Gurukrupa Gramin Bigar Sheti Sakahari Pat Sanstha Maryadit, Ratnagiri V. Additional Commissioner of Income-tax,

ITA 1349/PUN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8500 (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. 1349/PN/2014 & S.A. NO.81/PN/2014 (ASSESSMENT YEAR : 2010-11) GURUKRUPA GRAMIN BIGAR SHETI SAHAKARI PAT SANSTHA MARYADIT, A/P. SAWARDE, TAL : CHIPLUN, DIST : RATNAGIRI 415612 PAN NO. AAAAG7335H .. APPELLANT VS. ADDL.CIT, RATNAGIRI RANGE, 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 17-02-2014 OF THE CIT(A), KOLHAPUR CONFIRMING LEVY OF PENALTY OF RS.13,52,000/- 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 DEDU CTION OF RS.12,07,772/- UNDER CHAPTER VIA OF THE I.T. ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE 2 HAS ACCEPTED DEPOSITS FROM VARIOUS BANKS EXCEEDING AN AMOUNT OF RS.20,000/- OR MORE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUES OR ACCOUNT PAYEE BANK DRAFTS IN CONTRAVENTION OF THE P ROVISIONS OF SECTION 269SS/269T. HE, THEREFORE, REFERRED THE MATTER TO THE ADDL.CIT HAVING JURISDICTION OVER THE RANGE. THE ADDL.CIT I SSUED SHOW CAUSE NOTICE TO THE ASSESSEE U/S.271D OF THE I.T. ACT DIR ECTING THE ASSESSEE TO REPLY AS TO WHY PENALTY U/S.271D OF THE I.T. ACT SH OULD NOT BE IMPOSED FOR ACCEPTING DEPOSITS FROM VARIOUS PERSONS EXCEEDI NG AN AMOUNT OF RS.20,000/- OR MORE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFTS IN CONTRAVENTION OF THE P ROVISIONS 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 EXTE NDING CREDIT FACILITIES TO THEM. HOWEVER, THE CERTIFICATE ITSEL F SAYS THAT ACCORDING TO SECTION 12(1) OF MAHARASHTRA STATE COOPERATIVE SOCI ETIES ACT, 1960 AND RULE 10(1) OF THE MAHARASHTRA STATE COOPERATIVE SOC IETIES ACT, 1961 THE PAT SANSTHA IS CLASSIFIED AS COOPERATIVE BANK A ND FURTHER CLASSIFIED AS OTHER BANK. IT WAS EXPLAINED THAT DUE TO A BONA FIDE BELIEF THAT THE ASSESSEE IS A PRIMARY COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF ACCEPTING OF DEPOSITS FROM MEMBERS AND EXTENDING CR EDIT FACILITIES TO THEM, PART-V OF THE BANKING REGULATION ACT, 1949 IS APPLICABLE TO THE CASE OF THE ASSESSEE. THE BYE LAWS PROHIBIT THE AD MISSION OF ANY OTHER COOPERATIVE SOCIETY AS A MEMBER. FURTHER, THE ASSE SSEE IS CARRYING ON BUSINESS IN MOFFUSIL AREA. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE 3 ADDL.CIT THAT AFTER BEING BROUGHT TO ITS NOTICE THA T THEY ARE HIT BY THE PROVISIONS OF SECTION 269SS/269T THE ASSESSEE HAS S TOPPED ACCEPTING ANY DEPOSIT OR REPAID ANY SUCH DEPOSIT IN CASH. RE LYING ON VARIOUS DECISIONS IT WAS REQUESTED THAT THE PENALTY PROCEED INGS 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.13,5 2,000/- U/S.271D OF THE I.T. ACT. IN APPEAL THE LD.CIT(A) UPHELD THE A CTION 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. APPELLAN T'S MAIN CONTENTION IS THAT IT IS A CO-OPERATIVE BANK AND THER EFORE, AS PER PROVISIONS OF SECTION 269SS THE PROVISIONS OF SAID SECTION WILL NOT APPLY. IT HAS CITED THAT AS PER CLAUSE (CCV) OF SECTIO N 56 OF PART V OF BANKING REGULATION ACT, 1949 PRIMARY CO-OPERATIVE S ANK MEANS A CO-OPERATIVE SOCIETY OTHER THAN PRIMARY AGRICULTURA L CREDIT SOCIETY, THE PRIMARY OBJECTIVE OR PRINCIPLE BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS. THE APPELLANT CLAIMS THAT IT IS A C O-OPERATIVE SOCIETY HAVING PRINCIPLE BUSINESS OF ACCEPTING OF DEPO SITS FROM MEMBERS AND EXTENDING CREDIT FACILITY TO THEM WHICH IS A BANKING BUSINESS. HOWEVER, I FIND THAT ACCEPTING OF DEPOSIT AND PROVIDING OF CREDIT FACILITY TO MEMBERS CANNOT BE STATED TO BE A B ANKING BUSINESS. THESE ACTIVITIES ARE JUST A PART OF NUMEROUS ACTIVITIES OF A BANK. SECONDLY, FACILITIES OF A BANK ARE OPEN TO GENERAL P UBLIC WHEREAS A CREDIT CO-OPERATIVE SOCIETY ACCEPTS DEPOSIT AND EXTEN DS CREDIT FACILITIES TO MEMBERS ONLY. THAT IS WHY WHEREAS COOPERA TIVE SOCIETY HAS BEEN DEFINED UNDER SECTION 2(19) OF THE INCOME TA X ACT, A CO-OPERATIVE BANK HAS BEEN DEFINED IN BANKING REGULA TION ACT, 1949 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 GENUINE TRANSACTIONS AND, THEREFORE, PENALTY UNDER SECTION 27I D 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 RE LATED TO ASSESSMENT YEAR 2003-04 AND CONFIRMING THE VIEW TAKEN B Y THE ITAT IN EARLIER CASE THE HONOURABLE JURISDICTIONAL HIGH CO URT 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 SITU ATION THE TRIBUNALS CANCELLING PENALTY UNDER SECTIONS 271D AND 2 71E DOES NOT CALL ANY INTERFERENCE. THUS, THE ABOVE DECISION WAS G IVEN AS THERE WAS CHANGE IN LAW VERY RECENTLY AND IT WAS UNDERSTANDA BLE THAT THE APPELLANT HAS COMMITTED VIOLATION OF SECTION 269SS JU ST DUE TO 4 IGNORANCE. HOWEVER, THE CASE OF THE APPELLANT HERE IS IN RESPECT OF ASSESSMENT YEAR 2010-11 AND AFTER SEVERAL YEARS THE APPEL LANT CANNOT BE GIVEN THE BENEFIT OF IGNORANCE OF LAW. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND TAKEN BY THE APPELLANT CANNOT B E ENTERTAINED AND THE SAME ARE REJECTED AND THE PENALTY IMPOSED BY THE ASSESSING OFFICER IS CONFIRMED. 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 L AW 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 D ELETED. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW 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 DEFA ULT WAS UNAWARELY COMMITTED. IN SUCH CIRCUMSTANCES THE HON'BLE PUNE ITAT IN NUMBER OF APPEALS HAS HELD THAT NO PENALTY WAS LEVI ABLE U/S 271-D AND HAS DELETED THE SAME. IN VIEW OF THIS AND CONSIDER ING THE PRECEDENTS 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 ASSES SEES IN WHOSE CASES SUCH PENALTY LEVIED BY THE ADDL.CIT/JOINT CIT HAS B EEN DELETED BY THE CIT(A). HE FURTHER MADE A STATEMENT AT THE BAR THA T THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE CIT(A) IN ANY OF TH E CASES BY FILING APPEAL BEFORE THE TRIBUNAL. REFERRING TO THE DECIS ION OF THE VISAKHAPATNAM (THIRD MEMBER) BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VINMAN FINANCE AND LEASING LTD. REPORTED I N 120 TTJ 462 (VISAKHA) (TM) HE SUBMITTED THAT THE TRIBUNAL, AFTE R CONSIDERING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ASSISTANT DIRECTOR OF INSPECTOR (INVESTIGATION) VS. KUM. A.B.SHANTI RE PORTED IN 255 ITR 5 258 (SC) HAS DELETED THE PENALTY LEVIED U/S.271E OF THE I.T. ACT. WHILE DELETING SUCH PENALTY, THE TRIBUNAL HELD THAT THE ASSESSEES PLEA THAT PAYERS BELONGING TO RURAL AREAS HAVING NO BANK ING FACILITY AS ALSO IGNORANCE OF LAW CONSTITUTED REASONABLE CAUSE FOR V IOLATION OF SECTION 269T AND THEREFORE, PENALTY U/S.271E WAS NOT ATTRAC TED. RELYING ON THE FOLLOWING DECISIONS HE SUBMITTED THAT THE TRIBU NAL HAS DELETED THE PENALTY LEVIED U/S.271D OF THE I.T. ACT UNDER IDENT ICAL CIRCUMSTANCES : 1. CHIPLUN TALUKA NAGARI PAT SANSTHA LTD. & OTHERS V S. 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. JCI T, 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 NA RVEKAR VS. ACIT, PANVEL - ITA NO. 1615/PN/05 AND 51/PN/07 8. ITO VS. ANNASAHEB NALE NAGARI SAH. PAT SANSTHA LTD . - ITA NO. 507/PN/2008 ORDER DATED 30/05/2008 9. ITO VS. PHALTAN TRADERS NAGARI SAH. PAT SANSTHA L TD. - 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/0 7 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 O RDER DATED 23-05-2008 13. THE OMEC ENGINEERS V/S CIT [2007] - 294 ITR 599 6 14. DY.CIT VS. VIGNESH FLAT HOUSING PROMOTER 105 ITD 3 59 (CHENNAI) 15. MANOJ LALWANI (203) 260 ITR 590 (RAJ-JP) 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 7 9/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 LEVIE D U/S.271D OF THE I.T. ACT HAS BEEN DELETED BY THE TRIBUNAL AND IN CERTAIN CASES THE HONBLE HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE RE VENUE. 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, 7 THEREFORE, THE PENALTY LEVIED BY THE ADDL.CIT AND U PHELD BY THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SH OULD BE DISMISSED. 7. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTIC AL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF RATNAGIRI JIL HA GRAMSEVAK SAHAKARI PAT SANSTHA MARYADIT VIDE ITA NO. 1348/PN/ 2014. VIDE ORDER OF EVEN DATE, WE HAVE DECIDED THE APPEAL AND THE PENALTY SO LEVIED BY THE ADDL.CIT U/S.271D AND UPHELD BY THE CIT(A) H AS BEEN DIRECTED TO BE DELETED. THE RELEVANT OBSERVATION OF THE TRI BUNAL READS AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES. IT IS AN ADMITTED FACT THAT THE ASSESSEE PAT SANST HA HAS ACCEPTED DEPOSITS EXCEEDING RS.20,000/- IN CASH IN CONT RAVENTION OF THE PROVISIONS OF SECTION 269SS FOR WHICH PENALTY OF R S.10,95,000/- HAS BEEN LEVIED BY THE ADDL.CIT WHICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH CONTRAVENTION OF LAW WAS UNDER BONAFIDE BELIEF AND A FTER THE SAME WAS BROUGHT TO ITS NOTICE THE ASSESSEE PAT SANSTHA HAS STO PPED ACCEPTING ANY DEPOSIT OR REPAYMENT OF THE SAME BY CASH . WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN A GROUP OF CASES NAMELY CHIPLUN TALUKA NAGARI PAT SANSTHA LTD. AND OT HERS 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 SAHAKARI PAT SANSTHA MARYADIT IN I.T.A. NO. 1290/PN/2008 WHEREIN VIDE ITS 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 T HAT THE ASSESSEE WAS, UNTIL POINTED OUT BY THE ASSESSING OFFICER I N THE ASSESSMENT PROCEEDINGS, WAS OF THE BONAFIDE OPINION THAT THE PROVISIONS OF SECTION 269 SS DO NOT APPLY ON THE CRE DIT COOPERATIVE SOCIETIES. HE INVITES OUR ATTENTION TO THE FACT THAT EVEN THE TAX AUDITOR, WHO IS A QUALIFIED PROFESSIONAL, DID NOT POIN T OUT ANY NON-COMPLIANCE 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 VI OLATION OF SECTION 269 SS TOOK PLACE IN THE CASES OF A VERY LARGE NUMBER OF CREDIT COOPERATIVE SOCIETY WHICH, BY ITSELF, WOULD SHOW TH AT THERE WAS A WIDESPREAD, EVEN IF ERRONEOUS, BELIEF THAT THE PROV ISIONS OF SECTION 269SS DID NOT APPLY TO THE CREDIT COOPERATIVE SOCIET IES. LEARNED COUNSEL THEN CITES CBDT CIRCULAR DATED 25 TH MARCH 2004 WHICH IS TAKES NOTE OF THE FACT THAT, IN THE CASES OF CREDIT CO OPERATIVE SOCIETIES, ' THE PENALTIES UNDER SECTION 271D AND 271E OF THE IN COME TAX ACT 8 ARE BEING IMPOSED IN A LARGE NUMBER OF CASES WITHOUT A PPRECIATING THE GENUINE DIFFICULTIES FACED BY THEM IN COMPLYING WITH THESE PROVISIONS' AND ADVISES THE FIELD OFFICERS THAT 'PENALTIES UNDER SEC TION 271D AND 271E FOR VIOLATIONS OF THE PROVISIONS OF SECTION 269SS AND 269T, RESPECTIVELY, SHOULD NOT BE INDISCRIMINATELY IMPOSED' A ND 'THE PROVISIONS OF SECTION 273B SHOULD BE KEPT IN VIEW BEF ORE IMPOSING PENALTIES'. LEARNED COUNSEL SUBMITS THAT THE BUSINESS OF T HE 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 CO NCESSIONS AVAILABLE TO THE BANKING INSTITUTIONS WOULD INDEED BE AVAILABLE TO THESE INSTITUTIONS. IT IS FURTHER SUBMITTED THAT THESE CREDIT COOPERATIVE SOCIETIES ARE RUN AND MANAGED BY ELECTED REPRESENTATIVES WHO ARE NOT NECESSARILY HIGHLY QUALIFIED OR BUSINESS PEO PLE. EVEN THE PROFESSIONALS WORKING FOR THESE INSTITUTIONS HAVE BONAFID E BELIEVED THAT THE PROVISIONS OF SECTION 269SS ARE NOT APPLICAB LE, AS EVIDENT FROM THE TAX AUDIT REPORTS, AND, THEREFORE, IT IS FUT ILE TO EXPECT THAT THE MANAGEMENT OF THESE CREDIT COOPERATIVE SOCIETIES WILL NECESSARILY BE WELL EQUIPPED WITH LEGAL KNOWLEDGE. IN 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 APPLICABILITY OF , INTER ALIA, SECTION 269SS ON THE ASSESSEE COOPERATIVE SOCIETY. LEARNED COUNS EL 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. LEARNED COUNSEL THUS URGES US TO DELETE THE PENALTY ON THE GROUND THA T THE ASSESSEE WAS NOT AWARE ABOUT THE LEGAL REQUIREMENTS UNDER SECT ION 269 SS AND THUS HE WAS OF THE BONAFIDE BELIEF THAT THERE IS NO VI OLATION OF LAW IN ACCEPTING CASH DEPOSITS AND MAKING CASH PAYMENTS. LEARNE D COUNSEL SUBMITS THAT THIS BONAFIDE BELIEF, ON THE FACTS OF THE CASE, IS A REASONABLE CAUSE FOR THE PURPOSES OF SECTION 273 B. LEAR NED COUNSEL HAS ALSO ADDRESSED US ON SOME OTHER PERIPHERAL LEGAL ISSUES, BUT, FOR THE TIME BEING, WE SEE NO NEED TO DEAL WITH THE SAME. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, OBJ ECTS TO THIS SUBMISSION MAINLY ON THE GROUND THAT THERE IS NO MATER IAL ON RECORD TO EVIDENCE THE ASSESSEE'S CLAIM OF BONAFIDE BELI EF. HE VEHEMENTLY SUBMITS THAT A BLAND STATEMENT ABOUT BONAFI DE BELIEF CANNOT SUFFICE; IT MUST BE BACKED BY SOME MATERIAL A ND EVIDENCE. IT IS ALSO HIS CONTENTION THAT POST DHARMENDRA TEXTILE DEC ISION BY THE HON'BLE SUPREME COURT, WHICH HOLDS PENALTY UNDER SECT ION 271(1)(C) TO BE A CIVIL LIABILITY, THE CONCEPT OF BONAFIDE BE LIEF, WHICH CAN AT BEST BE A REASONABLE CAUSE FOR NON COMPLIANCE, IS REDUNDAN T IN THE CONTEXT OF PENALTIES UNDER THE INCOME TAX ACT, 1961. 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 INDIVIDUALS A ND GROUP OF INDIVIDUALS, AND IT HAS NO APPLICATION IN THE CONTEXT OF JURIDICAL PERSONS LIKE BODY INCORPORATE'. IT IS HIS CONTENTION TH AT THE ASSESSEE BEFORE US IS A CO-OPERATIVE SOCIETY WHICH IS 'MANAGED B Y DULY ELECTED MEMBERS WITH THE HELP OF PROFESSIONAL EXECUTIVES, AND, THEREFORE, PLEA OF IGNORANCE OF LAW S NOT AVAILABLE AT ALL'. IT IS A LSO CONTENDED THAT 'THE MAXIM IGNORANCE OF LAW IS NO EXCUSE IS SPELT AND SU BSEQUENT JUDICIAL EXPLANATION MAKING EXCEPTIONS TO THE EXTENT EVERYBODY IS NOT SUPPOSED TO KNOW THE LAW' WERE DEALING WITH CASES OF IN DIVIDUALS OR 9 BODY OF INDIVIDUALS'. HE FURTHER ADDS THAT 'REFERENCE TO ANY CASE LAW INDEX WOULD SHOW A NUMBER OF PENALTIES LEVIED UNDER SE CTION 271 D AND 271 E HAVE BEEN CONFIRMED FOR NOT SHOWING REASONA BLE THAT 'IF IGNORANCE OF LAW IS ACCEPTED, IT WILL BE PUTTING A P REMIUM ON PERSONS KNOWING THE LAW AND RENDER PENAL PROVISIONS OTIOSE AN D SHOULD BE AVOIDED. 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 ALIA , THESE SUBMISSIONS, HE URGES US TO CONFIRM THE ORDER OF THE AUTHORITIES BE LOW AND DECLINE TO INTERFERE IN THE MATTER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AT CONSIDERABL E LENGTH. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD AND DULY CON SIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITIO N. 6. THE ASSESSEE, AS WE HAVE NOTED EARLIER, IS A CREDIT CO OPERATIVE SOCIETY, - 'PAT SANSTHAN', AS IT IS KNOWN IN THE VERNAC ULAR LANGUAGE. THESE PAT SANSTHANS ARE QUITE A COMMON PHENOMENON IN TH IS PART OF THE COUNTRY AND THEY RENDER SERVICES, WHICH ARE SOMEWH AT CLOSE TO THE SERVICES USUALLY RENDERED BY THE COOPERATIVE BANKS, IN THE SENSE THEY ACCEPT DEPOSITS FROM THE MEMBERS AND GIVE LOANS TO THE MEMBERS. THESE INSTITUTIONS USUALLY WORK AT THE LEVEL O F TALUKAS AND MOFFUSIL TOWNS. THERE IS NO DOUBT THAT THESE ARE NOT BA NKS 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 RE NDERED BY THESE CREDIT COOPERATIVE SOCIETIES AND COOPERATIVE BANKS. IN THESE CIRCUMSTANCES, THE BONAFIDES OF ASSESSEE'S BELIEF FOR BEING ENTITLED TO THE SAME TREATMENT AS BANKING INSTITUTIONS CANNOT BE R EJECTED OUTRIGHT . THIS IS SURELY AN INCORRECT VIEW, BUT WHEN AN AUTHORITY IS EXAMINING AN EXPLANATION IN THE CONTEXT OF A PENALT Y PROCEEDINGS, ALL THAT THE AUTHORITY HAS TO SEE IS WHETHER OR NOT SUCH AN EXPLANATION STANDS THE PREPONDERANCE OF PROBABILITIES, AND WHETHE R THERE ARE ANY INCONSISTENCIES OR FALLACIES IN SUCH AN EXPLANATION WHIC H DEMONSTRATE THAT THE EXPLANATION IS A MAKE BELIEVE 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 SECTION 273 B HAVE ANY RELEVANCE IN SUCH A SITUATION. IT IS IMPORTA NT 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 RE ASONABLE CAUSE FOR HAVING COMMITTED THAT LAPSE. THE FACTS RELAT ING TO THE FACTORS LEADING TO A LAPSE CAN ONLY BE KNOWN TO THE PERSONS CO MMITTING THAT LAPSE ARE BEST IN THE KNOWLEDGE OF PERSON COMMITTING T HE LAPSE, AND, THEREFORE, THE ONUS ON HIM TO ELABORATE THE SAME. HOW EVER, IT IS INHERENTLY IMPOSSIBLE FOR ANYONE TO SUBSTANTIATE, WITH COGENT EVIDENCE AND MATERIAL AS BEING INSISTED BY THE LEAR NED DEPARTMENTAL REPRESENTATIVE, SOMETHING LIKE A BONAFID E, WHICH IS A STATE OF MIND. ALL THAT CAN BE DONE IN SUCH AS SITUATI ON IS TO EXPLAIN THE CIRCUMSTANCES AND FACTORS LEADING 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 A N EXPLANATION CAN BE ACCEPTABLE FOR INDIVIDUALS OR GROUPS OF INDIVI DUALS ALONE - AND NOT JURIDICAL PERSONS. THIS ISSUE IS NOW WELL SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF MOTILAL PADMAPAT SUGAR MILLS (SUPRA) WHEREIN THEIR LORDSHIPS HAVE OBSERVED THAT ' ...IT MU ST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERYONE IS PRESUMED TO KNOW THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRE SUMED TO KNOW 10 THE LAW, BUT THAT IS NOT A CORRECT STATEMENT; THERE I S NO SUCH MAXIM KNOWN TO LAW', AND INTERESTINGLY THESE OBSERVATIONS WER E MADE IN THE CONTEXT OF AN ARTIFICIAL JURIDICAL PERSON, I.E. A CO MPANY. REFERRING TO THESE OBSERVATIONS OF THE HON'BLE SUPREME COURT, A CO ORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF SUDERSHAN AUTO AND GE NERAL FINANCE VS CIT ( 60 ITD 177), OBSERVED AS FOLLOWS: 'THE IGNORANCE OF LAW MAY OR MAY NOT CONSTITUTE A VA LID EXCUSE FOR JUSTIFYING WITH A PROVISION OF THE STATUTE. IT WILL DE PEND UPON THE NATURE OF DEFAULT. IF IT IS MERELY TECHNICAL OR VENI AL BREACH, 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 ABSENCE OF GUILTY INTENTION ON THE PART OF THE ASSESSEE, ONE WILL HAVE TO CONSIDER ALL THE SURROUNDING FACTS AND CIRCUMSTANCES. WHETHER BY COMMITTING DEFAULT OF NON COMPLIANCE WITH A STATUTORY PROVISION OF LAW, AN ASSESSEE HAS DERIVED BENEFIT, GAIN OR ADVANTAGE, WHETHE R BY SUCH A DEFAULT OR NON COMPLIANCE THE ASSESSEE HAS DEFRAUDED T HE REVENUE OR CAUSED ANY LOSS TO THE REVENUE ? THESE ARE SOME OF THE F ACTORS WHICH WILL HAVE TO SERIOUSLY CONSIDERED BEFORE CONSIDERING T HE FACT AS TO WHETHER IGNORANCE OF LAW ON THE PART OF THE ASSESSEE OR HIS CONSULTANT CAN CONSTITUTE VALID EXCUSE OR REASONABLE CAUSE FOR THE PURPOSE OF SECTION 273B......' 9. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEWS SO STA TED BY THE CO ORDINATE BENCH. VIEWED IN THIS PERSPECTIVE AND BEARI NG IN MIND ENTIRETY OF THE CASE, AS ALSO THE FACT THAT THE ASSESSING OFFICER HAS IN SOME OF THE CASES ACCEPTED THE SAME EXPLANATION IN THE OTHER YEARS, WE ARE OF THE CONSIDERED VIEW THAT THE EXPLANATION O F THE ASSESSEE DESERVES TO BE ACCEPTED. IT WAS A WIDESPREAD, EVEN IF ERRONEOUS, BELIEF THAT THE PROVISIONS OF SECTION 269 SS DO NOT A PPLY TO THE CREDIT COOPERATIVE SOCIETIES, AND IT IS ALSO EVIDENT FROM THE FACT THAT EVEN THE CBDT HAS TAKEN NOTICE OF IMPOSITION OF RESULTANT PENAL TIES IN LARGE NUMBER OF CASES, AND ISSUED A CIRCULAR HIGHLIGHTING THA T THESE PENALTIES SHOULD NOT BE IMPOSED INDISCRIMINATELY AND WI THOUT CONSIDERING THE SCHEME OF SECTION 273 B. SUCH A WIDESP READ BELIEF, BY ITSELF, CAN 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 K NOW AS TO WHAT IS THE CORRECT LEGAL POSITION OR AT LEAST THE REV ENUE'S STAND ON THAT ISSUE, THERE IS NO QUESTION OF HIS HAVING BONAFIDE BUT INCORRECT BELIEF ABOUT THE LEGAL POSITION. THAT IS A DIFFERENT SITUATION AND WE ARE NOT AT ALL CONCERNED WITH SUCH A SITUATION IN THE PRE SENT CASE. , THIS DECISION CANNOT HAVE ANY PRECEDENCE VALUE IN SUCH A SI TUATION. 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 NAGA RI SAH. PAT SANSTHA MARYADIT (SUPRA) AND UPHOLD THE GRIEVANCE OF THE ASSESSEES DIRECTING THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTIES IN 11 RESPECT OF ALL THE ASSESSEES BEFORE US. THE ASSESSEES GET THE R ELIEF 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 SAHAKAR I PATSANSTHA MARYADIT WHEREIN THEIR LORDSHIPS HAVE HELD THAT AFTER POSITION OF LAW IS BROUGHT TO THE NOTICE OF THE ASSESSEE THE ASSESSEE HAS STA RTED 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 ASSESSEES HAVE GIVEN AFFIDAVITS TO THAT EFFECT. KEEP ING THIS IN VIEW ALSO THE PENALTIES INDEED DESERVE TO BE DELETED. 7.1 SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN V ARIOUS OTHER DECISIONS FILED IN THE PAPER BOOK BY THE LD. COUNSEL F OR 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 O F CIT VS. BANDHKAM KHATE SEVAKANCHI SAHAKARI PAT SANSTHA VIDE ITA NO.156 OF 2009 ORDER DATED 18-03-2009 HAS DISMISSED THE APPEAL FI LED 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 ACCEPTING 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 THA T IT HAS STOPPED ACCEPTING OR REPAYING THE DEPOSITS IN CASH AFTE R THE LAW WAS BROUGHT TO ITS NOTICE COULD NOT BE CONTROVERTED BY T HE LD. DEPARTMENTAL REPRESENTATIVE. IN VIEW OF THE CONSISTEN T DECISION OF THE TRIBUNAL IN VARIOUS CASES WHERE PENALTY LEVIED U/ S.271D HAS BEEN DIRECTED TO BE DELETED AND FURTHER CONSIDERING THE F ACT THAT THE CIT(A) HIMSELF IN VARIOUS IDENTICAL CASES HAS DELETED THE PENAL TY LEVIED U/S.271D FOR WHICH THE REVENUE HAS NOT FILED ANY APPE AL BEFORE THE TRIBUNAL, THEREFORE, WE ARE OF THE CONSIDERED OPINIO N THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271D OF THE I.T. ACT. W E, THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSIN G OFFICER TO CANCEL THE PENALTY SO LEVIED U/S.271D OF THE I.T .ACT . 7.1 RESPECTFULLY FOLLOWING OUR DECISION IN THE CASE CITED (SUPRA), WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO CANCEL THE PENALTY. STAY APPLICATION NO.81/PN/2014 : 8. THE ASSESSEE HAS FILED THE STAY APPLICATION REQU ESTING THE TRIBUNAL TO STAY THE REALISATION OF OUTSTANDING DEM AND OF 12 RS.13,52,000/-. VIDE ORDER OF EVEN DATE, WE HAVE D IRECTED THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED U/S. 271D. THEREFORE, THE STAY APPLICATION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. ACCORDINGLY, THE SAME 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