BARODA PAN NO.AALS0073P (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI G.S. SOURYAVANSHI, SR-DR RESPONDENT BY:- SHRI M.K. PATEL, AR O R D E R PER BENCH:- THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-V, BARODA IN APPEAL NO.CAB/(A)- -V/53/09-10 DATED 15- 02-2010. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD -5(3), BARODA U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED07-08-2008 FOR THE ASSESSMENT Y EAR 2006-07. THE PENALTY UNDER DISPUTE WAS LEVIED BY ASSESSING OFFICER U/S.2 71E OF THE ACT VIDE HIS ORDER DATED 25-09-2009. ITA NO.1270/AHD/2010 A.Y. 2006-07 ITO WD-5(3) BRD V. SHREE KRISHNA SAHAKARI BANK LTD. PAGE 2 2. THE ONLY ISSUE IN THIS APPEAL OR REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASSESSING OFF ICER UNDER SECTION 271E OF THE ACT FOR CONTRAVENTION OF PROVISIONS OF SECTION 269T OF THE ACT. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 & 2 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY OF RS.19,44,31 4/- LEVIED U/S 271E OF THE ACT FOR CONTRAVENTION OF PROVISIONS OF SECTION 269T OF THE ACT. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE BANK IS A VERY OLD BANK WHICH HAS BEEN ENG AGED IN BANKING ACTIVITIES FOR SEVERAL YEARS AND THUS CANNOT CLAIM THE BENEFIT OF IGNORANCE OF LAW FOR BREACH OF PROVISIONS OF SECTIO N 269T. APART FROM BUILDING UP A GENERAL SCENARIO OF LOSS OF FAITH IN THE COOPERATIVE BANKS, THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH ANY REA SONABLE CAUSE FOR THE DEFAULT. IN THE CIRCUMSTANCES, THE PENALTY U/S. 271E WAS RIGHTLY LEVIED IN THE ASSESSEES CASE. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSEE IS A BANK REGISTERED UNDER COOPERATIVE SOCIETIES ACT AND IS E NGAGED IN THE BUSINESS OF BANKING BORROWING AND LENDING OF DEPOSITS. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE CLAIMED THAT IT IS A COOPERATI VE BANK, AND IT HAS REPAID TO VARIOUS DEPOSITORS CASH AMOUNTING TO RS.19,44,34 0/-. ACCORDINGLY, ASSESSING OFFICER NOTED THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269T AND INITIATED PENALTY PROCEEDINGS U/S.271E OF THE ACT. THE AO LEVIED THE PENALTY U/S 271 E OF THE ACT BY GIVING FOLLOWING FI NDINGS IN PARA-3 :- 3.THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN CAREFU LLY CONSIDERED. HOWEVER, IT IS NOTICED THAT THIS YEAR IS NOT THE FI RST INSTANCE WHEREIN THE PROVISIONS OF SECTION 269T HAVE BEEN VIOLATED BY TH E BANK. THE PLEA OF THE ASSESSEE THAT ITS EMPLOYEES WERE NOT AWARE OF T HE PROVISIONS OF THE INCOME TAX ACT CAN AT BEST APPLY TO A SINGLE INSTAN CE BUT NOT WHEN THE VIOLATIONS ARE REPEATED YEAR AFTER YEAR. HENCE IT I S HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269 T AND IS LIABLE FOR IMPOSITION OF PENALTY U/S.271E. THE PENALTY OF RS.19,44,314/- IS HEREBY IMPOSED U/S.271E. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO DELETED PENALTY BY GIVING FOLLOWING FINDINGS IN PARA-4.3 OF HIS APPELLATE ORDER:- ITA NO.1270/AHD/2010 A.Y. 2006-07 ITO WD-5(3) BRD V. SHREE KRISHNA SAHAKARI BANK LTD. PAGE 3 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE SUBMISSIONS OF THE APPELLANT, THE PENALTY ORDER AND THE DECISIO NS CITED IN CONTEXT. IT IS A FACT THAT HERE WAS A SECURITY SCAM AND NUMBER OF CO-OP. BANKS WERE UNDER LIQUIDATION DUE TO THEIR ASSOCIATION IN UNSCRUPULOUS TRANSACTIONS AND THAT THERE WAS GENERAL CHAOS AND L OSS OF FAITH IN THE CO-OP. BANKING BUSINESS. FURTHER, THE NPA OF THE BA NK WAS STEADILY INCREASING AND COUPLED WITH THE FACT THAT THERE WAS A FRAUD COMMITTED BY THE STAFF MEMBERS AND DIRECTOR OF THE BANK DURIN G THE PERIOD UNDER CONSIDERATION, THE SITUATION CREATED A PANIC AMONG THE DEPOSITORS AND A RUN ON THE BANK FOR IMMEDIATE WITHDRAWALS OF THEIR LIFE SAVINGS FROM THE BANK. IT IS THUS QUITE LIKELY THAT UNDER THIS PRESS URE SITUATION, THE DEPOSITS WERE REPAID IN CASH AND THE BREACH OF THE PROVISION OF SECTION 269T THUS APPEARS TO BE BONAFIDE. IN MY HUMBLE OPIN ION THE PREVAILING CIRCUMSTANCES PRESENT A REASONABLE CAUSE FOR THE DE FAULT AND THE PENALTY OF RS.1944314/- IS THUS DIRECTED TO BE DELE TED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE THE TRIBUN AL. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT IN VIEW OF OVERALL ECONOMIC FAILURE OF MANY CO-OPEATIVE BANKS LIKE THE MADHAVPURA MERCANTILE CO-OPEATIVE BANK THE DEPOSITORS INSISTED ON REPAYMENT OF THEIR FIXED DEPOSITS IN CASH. THE ASSESSEE FURTHER STATED THAT ITS DEPOSITORS WERE EI THER LOWER OR MIDDLECLASS FAMILIES AND HAD KEPT THEIR LIFE TOME SAVINGS WITH THEM. THE ASSESSEE ALSO STATED THAT MAJORITY OF THE TERM DEPOSITS HOLDERS W ERE ALSO HAVING SAVING ACCOUNTS WITH THE BANK AND REPAYMENT OF THE FDR AMO UNT ON MATURITY WAS ONLY A TECHNICAL DEFAULT WITHOUT ANY DISHONEST INTE NTION . THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THIS TRIBUNA L OF AMRITSAR BENCH IN THE CASE OF THE FARIDKOT BATHINDA KSHETRIYA GRAMIN BANK V JCTI (2003) 81 TTJ 706 (ASR), WHEREIN THE TRIBUNAL HAS HELD IN PARAA-5 :- 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE DECISIONS CITED AT THE TIME OF HEARING OF THE APPEAL WHERE DULY CONSID ERED BY US. IN THIS CASE, THE JT. CIT. BHATINDA, IMPOSED A PENALTY OF R S.26,31,659 UNDER S. 271E OF THE ACT. IN FURTHER APPEAL, THE CIT(A) DELE TED THE PENALTY OF RS.1,51,622 AND SUSTAINED THE PENALTY OF RS.24,80,0 37. THE ASSESSEE IS A REGIONAL RURAL BANK ESTABLISHED UNDER THE REGI ONAL RURAL BANKS ACT, 1976. SEC. 18 OF THE SAID ACT PROVIDES THAT THE MAI N IMPORTANT OPERATION OF THE BANK IS TO PROVIDE LOANS AND ADVANCES, PARTI CULARLY, TO THE WEAKER ITA NO.1270/AHD/2010 A.Y. 2006-07 ITO WD-5(3) BRD V. SHREE KRISHNA SAHAKARI BANK LTD. PAGE 4 SECTIONS OF THE SOCIETY BY MOBILIZING DEPOSITS FROM THE SAME SECTION. IT IS STATED THAT THE BANK PAYS PER CENT HIGHER RATE OF INTEREST AS COMPARED TO THE OTHER NATIONALIZE BANKS TO ENCOURAG E SAVINGS IN THE WEAKER SECTIONS OF THE SOCIETY. THE OFFICERS AND ST AFF OF THE BANK PRIMARILY DEAL WITH ILLITERATE AGRICULTURISTS, FARM LABOURERS AND OTHER WEAKER SECTION OF THE SOCIETY. IT WAS ALSO BROUGHT TO OUR NOTICE THAT IN 1995-96, AT THE TIME OF BANKING REFORMS, 148 REGION AL RURAL BANKS OUT OF 196 IN INDIA WERE LOSS MAKING AND ON THE VERGE OF C LOSURE. KEEPING IN VIEW THIS FACT, THE GOVERNMENT OF INDIA INSTRUCTED THESE BANKS AND TRADE UNIONS TO GENERATE MORE DEPOSITS AND TO MAKE DIFFER ENT TYPE OF ADVANCES TO SERVICE. IT IS SATED THAT AFTER 1989, T HE PAY SCALES OF THE NATIONALIZED BANKS HAVE BEEN REVISED TWICE BUT NO R EVISION OF THE PAY SCALES HAS BEEN MADE IN THE CASE OF REGIONAL RURAL BANKS. THE ASSESSEE-BANK WAS THE LAST REGIONAL RURAL BANK ESTA BLISHED IN 1986, UNDER THE REGIONAL RURAL BANK ACT AND NO NEW REGION AL RURAL BANK HAS BEEN ESTABLISHED DUE TO THE FACT THAT THE REGIONAL RURAL BANKS WERE LOSS MAKING UNITS. THAT IN CONTEXT TO THE ABOVE STATED F ACTS/CONDITIONS, THE STAFF AND OFFICERS OF THE BANK WORKED HARD TO MOBIL IZE DEPOSITS FROM THE VARIOUS SECTIONS OF THE SOCIETY. FURTHERMORE, IT IS STATED THAT THE STAFF OF THE ASSESSEE-BANK WAS WORKING IN THE AREA WHERE THE IR EXPOSURE TO THE BANKING AND OTHER LAWS, LIKE INCOME-TAX WAS VERY LI MITED. THE ASSESSEE=-BANK HAD NO TRAINING COLLEGE OF ITS OWN A S INCOME OTHER NATIONALIZED BANKS. IN THE ABOVE BACKGROUND, THIS P LEA OF THE ASSESSEE CANNOT BE REJECTED THAT AT THE RELEVANT TIME, THE P AYMENT PASSING OFFICER IN BANK WAS NEW AND HAD NO KNOWLEDGE ABOUT THE INCO ME-TAX LAW, PARTICULARLY, THE PROVISIONS OF S. 269T R/W S. 271E OF THE IT ACT, 1961. HOWEVER, THE DEPARTMENTAL AUTHORITIES HAVE ALSO NOT REJECTED THIS CONTENTION OF THE AS. ON THIS COUNT, IT CAN BE HELD THAT DUE TO IGNORANCE OF LAW, THE CONCERNED OFFICER WAS UNDER THE BONA FI DE BELIEF THAT REPAYMENTS EXCEEDING RS.20,000 CAN BE MADE IN CASH ALSO. IT IS TRUE THAT THE STAFF OF THE ASSESSEE[-BANK WERE WORKING W ITHIN THE ARE OF OPERATION OF THE BANK ONLY AND THEIR EXPOSURE TO TH E BANK AND OTHER LAWS LIKE INCOME-TAX WAS VERY LIMITED AND THIS PLEA OF THE ASSESSEE HAS DEFINITE WEIGHTAGE IN THE PRESENTED CONTEXT. FURTHE RMORE, IT IS AN ADMITTED FACT THAT THE ASSESSEE-[BANK HAD NO TRAINI NG COLLEGE OF ITS OWN AS IN THE CASE OF THE NATIONALISED BANKS. SEC.271E R/W S. 273B OF THE IT ACT, 1961, PROVIDES THAT IF THE ASSESSEE PROVIDES T HAT IT WAS PREVENTED BY REASONABLE CAUSE FROM COMPLYING WITH THE PROVISI ONS OF ABOVE SECTIONS, NO PENALTY CAN BE IMPOSED. THE COURTS OF THE COUNTRY HAVE HELD THAT IGNORANCE OF LAW CAN BE TAKEN AS A VALID PLEA FOR NON- COMPLIANCE OF PROVISIONS OF INCOME-=TAX LAW AND RUL ES. AT THE SAME TIME, IT HAS ALSO BEEN HELD BY THE VARIOUS BENCHES OF THE TRIBUNAL THAT ORDINARILY A PLEA AS TO THE IGNORANCE OF LAW CANNOT SUPPORT THE BREACH OF A STATUTORY PROVISION, BUT THE FACT OF SUCH AN INNO CENT MISTAKE DUE TO IGNORANCE OF THE RELEVANT PROVISIONS OF LAW COUPLED WITH THE FACT THAT THE TRANSACTIONS IN QUESTION WERE GENUINE AND BONA FIDE TRANSACTIONS AND ITA NO.1270/AHD/2010 A.Y. 2006-07 ITO WD-5(3) BRD V. SHREE KRISHNA SAHAKARI BANK LTD. PAGE 5 WERE UNDERTAKEN DURING THE REGULAR COURSE OF THE BU SINESS, WILL CONSTITUTE A REASONABLE CAUSE. AT THIS STAGE, W MAY ALSO TAKE SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD. VS. STATE OF U.P (1979) 118 ITR 325 (SC), WHEREIN IT HAS BEEN HELD THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT E VERYONE IS PRESUMED TO KNOW THE LAW BUT THAT IS NOT A CORRECT STATEMENT. THERE IS NO SUCH MAXIM KNOW TO LAW. IN THE INSTANT CASE, IT WAS THE CONTENTION OF THE ASSESSEE THAT THE STAFF OF THE AS SESSEE-BANK WERE ACTING IN A BOOKS OF ACCOUNT FIDE BELIEF THAT NO OF FENCE IS BEING MADE WHILE MAKING THE PAYMENTS OF VARIOUS DEPOSITS IN CA SH. DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE FILED T HE AFFIDAVITS AND PRODUCED EVIDENCE REGARDING IDENTITY OF THE DEPOSIT ORS. IT IS NOTICED THAT THE DEPARTMENT HAS NOT IMPEACHED THE TRANSACTION AS NON-GENUINE. AT THE SAME TIME, IT IS ALSO NOT THE CASE OF THE DEPAR TMENT THAT THE DEPOSITORS WERE BENAMI. IN THAT VIEW OF THE MATTE, IT CAN BE SAFELY HELD THAT THE BONA FIDE BELIEF COUPLED WITH THE GENUINEN ESS OF THE TRANSACTIONS CONSTITUTE A REASONABLE CAUSE, AS PROV IDED UNDER S. 273B OF THE ACT. 5.2 IN THE CASE OF SHREENATH BUILDERS VS. DY. CIT ( SUPRA) IT HAS BEEN HELD REVEALS THAT THE USE OF THE EXPRESSION SHALL BE LIABLE TO PAY IN SS. 271D AND 271E AND THE PROVISIONS OF S. 273B PRO VIDING THAT NO PENALTY WOULD BE LEVIABLE IF THE PERSON CONCERNED P ROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE CLEARLY INDIC ATES THAT THESE PROVISIONS GIVE A DISCRETION TO THE AUTHORITIES TO IMPOSE THE PENALTY OR NOT TO IMPOSE THE PENALTY. SUCH A DISCRETION HAS TO BE EXERCISED IN A JUST AND FAIR MANNER HAVING REGARD TO THE ENTIRE RE LEVANT FACTS AND MATERIALS EXISTING ON RECORDS. WHILE TAKING SUCH A VIEW, THE TRIBUNAL (AHMEDABAD BENCH) HAD APPLIED THE RATIO OF THE DECI SION OF THE ANDHRA PRADESH HIGH COURT IN THE CASE OF ITO VS. LAKSHMKI ENTERPRISES & ORS. (1990) 185 ITR 595 (AP) 6. WE FIND IN THE INSTANCE CASE THAT THE CONTENTION OF THE ASSESSEE THAT THE STAFF OF ASSESSEE=BANK WAS ACTING ON A BONA FIDE BE LIEF THAT NO OFFENCE HAS BEEN MADE OUT WHILE MAKING THE PAYMENTS OF VARIOUS DEPOSITS IN CASH. DURING THE COURSE OF PROCEEDINGS BEFORE THE LOWER AUTHORIT IES, IT WAS CONSISTENTLY CONTENDED THAT THE IDENTITY OF THE DEPOSITORS ARE N OT IN DOUBT AND THE TRANSACTIONS ARE GENUINE ONE. IT ALSO NOT THE CASE OF THE REVENUE THE DEPOSITORS WERE BENAMI. ACCORDINGLY, IT CAN BE SAFE LY SAID THAT THE BONA FIDE BELIEF COUPLED WITH GENUINENESS OF THE TRANSACTIONS CONSTITUTE A REASONABLE CAUSE AS PROVIDED U/S 273B OF THE ACT FOR REPAYMENT OF FDRS IN CASH BY ITA NO.1270/AHD/2010 A.Y. 2006-07 ITO WD-5(3) BRD V. SHREE KRISHNA SAHAKARI BANK LTD. PAGE 6 BANK. AT THE SAME TIME, WE ARE OF THE VIEW THAT OR DINARY A PLEA AS TO THE IGNORANCE OF LAW CANNOT SUPPORT THE BREACH OF A STA TUTORY PROVISION, BUT THE FACT OF SUCH AN INNOCENT MISTAKE DUE TO IGNORANCE O F THE RELEVANT PROVISIONS OF LAW COUPLED WITH THE FACT THAT THE TRANSACTIONS IN QUESTION WERE GENUINE AND BONA FIDE TRANSACTIONS AND WERE UNDERTAKEN DURING T HE REGULAR COURSE OF THE BUSINESS, WILL CONSTITUTE A REASONABLE CAUSE. IN VI EW OF THE ABOVE DISCUSSION, WE CONFIRM THE ORDER OF CIT(A) DELETING THE PENALTY AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22/02/2011 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 22/02/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD