Ratnagiri Julha Gramsevak Sakahari Pat Sanstha Maryadit, Ratnagiri V. Additional Commissioner of Income-tax,

ITA 1348/PUN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8501 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Bonafide belief; Application of stay; Reasonable cause; Non compliance; Ignorance of law
• Section: 273B; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1348/PN/2014 & SA NO.80/PN/2014 (ASSESSMENT YEAR : 2010-11) RATNAGIRI JILHA GRAMSEVAK SAHAKARI PAT SANSTHA MARYADIT, RELIANCE COMPLEX, BHOGALE, TAL : CHIPLUN, DIST : RATNAGIRI 415 612 .. APPELLANT PAN NO.AAAAR4136R VS. ADDL.CIT, RATNAGIRI CIRCLE, RATNAGIRI .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 07-08-2014 DATE OF PRONOUNCEMENT : 20-08-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20-02-2014 OF THE CIT(A), KOLHAPUR CONFIRMING LEVY OF PENALTY OF RS.10,95,000/- U/S.271D OF THE I.T. ACT. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS COOPERATIVE CREDIT SOCIETY COVERED BY THE PROVISIONS OF SECTION 80P(2) (A)(I) OF THE I.T. ACT. IT FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-11 ON 31-03-2011 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS.14,74,875 /- UNDER CHAPTER VIA OF THE I.T. ACT. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS ACCEP TED DEPOSITS FROM 2 VARIOUS BANKS EXCEEDING AN AMOUNT OF RS.20,000/- OR MORE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE BANK DRAF TS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS/269T. HE, THERE FORE, REFERRED THE MATTER TO THE ADDL.CIT HAVING JURISDICTION OVER THE RANGE. THE ADDL.CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE U /S.271D OF THE I.T. ACT DIRECTING THE ASSESSEE TO REPLY AS TO WHY PENAL TY U/S.271D OF THE I.T. ACT SHOULD NOT BE IMPOSED FOR ACCEPTING DEPOSITS FR OM VARIOUS PERSONS EXCEEDING AN AMOUNT OF RS.20,000/- OR MORE OTHERWIS E THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFTS IN CONTRA VENTION OF THE PROVISIONS OF SECTION 269SS/269T. 2.1 IT WAS EXPLAINED BY THE ASSESSEE THAT AS PER RE GISTRATION CERTIFICATE THE ASSESSEE IS A COOPERATIVE CREDIT SOCIETY WHOSE MAIN BUSINESS IS THAT OF ACCEPTING OF DEPOSITS FROM MEMBERS AND EXTENDING CREDIT FACILITIES TO THEM. HOWEVER, THE CERTIFICATE ITSELF SAYS THAT AC CORDING TO SECTION 12(1) OF MAHARASHTRA STATE COOPERATIVE SOCIETIES ACT, 196 0 AND RULE 10(1) OF THE MAHARASHTRA STATE COOPERATIVE SOCIETIES ACT, 19 61 THE PAT SANSTHA IS CLASSIFIED AS COOPERATIVE BANK AND FURTHER CLASSIFI ED AS OTHER BANK. IT WAS EXPLAINED THAT DUE TO A BONAFIDE BELIEF THAT TH E ASSESSEE IS A PRIMARY COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF ACC EPTING OF DEPOSITS FROM MEMBERS AND EXTENDING CREDIT FACILITIES TO THEM, PA RT-V OF THE BANKING REGULATION ACT, 1949 IS APPLICABLE TO THE CASE OF T HE ASSESSEE. THE BYE LAWS PROHIBIT THE ADMISSION OF ANY OTHER COOPERATIV E SOCIETY AS A MEMBER. FURTHER, THE ASSESSEE IS CARRYING ON BUSINESS IN MO FFUSIL AREA. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE ADDL.CIT THAT AFTER BEING BROUGHT TO ITS NOTICE THAT THEY ARE HIT BY THE PROVISIONS OF SECTI ON 269SS/269T THE 3 ASSESSEE HAS STOPPED ACCEPTING ANY DEPOSIT OR REPAI D ANY SUCH DEPOSIT IN CASH. RELYING ON VARIOUS DECISIONS IT WAS REQUESTE D THAT THE PENALTY PROCEEDINGS INITIATED SHOULD BE DROPPED. 3. HOWEVER, THE ADDL. CIT WAS NOT SATISFIED WITH TH E EXPLANATION GIVEN BY THE ASSESSEE AND LEVIED PENALTY OF RS.10,9 5,000/- U/S.271D OF THE I.T. ACT. IN APPEAL THE LD.CIT(A) UPHELD THE ACTIO N OF THE ADDL.CIT BY OBSERVING AS UNDER : 6. I HAVE GONE THROUGH FACTS OF THE CASE AND SUBMISSIO NS MADE BY THE APPELLANT DURING APPELLATE PROCEEDINGS. APPELLANT'S M AIN CONTENTION IS THAT IT IS A CO-OPERATIVE BANK AND THEREFORE, AS PER PROVISIONS OF SECTION 269SS THE PROVISIONS OF SAID SECTION WILL NOT APPLY. I T HAS CITED THAT AS PER CLAUSE (CCV) OF SECTION 56 OF PART V OF BANKING R EGULATION ACT, 1949 PRIMARY CO-OPERATIVE SANK MEANS A CO-OPERATIVE SOCIE TY OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY, THE PRIMARY OB JECTIVE OR PRINCIPLE BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS. T HE APPELLANT CLAIMS THAT IT IS A CO-OPERATIVE SOCIETY HAVING PRINC IPLE BUSINESS OF ACCEPTING OF DEPOSITS FROM MEMBERS AND EXTENDING CREDI T FACILITY TO THEM WHICH IS A BANKING BUSINESS. HOWEVER, I FIND THAT ACCEP TING OF DEPOSIT AND PROVIDING OF CREDIT FACILITY TO MEMBERS CANNOT B E STATED TO BE A BANKING BUSINESS. THESE ACTIVITIES ARE JUST A PART OF NUMEROUS ACTIVITIES OF A BANK. SECONDLY, FACILITIES OF A BANK ARE OPEN T O GENERAL PUBLIC WHEREAS A CREDIT CO-OPERATIVE SOCIETY ACCEPTS DEPOSIT AND EXTENDS CREDIT FACILITIES TO MEMBERS ONLY. THAT IS WHY WHEREAS COOPERA TIVE SOCIETY HAS BEEN DEFINED UNDER SECTION 2(19) OF THE INCOME TAX A CT, A CO-OPERATIVE BANK HAS BEEN DEFINED IN BANKING REGULATION ACT, 194 9 AND THE TWO DEFINITIONS ARE QUITE DISTINCT. 7. THE APPELLANT HAS TAKEN SECOND CONTENTION THAT IT HAS RECEIVED CASH FROM CERTAIN MEMBERS HOWEVER, ALL THESE ARE GENUI NE TRANSACTIONS AND, THEREFORE, PENALTY UNDER SECTION 27ID SHOULD NOT BE IMPOSED IN THIS REGARD, THE APPELLANT HAS RELIED ON VARIOUS CASE LAWS SUCH AS DECISION OF THE ITAT PUNE BENCH 'B' IN ITA NO. 66/PN/2009, 667/ PN/2009, 669/PN/2009 AND OTHERS. THESE DECISIONS RELATED TO ASSESSME NT YEAR 2003-04 AND CONFIRMING THE VIEW TAKEN BY THE ITAT I N EARLIER CASE THE HONOURABLE JURISDICTIONAL HIGH COURT HELD THAT SINCE AFTER THE POSITION OF LAW IS BROUGHT TO THE NOTICE OF THE ASSESSEE, THE ASSESSEE HAS STARTED TAKING MONEY BY CHEQUE, IN SUCH A SITUATION THE TRIBU NALS CANCELLING PENALTY UNDER SECTIONS 271D AND 271E DOES NOT CALL AN Y INTERFERENCE. THUS, THE ABOVE DECISION WAS GIVEN AS THERE WAS CHANGE I N LAW VERY RECENTLY AND IT WAS UNDERSTANDABLE THAT THE APPELLAN T HAS COMMITTED VIOLATION OF SECTION 269SS JUST DUE TO IGNORANCE. HO WEVER, THE CASE OF THE APPELLANT HERE IS IN RESPECT OF ASSESSMENT YEAR 2010- 11 AND AFTER SEVERAL YEARS THE APPELLANT CANNOT BE GIVEN THE BENEF IT OF IGNORANCE OF LAW. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND TAKE N BY THE APPELLANT CANNOT BE ENTERTAINED AND THE SAME ARE REJECTED AND THE PENALTY IMPOSED BY THE ASSESSING OFFICER IS CONFIRMED. 4 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : WITHOUT PREJUDICE TO EACH OTHER 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY LEVIED UN DER S. 271-D OF THE ACT AS THE ASSESSEE-SOCIETY WAS PREVENTED BY SUFFICIENT CAU SE WITHIN THE MEANING OF S. 273B OF THE ACT. THE PENALTY BE DELET ED. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE FACTS SHOW THAT THE ASSESSEE-SOCIETY HAVING AREA OF OPERATION IN MO FFUSIL AREA WAS NOT AWARE OF THE PROVISIONS OF LAW AND HENCE THE DEF AULT WAS UNAWARELY COMMITTED. IN SUCH CIRCUMSTANCES THE HON'BLE PUNE ITAT IN NUMBER OF APPEALS HAS HELD THAT NO PENALTY WAS LEVIABLE U/S 271-D AND HAS DELETED THE SAME. IN VIEW OF THIS AND CONSIDERING THE PRECEDEN TS THE PENALTY LEVIED BE CANCELLED. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE CIT(A), KOLHAPUR IN 17 OTHER CASES, HAS DELETED THE PENALTY LEVIED U/S.271D OF THE I.T. ACT BY FOLLOWING VARIOUS DECIS IONS. HE FILED A LIST OF THOSE CASES BEFORE HIM AND THE NAME OF THE ASSESSEE S IN WHOSE CASES SUCH PENALTY LEVIED BY THE ADDL.CIT/JOINT CIT HAS BEEN D ELETED BY THE CIT(A). HE FURTHER MADE A STATEMENT AT THE BAR THAT THE REV ENUE HAS NOT CHALLENGED THE ORDER OF THE CIT(A) IN ANY OF THE CASES BY FILI NG APPEAL BEFORE THE TRIBUNAL. REFERRING TO THE DECISION OF THE VISAKHA PATNAM (THIRD MEMBER) BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S. VINMAN FINANCE AND LEASING LTD. REPORTED IN 120 TTJ 462 (VISAKHA) (TM) HE SUBMITTED THAT THE TRIBUNAL, AFTER CONSIDERING THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF ASSISTANT DIRECTOR OF INSPECTO R (INVESTIGATION) VS. KUM. A.B.SHANTI REPORTED IN 255 ITR 258 (SC) HAS DE LETED THE PENALTY LEVIED U/S.271E OF THE I.T. ACT. WHILE DELETING SU CH PENALTY, THE TRIBUNAL HELD THAT THE ASSESSEES PLEA THAT PAYERS BELONGING TO RURAL AREAS HAVING NO 5 BANKING FACILITY AS ALSO IGNORANCE OF LAW CONSTITUT ED REASONABLE CAUSE FOR VIOLATION OF SECTION 269T AND THEREFORE, PENALTY U/ S.271E WAS NOT ATTRACTED. RELYING ON THE FOLLOWING DECISIONS HE S UBMITTED THAT THE TRIBUNAL HAS DELETED THE PENALTY LEVIED U/S.271D OF THE I.T. ACT UNDER IDENTICAL CIRCUMSTANCES : 1. CHIPLUN TALUKA NAGARI PAT SANSTHA LTD. & OTHERS VS . ACIT, RATNAGIRI CIRCLE, RATNAGIRI ITA NOS. 666,667,669,6 71, 710/PN/2009 ORDER DATED 20-06-2009 2. ITO VS. THE SANGLI SALARY EARNERS CO-OP SOCIETY LT D. ITA NO.809/PN/2007 3. VASANTDADA NAGARI SAHAKARI PAT SANSTHA LTD. VS. JC IT, RANGE-1, SANGLI ITA NO.241 AND 242/PN/2008 ORDER DATED 22- 04-2008 4. SHRI HANUMAN NAGARI SAHAKARI PAT SANSTHA LTD. VS. THE ACIT, SANGLI ITA NO.79 & 80/PN/2003 5. BANDHKAM KHATE SEVAKANCHI SAHAKARI PAT SANSTHA MA RYADIT, RATNAGIRI VS. ACIT, RATNAGIRI CIRCLE, RATNAGIRI IT A NOS. 1562 AND 1564/PN/2007 6. SHRI MORE BHARATKUMAR BHAUSAHEB VS. ACIT, SATARA RANGE, SATARA - ITA NO. 1070/PN/2005 7. ACIT VS. VASANT H NARVEKAR, PANVEL AND VASANT H N ARVEKAR VS. ACIT, PANVEL - ITA NO. 1615/PN/05 AND 51/PN/07 8. ITO VS. ANNASAHEB NALE NAGARI SAH. PAT SANSTHA LT D. - ITA NO. 507/PN/2008 ORDER DATED 30/05/2008 9. ITO VS. PHALTAN TRADERS NAGARI SAH. PAT SANSTHA LT D. - ITA NO. 505/ PN/2008 ORDER DATED 30-04-2008 10. ITO VS. SHRIMANT MALOJIRAJE GRAHATARAN SAH. PAT SANSTHA LTD. - ITA NO. 506/PN/2008 11. SOLAPUR MAHANAGAR PALIKA VARISHTA SHRENI SEVAK S AH. PAT SANSTHA VS. JT. CIT, R-L, SOLAPUR - ITA NO. 1511/PN/07 ORDER DATED 22/1/2009 12. ITO, WARD 3 SATARA VS. YASHODEEP GRAMIN BIGAR SH ETI SAHAKARI PAT SANSTHA & ORS. - ITA NO. 473 & 515 TO 518/PN/08 ORDER DATED 23-05-2008 13. THE OMEC ENGINEERS V/S CIT [2007] - 294 ITR 599 14. DY.CIT VS. VIGNESH FLAT HOUSING PROMOTER 105 ITD 3 59 (CHENNAI) 15. MANOJ LALWANI (203) 260 ITR 590 (RAJ-JP) 6 16. BHAGWATI PRASAD BAJORIA - [2003] 488 ITR 263.( GAU.) 17. CIT VS. MAHESHWARI NIRMAN UDYOG [2008] 302 ITR 2 01 (RAJ) 18. CIT VS. BOMBAY CONDUCTORS & ELECTRICALS LTD. [2008 ] 3 DTR (GUJ) 200 19. CIT VS. BALAJI TRADERS [2008] 167 TAXMAN 27 (MA D) 20. CIT VS. KUNDRATHUR FINANCE & CHIT CO. [2006] 28 3 ITR 320 (MAD) 2L. SHRI MORE BHARATKUMAR BHAUSAHEB - ITA/ 1070/ PN/ 2005 ORDER DATED 24/07/2007 22. SHRI VYANKATESH. V MANDKE VS. ADDL. CIT RANGE-5, PUNE - ITA NO. 539/PN/2003 ORDER DATED 24/07/2007 23. SHRI RAMESH D DHONE VS ADDL CIT, RANGE-3, PUNE - ITA/214/PN/2005 24. M/S. D R TEXTILES - ITA/ 1423/PN/04 25. HANUMAN NAGARI SAH. PAT SANSTHA LTD. - ITA NO 79 /PN/2003 AND 80/PN/2003 ORDER DATED 20/05/2005 26. SHIVNERI NAGARI SAH. PAT SANSTHA LTD. - ITA NO. 434 & 435/ PN/2004 ORDER DATED 25/01/2007 27. SHRIMANT MALOJIRAJE GRAHATARAN SAHAKARI PAT SA NSTHA LTD. - ITA NO. 506/PN/2008 ORDER DATED 30/04/2008 28. VISHAL PURANDAR NAGARI SAHAKARI PAT SANSTHA - ITA NO.1290/PN/2008 ORDER DATED 22/12/2008 5.1 REFERRING TO THE ABOVE DECISIONS HE SUBMITTED T HAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE PENALTY LEVIED U/S.271D OF THE I.T. ACT HAS BEEN DELETED BY THE TRIBUNAL AND IN CERTAIN CASES T HE HONBLE HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE REVENUE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ADDL.CIT AND THE CIT(A). HE SUBMITTED THAT SINCE THE ASSESSEE HAS VIOLATED THE PROVISIONS OF S ECTION 269SS/269T, THEREFORE, THE PENALTY LEVIED BY THE ADDL.CIT AND U PHELD BY THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOUL D BE DISMISSED. 7 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. IT IS AN ADMITTED FACT THAT THE ASSESSEE PAT SANSTHA H AS ACCEPTED DEPOSITS EXCEEDING RS.20,000/- IN CASH IN CONTRAVENTION OF T HE PROVISIONS OF SECTION 269SS FOR WHICH PENALTY OF RS.10,95,000/- H AS BEEN LEVIED BY THE ADDL.CIT WHICH HAS BEEN UPHELD BY THE CIT(A). IT I S THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH CONTRAVE NTION OF LAW WAS UNDER BONAFIDE BELIEF AND AFTER THE SAME WAS BROUGHT TO I TS NOTICE THE ASSESSEE PAT SANSTHA HAS STOPPED ACCEPTING ANY DEPOSIT OR RE PAYMENT OF THE SAME BY CASH. WE FIND AN IDENTICAL ISSUE HAD COME UP BE FORE THE TRIBUNAL IN A GROUP OF CASES NAMELY CHIPLUN TALUKA NAGARI PAT SAN STHA LTD. AND OTHERS VIDE ITA NOS. 666 TO 671/PN/2009 AND ITA NO.710/PN/ 2009 ORDER DATED 30-06-2009. WE FIND THE TRIBUNAL CANCELLED THE PEN ALTY SO LEVIED U/S.271D OF THE I.T. ACT BY OBSERVING AS UNDER : 4. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE A CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF VISHAL PURANDAR NAGARI S AHAKARI PAT SANSTHA MARYADIT IN I.T.A. NO. 1290/PN/2008 WHEREIN VIDE IT S ORDER DATED22-12-2008 THIS BENCH OF THE TRIBUNAL HAD UPHEL D THE GRIEVANCE OF THE ASSESSEE BY OBSERVING AND CONCLUDING AS UNDER: 4. THE BASIC THRUST OF ASSESSEE'S SUBMISSIONS BEFORE US IS TH AT THE ASSESSEE WAS, UNTIL POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS, WAS OF THE BONAFIDE OPINION THAT THE PROVISIONS OF SECTION 269 SS DO NOT APPLY ON THE CREDIT COOPER ATIVE SOCIETIES. HE INVITES OUR ATTENTION TO THE FACT THAT EVEN THE TAX AUDITOR, WHO IS A QUALIFIED PROFESSIONAL, DID NOT POINT OUT ANY NON-CO MPLIANCE WITH THE PROVISIONS OF SECTION 269SS EVEN THOUGH THERE IS A SPECIFIC DISCLOSURE REQUIREMENT IN RESPECT OF THE SAME. OUR ATTENTION IS ALSO INVITED TO THE FACT THAT THIS VIOLATION OF SECTION 269 SS TO OK PLACE IN THE CASES OF A VERY LARGE NUMBER OF CREDIT COOPERATIVE SOCIETY WHIC H, BY ITSELF, WOULD SHOW THAT THERE WAS A WIDESPREAD, EVEN IF ERRONEOUS, BE LIEF THAT THE PROVISIONS OF SECTION 269SS DID NOT APPLY TO THE CRED IT COOPERATIVE SOCIETIES. LEARNED COUNSEL THEN CITES CBDT CIRCULAR D ATED 25 TH MARCH 2004 WHICH IS TAKES NOTE OF THE FACT THAT, IN THE CA SES OF CREDIT COOPERATIVE SOCIETIES, ' THE PENALTIES UNDER SECTION 2 71D AND 271E OF THE INCOME TAX ACT ARE BEING IMPOSED IN A LARGE NUM BER OF CASES WITHOUT APPRECIATING THE GENUINE DIFFICULTIES FACED BY THEM IN COMPLYING WITH THESE PROVISIONS' AND ADVISES THE FIELD OFFICERS THA T 'PENALTIES UNDER SECTION 271D AND 271E FOR VIOLATIONS OF THE PROVISIONS OF SECTION 269SS AND 269T, RESPECTIVELY, SHOULD NOT BE INDISCRIMINATELY IMPOSED' AND 'THE PROVISIONS OF SECTION 273B SHOULD BE KEPT IN VIEW BEFORE IMPOSING 8 PENALTIES'. LEARNED COUNSEL SUBMITS THAT THE BUSINESS OF THE CREDIT COOPERATIVE SOCIETY, THOUGH ADMITTEDLY DISTINCT FROM THAT OF A BANK, IS SOMEWHAT AKIN TO THE COOPERATIVE BANKS AS, FOR ALL PR ACTICAL PURPOSES, THE BUSINESS CONSISTS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIVING ADVANCES TO THE MEMBERS. IT WAS THUS QUITE POSSIBLE FOR THESE SOCIETIES TO BONAFIDE BELIEVE THAT CONCESSIONS AVAILABLE TO THE BAN KING INSTITUTIONS WOULD INDEED BE AVAILABLE TO THESE INSTITUTIONS. IT IS FURTHER SUBMITTED THAT THESE CREDIT COOPERATIVE SOCIETIES ARE RUN AND MA NAGED BY ELECTED REPRESENTATIVES WHO ARE NOT NECESSARILY HIGHLY QUALIFIE D OR BUSINESS PEOPLE. EVEN THE PROFESSIONALS WORKING FOR THESE INSTITU TIONS HAVE BONAFIDE BELIEVED THAT THE PROVISIONS OF SECTION 269S S ARE NOT APPLICABLE, AS EVIDENT FROM THE TAX AUDIT REPORTS, AND, THEREFORE , IT IS FUTILE TO EXPECT THAT THE MANAGEMENT OF THESE CREDIT COOPERATIVE SOCIE TIES WILL NECESSARILY BE WELL EQUIPPED WITH LEGAL KNOWLEDGE. I N ANY EVENT, AS POINTED OUT BY THE LEARNED COUNSEL, CHAIRMAN OF THE ASSESSEE SOCIETY HAS GIVEN AN AFFIDAVIT TO THE EFFECT THAT UNTIL IT WAS SO POINTED OUT BY THE ASSESSING OFFICER, HE WAS NOT AWARE ABOUT THE APPLICABIL ITY OF, INTER ALIA, SECTION 269SS ON THE ASSESSEE COOPERATIVE SOCIETY. LEARN ED COUNSEL ALSO INVITES OUR ATTENTION TO SEVERAL DECISIONS PASSED BY THE COORDINATE BENCHES WHICH, RELYING UPON THE HON'BLE SUPREME COU RT DECISION IN THE CASE OF MOTILAL PADMAPAT SUGAR MILLS LTD VS STATE OF UTTAR PRADESH (118 ITR 326), UPHELD THE IGNORANCE OF LAW AS A REASO NABLE CAUSE FOR NON COMPLIANCE WITH THE PROVISIONS OF SECTION 269SS. LEAR NED COUNSEL THUS URGES US TO DELETE THE PENALTY ON THE GROUND THAT THE ASSESSEE WAS NOT AWARE ABOUT THE LEGAL REQUIREMENTS UNDER SECTION 269 SS AND THUS HE WAS OF THE BONAFIDE BELIEF THAT THERE IS NO VIOLATION OF LAW IN ACCEPTING CASH DEPOSITS AND MAKING CASH PAYMENTS. LEARNED COUNSEL SU BMITS THAT THIS BONAFIDE BELIEF, ON THE FACTS OF THE CASE, IS A RE ASONABLE CAUSE FOR THE PURPOSES OF SECTION 273 B. LEARNED COUNSEL HAS ALSO ADDRE SSED US ON SOME OTHER PERIPHERAL LEGAL ISSUES, BUT, FOR THE TIME B EING, WE SEE NO NEED TO DEAL WITH THE SAME. LEARNED DEPARTMENTAL REP RESENTATIVE, ON THE OTHER HAND, OBJECTS TO THIS SUBMISSION MAINLY ON TH E GROUND THAT THERE IS NO MATERIAL ON RECORD TO EVIDENCE THE ASSESSEE 'S CLAIM OF BONAFIDE BELIEF. HE VEHEMENTLY SUBMITS THAT A BLAND STATEMENT ABOUT BONAFIDE BELIEF CANNOT SUFFICE; IT MUST BE BACKED B Y SOME MATERIAL AND EVIDENCE. IT IS ALSO HIS CONTENTION THAT POST DHARMEND RA TEXTILE DECISION BY THE HON'BLE SUPREME COURT, WHICH HOLDS PENALTY UN DER SECTION 271(1)(C) TO BE A CIVIL LIABILITY, THE CONCEPT OF B ONAFIDE BELIEF, WHICH CAN AT BEST BE A REASONABLE CAUSE FOR NON COMPLIANCE, IS RE DUNDANT IN THE CONTEXT OF PENALTIES UNDER THE INCOME TAX ACT, 196 1. BY WAY OF A WRITTEN NOTE, HE FURTHER SUBMITS THAT 'IGNORANCE OF LAW AND ABSENCE OF MEN'S REA IS A DEFENCE ONLY IN RESPECT OF INDIVIDUA LS AND GROUP OF INDIVIDUALS, AND IT HAS NO APPLICATION IN THE CONTEXT OF JURIDICAL PERSONS LIKE BODY INCORPORATE'. IT IS HIS CONTENTION THAT THE ASSESSEE BEFORE US IS A CO-OPERATIVE SOCIETY WHICH IS 'MANAGED BY DULY ELECTE D MEMBERS WITH THE HELP OF PROFESSIONAL EXECUTIVES, AND, THEREFORE, P LEA OF IGNORANCE OF LAW S NOT AVAILABLE AT ALL'. IT IS ALSO CONTENDED THA T 'THE MAXIM IGNORANCE OF LAW IS NO EXCUSE IS SPELT AND SUBSEQUENT JUD ICIAL EXPLANATION MAKING EXCEPTIONS TO THE EXTENT EVERYBODY IS NOT SUPP OSED TO KNOW THE LAW' WERE DEALING WITH CASES OF INDIVIDUALS OR BODY OF INDIVIDUALS'. HE FURTHER ADDS THAT 'REFERENCE TO ANY CASE LAW INDEX W OULD SHOW A NUMBER OF PENALTIES LEVIED UNDER SECTION 271 D AND 271 E HAV E BEEN CONFIRMED FOR NOT SHOWING REASONABLE THAT 'IF IGNORANCE OF LAW IS ACCEPTED, IT WILL BE PUTTING A PREMIUM ON PERSONS KNOWING THE LAW AND REND ER PENAL PROVISIONS OTIOSE AND SHOULD BE AVOIDED. 9 LEARNED DEPARTMENTAL REPRESENTATIVE HAS PAINSTAKINGLY TAKEN US THROUGH A NUMBER OF JUDICIAL PRECEDENTS DEALING WITH THE MATTERS RELATING TO PENALTIES. ON THE STRENGTH OF, INTER ALI A, THESE SUBMISSIONS, HE URGES US TO CONFIRM THE ORDER OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AT CONSIDERAB LE LENGTH. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERE D FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. THE ASSESSEE, AS WE HAVE NOTED EARLIER, IS A CREDIT CO OPERATIVE SOCIETY, - 'PAT SANSTHAN', AS IT IS KNOWN IN THE VERNACULAR LA NGUAGE. THESE PAT SANSTHANS ARE QUITE A COMMON PHENOMENON IN THIS PART OF THE COUNTRY AND THEY RENDER SERVICES, WHICH ARE SOMEWHAT CLOSE TO T HE SERVICES USUALLY RENDERED BY THE COOPERATIVE BANKS, IN THE SENSE THEY ACCEPT DEPOSITS FROM THE MEMBERS AND GIVE LOANS TO THE MEMBER S. THESE INSTITUTIONS USUALLY WORK AT THE LEVEL OF TALUKAS AND M OFFUSIL TOWNS. THERE IS NO DOUBT THAT THESE ARE NOT BANKS AND ARE NOT PERMITTED TO CARRY OUT THE BANKING BUSINESS, BUT IT IS ALSO TRUE THAT THERE IS A FAIR DEGREE OF SIMILARITY IN THE SERVICES RENDERED BY THESE CREDIT COOPERATIVE SOCIETIES AND COOPERATIVE BANKS. IN THESE CIRCUMSTANCES, THE BONAFIDES OF ASSESSEE'S BELIEF FOR BEING ENTITLED TO THE SAME TREATMEN T AS BANKING INSTITUTIONS CANNOT BE REJECTED OUTRIGHT . THIS IS SUREL Y AN INCORRECT VIEW, BUT WHEN AN AUTHORITY IS EXAMINING AN EXPLANATION IN THE CONTEXT OF A PENALTY PROCEEDINGS, ALL THAT THE AUTHORITY HAS TO SE E IS WHETHER OR NOT SUCH AN EXPLANATION STANDS THE PREPONDERANCE OF PROBAB ILITIES, AND WHETHER THERE ARE ANY INCONSISTENCIES OR FALLACIES IN SUCH AN EXPLANATION WHICH DEMONSTRATE THAT THE EXPLANATION IS A MAKE BELI EVE STORY. 7. THE QUESTION WHETHER OR NOT THE LEGAL POSITION ADO PTED BY THE ASSESSEE IS CORRECT OR NOT CANNOT BE THE ONLY BASIS ON WHI CH PENALTY MATTERS ARE DECIDED, OR ELSE THERE IS NO NEED FOR ANY HEARING ONCE THE LAPSE ON THE PART OF THE ASSESSEE IS ESTABLISHED, NOR CAN S ECTION 273 B HAVE ANY RELEVANCE IN SUCH A SITUATION. IT IS IMPORTAN T TO BEAR IN MIND THAT SECTION 273 B COMES INTO PLAY WHEN THE ASSESSEE HAS C OMMITTED A LAPSE BUT THE ASSESSEE CAN DEMONSTRATE THAT THERE WAS REA SONABLE CAUSE FOR HAVING COMMITTED THAT LAPSE. THE FACTS RELATING TO THE FACTORS LEADING TO A LAPSE CAN ONLY BE KNOWN TO THE PERSONS COMMITTING THAT LAPSE ARE BEST IN THE KNOWLEDGE OF PERSON COMMITTING THE LAPSE, AND, THEREFORE, THE ONUS ON HIM TO ELABORATE THE SAME. HOWEVER, IT IS INHE RENTLY IMPOSSIBLE FOR ANYONE TO SUBSTANTIATE, WITH COGENT EVIDENCE AND MATERIAL AS BEING INSISTED BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE, SOMETHING LIKE A BONAFIDE, WHICH IS A STATE OF MIND. ALL THAT CAN BE DONE IN SUCH AS SITUATION IS TO EXPLAIN THE CIRCUMSTANCES AND FACTORS LE ADING TO SUCH A BELIEF, AND, IN OUR CONSIDERED VIEW, 8. THE OTHER ASPECT OF THE MATTER IS WHETHER OR NOT I GNORANCE OF LAW CAN BE AN ACCEPTABLE EXPLANATION, AND WHETHER SUCH AN EX PLANATION CAN BE ACCEPTABLE FOR INDIVIDUALS OR GROUPS OF INDIVIDUALS A LONE - AND NOT JURIDICAL PERSONS. THIS ISSUE IS NOW WELL SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF MOTILAL PADMAPAT SUGAR MILLS (SUP RA) WHEREIN THEIR LORDSHIPS HAVE OBSERVED THAT ' ...IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERYONE IS PRESUMED TO KNOW THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT I S NOT A CORRECT STATEMENT; THERE IS NO SUCH MAXIM KNOWN TO LAW', AND INTERESTINGLY THESE OBSERVATIONS WERE MADE IN THE CONTEXT OF AN ARTI FICIAL JURIDICAL PERSON, I.E. A COMPANY. REFERRING TO THESE OBSERVATION S OF THE HON'BLE SUPREME COURT, A CO ORDINATE BENCH OF THIS TRIBUNAL , IN THE CASE OF SUDERSHAN AUTO AND GENERAL FINANCE VS CIT ( 60 ITD 17 7), OBSERVED AS FOLLOWS: 10 'THE IGNORANCE OF LAW MAY OR MAY NOT CONSTITUTE A VA LID EXCUSE FOR JUSTIFYING WITH A PROVISION OF THE STATUTE. IT WILL D EPEND UPON THE NATURE OF DEFAULT. IF IT IS MERELY TECHNICAL OR VENIAL BREA CH, NO PENALTY WOULD BE IMPOSSIBLE BECAUSE THE LEVY OF PENALTY WOULD NECESSARILY IMPLIES EXISTENCE OF SOME GUILTY INTENTION ON THE PART OF THE DEFAULTER OR THE OFFENDER. IN ORDER TO DETERMINE THE EXISTENCE OR ABSE NCE OF GUILTY INTENTION ON THE PART OF THE ASSESSEE, ONE WILL HAVE TO CONSIDER ALL THE SURROUNDING FACTS AND CIRCUMSTANCES. WHETHER BY COMMITT ING DEFAULT OF NON COMPLIANCE WITH A STATUTORY PROVISION OF LAW, AN ASSESSEE HAS DERIVED BENEFIT, GAIN OR ADVANTAGE, WHETHER BY SUCH A DEFAULT OR NON COMPLIANCE THE ASSESSEE HAS DEFRAUDED THE REVENUE OR CA USED ANY LOSS TO THE REVENUE ? THESE ARE SOME OF THE FACTORS WHICH W ILL HAVE TO SERIOUSLY CONSIDERED BEFORE CONSIDERING THE FACT AS TO W HETHER IGNORANCE OF LAW ON THE PART OF THE ASSESSEE OR HIS CONSULTANT CAN CONSTITUTE VALID EXCUSE OR REASONABLE CAUSE FOR THE PURPOSE OF SECTION 2 73B......' 9. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEWS SO ST ATED BY THE CO ORDINATE BENCH. VIEWED IN THIS PERSPECTIVE AND BEARIN G IN MIND ENTIRETY OF THE CASE, AS ALSO THE FACT THAT THE ASSESSING OFFICER H AS IN SOME OF THE CASES ACCEPTED THE SAME EXPLANATION IN THE OTHER YEARS, WE ARE OF THE CONSIDERED VIEW THAT THE EXPLANATION OF THE ASSESSEE DESE RVES TO BE ACCEPTED. IT WAS A WIDESPREAD, EVEN IF ERRONEOUS, BELI EF THAT THE PROVISIONS OF SECTION 269 SS DO NOT APPLY TO THE CRED IT COOPERATIVE SOCIETIES, AND IT IS ALSO EVIDENT FROM THE FACT THAT EV EN THE CBDT HAS TAKEN NOTICE OF IMPOSITION OF RESULTANT PENALTIES IN L ARGE NUMBER OF CASES, AND ISSUED A CIRCULAR HIGHLIGHTING THAT THESE PEN ALTIES SHOULD NOT BE IMPOSED INDISCRIMINATELY AND WITHOUT CONSIDERING TH E SCHEME OF SECTION 273 B. SUCH A WIDESPREAD BELIEF, BY ITSELF, C AN BE VIEWED AS A REASONABLE CAUSE FOR ASSESSEE'S BONAFIDE BELIEF. 10. HAVING SAID THAT, WE MAY ALSO ADD THAT IT IS NOT A CASE WHERE EVEN AFTER THE ASSESSEE AFTER HAVING COME ' TO KNOW OF THE C ORRECT LEGAL POSITION DUE TO INCOME TAX DEPARTMENT'S ACTION AGAINST HIM CONTINUES TO FOLLOW THE SAME PRACTICE. ONCE THE ASSESSEE COMES TO KNO W AS TO WHAT IS THE CORRECT LEGAL POSITION OR AT LEAST THE REVENUE'S ST AND ON THAT ISSUE, THERE IS NO QUESTION OF HIS HAVING BONAFIDE BUT INCORR ECT BELIEF ABOUT THE LEGAL POSITION. THAT IS A DIFFERENT SITUATION AND WE ARE NOT AT ALL CONCERNED WITH SUCH A SITUATION IN THE PRESENT CASE. , THIS DECISION CANNOT HAVE ANY PRECEDENCE VALUE IN SUCH A SITUATION. 11. WITH THE AFORESAID CAVEAT, WE UPHOLD THE GRIEVAN CE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 5. WE SEE NO REASON TO DEVIATE FROM THE VIEW ALREADY TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF VISHAL PURANDAR NAG ARI SAH. PAT SANSTHA MARYADIT (SUPRA) AND UPHOLD THE GRIEVANCE OF THE ASSESSE ES DIRECTING THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTIES IN RE SPECT OF ALL THE ASSESSEES BEFORE US. THE ASSESSEES GET THE RELIEF ACCORDINGLY. 6. THE VIEW SO TAKEN BY US IN EARLIER CASES HAVE BEEN C ONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATE D 18-3-2009 IN THE CASE OF CIT VS BANDHKAM KHATE SEVAKANCHI SAHAKARI PAT SANSTHA MARYADIT WHEREIN THEIR LORDSHIPS HAVE HELD THAT AFTER POSITION OF LAW IS BROUGHT TO THE NOTICE OF THE ASSESSEE THE ASSESSEE HAS START ED TAKING MONEY BY CHEQUE, IN SUCH A SITUATION TRIBUNALS CANCEL LING PENALTY U/S.271D AND 271E DOES NOT CALL FOR ANY INFERENCE. I N THE PRESENT CASES 11 ASSESSEES HAVE GIVEN AFFIDAVITS TO THAT EFFECT. KEEPING THIS IN VIEW ALSO THE PENALTIES INDEED DESERVE TO BE DELETED. 7.1 SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN VARIOUS OTHER DECISIONS FILED IN THE PAPER BOOK BY THE LD. COUNSE L FOR THE ASSESSEE. WE FIND WHEN IN ONE OF THE CASES THE REVENUE FILED AN APPEAL BEFORE THE HONBLE HIGH COURT, THE HIGH COURT IN THE CASE OF C IT VS. BANDHKAM KHATE SEVAKANCHI SAHAKARI PAT SANSTHA VIDE ITA NO.1 56 OF 2009 ORDER DATED 18-03-2009 HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : PC : IN RESPECT OF THE SIMILAR COOPERATIVE SOCIETY, WE HAVE DISMISSED THE APPEAL AND WE HAVE TAKEN A NOTE THAT AFTER THE POSIT ION OF LAW WAS BROUGHT TO THEIR NOTICE, THEY HAVE STARTED ACCEPTIN G THE MONEY BY CHEQUE. CONSIDERING THE ABOVE, THERE IS NO MERIT IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. 7.2 THE SUBMISSION OF THE ASSESSEE BEFORE THE ADDL. CIT THAT IT HAS STOPPED ACCEPTING OR REPAYING THE DEPOSITS IN CASH AFTER THE LAW WAS BROUGHT TO ITS NOTICE COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. IN VIEW OF THE CONSISTENT DECISION OF THE TRIBUNAL IN VARIOUS CASES WHERE PENALTY LEVIED U/S.271D HAS BEE N DIRECTED TO BE DELETED AND FURTHER CONSIDERING THE FACT THAT THE C IT(A) HIMSELF IN VARIOUS IDENTICAL CASES HAS DELETED THE PENALTY LEVIED U/S. 271D FOR WHICH THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNA L, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FO R LEVY OF PENALTY U/S.271D OF THE I.T. ACT. WE, THEREFORE, SET-ASIDE THE ORDE R OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVIED U/S.271D OF THE I.T .ACT. 12 STAY APPLICATION NO.80/PN/2014 : 8. THE ASSESSEE HAS FILED THE STAY APPLICATION REQU ESTING THE TRIBUNAL TO STAY THE REALISATION OF OUTSTANDING DEMAND OF RS .10,95,000/-. VIDE ORDER OF EVEN DATE, WE HAVE DIRECTED THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED U/S.271D. THEREFORE, THE STAY APPLI CATION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. ACCORDINGLY, THE SAM E IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE STAY APPLICATION FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20-08-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 20 TH AUGUST, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE