The ITO, Ward-3(3), Anand V. Shri Dineshchandra S.Shah(HUF), Petlad

ITA 1428/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63176 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1428-1429/AHD/2010 ASSESSMENT YEAR :2006-07 INCOME TAX OFFICER, WARD-3(3), PETLAD V/S . DINESHCHANDRA SHANTILAL SHAH (HUF) PROP KESHAVLAL B SHROFF AT: VATADARA, TA: KHAMBHAT [ PAN NO.AAEHS 1064G ] / APPELLANT .. / RESPONDENT) /BY ASSESSEE NONE /BY REVENUE SHRI D.C.PATWARI, CIT-DR /DATE OF HEARING 04-12-2012 ! /DATE OF PRONOUNCEMENT 07-12-2012 ' ' ' ' / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THESE ARE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, B ARODA (CIT(A) FOR SHORT) OF EVEN DATED I.E. ON 22-01-2010 PERTAINING TO ASSE SSMENT YEAR (AY) 2006-07. ALL THESE ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP ITA NO.1428/AHD2010. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE PENALTY OF R S.2,20,72,844/- LEVIED U/S. 271D OF THE ACT ON ACCOUNT OF ACCEPTANC E OF LOANS IN CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE INCOME-TAX ACT. 2. THE LD. CIT(APPEALS) FAILED TO APPRECIATE THAT T HE ASSESSEE ACCEPTED DEPOSITS IN THE FORM OF POST DATED CHEQUES (OTHER T HAN ACCOUNT PAYEE CHEQUES) AS SECURITIES WHICH IS CONTRAVENTION OF PR OVISIONS OF SECTION 269SS OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT SCRUTINY ASSESSMEN T U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) WAS FRAMED AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAD ACCEPTED CHEQUES (OTHER THAN ACCOUNT PAYEE CHEQUES) FOR CERTAIN INDIVIDUALS WHEREIN THE SUM INVOLVED IN EACH CASE WAS IN EXCESS OF RS.20,000/-. REFERRING TO THE PROVISIONS OF SECTION 269SS OF THE ACT, IT WAS HELD BY THE LD. ADDL. CIT THAT THIS AMOUNTED TO ACC EPTANCE OF LOAN OR DEPOSIT OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT P AYEE DRAFT, IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS. T HE ASSESSEE WAS CALLED UPON TO SHOW-CAUSE WHY THE SAME MAY NOT BE LEVIED. THE ASSESSEE DULY FILED REPLY TO THE SHOW-CAUSE NOTICE AND THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT ACCEPTED BY THE LD. ADDL. CIT AND HE IMPOSE D PENALTY U/S 271D OF RS.2,20,72,084/-. AGAINST THIS ASSESSEE FILED APPEA L BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE ALLOW ED THE APPEAL. 4. AGAINST THE ORDER OF LD. CIT(A) THE REVENUE IS N OW IN APPEAL BEFORE THE TRIBUNAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER , NOTICE OF HEARING WAS DULY SERVED UPON AS ACKNOWLEDGEMENT DUE IS ON R ECORD. THEREFORE APPEALS ARE HEARING IN ABSENCE OF ASSESSEE. ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 3 6. BOTH THE GROUNDS ARE INTER-CONNECTED AND ARE BEI NG DISPOSED BY WAY OF CONSOLIDATED ORDER. LD. CIT-DR, SHRI D.C. PATWARI A PPEARED ON BEHALF OF REVENUE AND SUPPORTED THE ORDER OF ASSESSING OFFICE R. 7. WE HAVE HEARD THE LD. CIT-DR AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE ONLY CONTROVERSY IN THIS CASE IS WITH R EGARD TO DELETION OF PENALTY LEVIED U/S. 271D OF THE ACT FOR CONTRAVENTION OF PR OVISIONS OF SECTION 269SS OF THE ACT. IN RESPONSE TO SHOW-CAUSE FOR LEVY OF PENA LTY U/S. 271D OF THE ACT, THE ASSESSEE HAD SUBMITTED BEFORE LD. ADDL. CIT, WH ICH HAS BEEN REPRODUCED IN THE ORDER OF LD. CIT(A) IN PARA-3 HEREINBELOW:- 3.. THE NATURE OF TRANSACTIONS OF CHEQUE DISCOUNTING I S EXPLAINED A UNDER:- THE FARMERS/SELLERS SELL THE GOODS TO THE TRADERS. THE TRADERS WILL MAKE PAYMENT BY CROSSED CHEQUE TO FARMERS/SELLERS. THE D UE DATE OF THE CHEQUE MAY BE AFTER ONE MONTH OR TWO MONTHS. SINCE THE FARMERS/SELLERS ARE COMING FROM DIFFERENT VILLAGES OR FAR PLACES AND THEY WANT IMMEDIATE MONEY. THEY PREFER TO DISCOUNT THE C HEQUE WITH SHROFF TO GET IMMEDIATE MONEY. SO THEY APPROACH TO THE SHR OFF WITH CROSSED CHEQUES OF TRADERS. FARMERS/SELLERS GIVE CHEQUE OF THE SHROFF AFTER ENDORSING THE CHEQUE IN FAVOUR OF THE SHROFF. THE SHROFF ACCEPTS THE CHEQUE OF THE TRADERS ON BAS IS OF CREDIT WORTHINESS OF THE LOCAL TRADER WHO ISSUE THE CHEQUE TO THE FARMERS/SELLERS. THEN THE SHROFF MAKE PAYMENT TO TH E FARMERS/SELLERS AFTER DEDUCING HIS COMMISSION. NORMALLY THE SHROFF CHARGES COMMISSION @ 1% TO 1.5% PER MONTH. ON THE DUE DATE OF THE CHEQ UE, THE SHROFF DEPOSITS THE CHEQUE IN HIS BANK ACCOUNT AND THEY MO NEY IS CREDITED TO HIS BANK ACCOUNT AND THE MONEY IS CREDITED TO HIS A CCOUNT ON THAT DATE. IN THIS MANNER, THE WHOLE TRANSACTION IS COMPLETED. SINCE, IT IS NOT A TRANSACTION IN THE NATURE OF DEP OSIT OR LOAN, AND THEREFORE PROVISIONS OF SEC.269SS OR SEC. 269T OF T HE ACT ARE NOT APPLICABLE TO THIS TRANSACTION. PLEASE CONSIDER THE ABOVE EXPLANATION AND DROP THE PENALTY PROCEEDINGS AND OBLIGE. IN THE CASE IN HAND, THE PENALTY HAS BEEN IMPOSED F OR CONTRAVENTION OF 269SS OF THE ACT, WHICH READS AS UNDER:- ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 4 269SS . NO PERSON SHALL, AFTER THE 30 TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SEC TION REFERRED TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY A N ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT IF,- (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGRE GATE AMOUNT OF SUCH LOAN AND DEPOSIT ; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH P ERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYME NT HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMO UNT REMAINING UNPAID ; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B) IS [TWENTY] THOUSAND RUPEES OR MORE: PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM, OR ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED BY,- (A) GOVERNMENT ; (B) ANY BANKING COMPANY, POST OFFICE SAVINGS BANK O R CO- OPERATIVE BANK ; (C) ANY CORPORATION ESTABLISHED BY A CENTRAL, STATE OR PROVINCIAL ACT ; (D) ANY GOVERNMENT COMPANY AS DEFINED IN SECTION 61 7 OF THE COMPANIES ACT, 11956 (1 OF 1956) ; (E) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OF CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENT RAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITI NG, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE: [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED ARE BOTH HAVIN G AGRICULTURAL INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABL E TO TAX UNDER THIS ACT.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, - (I) BANKING COMPANY MEANS A COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 (10 OF 1949), APPLIES AND ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 5 INCLUDES ANY BANK OR BANKING INSTITUTION REFERRED T O IN SECTION 51 OF THAT ACT ;] (II) CO-OPERATIVE BANK SHALL HAVE THE MEANING ASS IGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1 949) (III) LOAN OR DEPOSIT MEANS LOAN OR DEPOSIT OF MO NEY.] THE AFORESAID PROVISIONS MANDATES THAT NO PERSON SH ALL AFTER THE 30 TH DAY OF JUNE, 1984 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK DRAFT, (A) IF PAYEE OF SUCH LOAN OR DEPOSIT OR (B) ON THE DAT E OF TAKING OR ACCEPTING SUCH LOAN OR DEPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEP TED EARLIER B SUCH PERSON FROM THE DEPOSITOR IS REMAINING UNPAID OR (C) THE A MOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE (B) IS TWENTY THOUSAND RUPEES OR MORE. 7.1 ANY VIOLATION THEREOF ATTRACTS PENALTY U/S. 271 D OF THE ACT, WHICH READS AS UNDER:- 271D [1] IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOS IT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS, H E SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT O F THE LOAN OR DEPOSIT SO TAKEN OR ACCEPTED.] 271D [2] ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SH ALL BE IMPOSED BY THE [JOINT] COMMISSIONER.] FROM THE AFORESAID PROVISIONS, IT IS CLEAR THAT IF A PERSON TAKES OR ACCEPTS SUCH LOAN OR DEPOSIT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT, HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM E QUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT SO TAKEN OR ACCEPTED AND SUCH PENAL TY IS IMPOSABLE BY THE JOINT CIT. NOW APPLYING THE AFORESAID PROVISIONS, O N THE FACTS OF THE PRESENT CASE, IT APPEARS THAT ASSESSING OFFICER HAS WRONGLY APPLIED THE PROVISIONS. SINCE IN THIS CASE, THE ASSESSEE HAD, IN FACT, GIVE N LOAN TO THE FARMERS, THEREFORE, THERE WAS NO QUESTION OF ACCEPTING OF LO AN OR DEPOSIT, IN FACT, THE ASSESSEE HAD GIVEN LOAN WHICH WAS REPAID BY THE FAR MERS. WE FIND THAT LD. ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 6 CIT(A) HAS DEALT WITH THIS ISSUE IN PARA-5 AND 5.1 OF HIS ORDER, WHICH IS REPRODUCED HEREINBELOW:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE FACTS OF THE CASE. HERE THE ASSESSEE, BEING A SHROFF , HAS TWO LINES OF BUSINESS CHEQUE DISCOUNTING BUSINESS AND MONEY LENDING BUSIN ESS. THE TWO LINES OF BUSINESS ARE SEPARATE AND DISTINCT. SEPARA TE LEDGERS ARE MAINTAINED IN RESPECT OF THE TWO LINES OF BUSINESS. IN THE MONEY LENDING BUSINESS, THE ASSESSEE ACCEPTS LOANS/ADVANCES ON WH ICH INTEREST IS PAID AND LENDS OUT MONEY BY WAY OF LOAN ON WHICH IN TERESTS IS CHARGED. IN THIS LINE OF BUSINESS, ALL TRANSACTIONS ABOVE RS .20,000/- HAVE BEEN MADE BY ASSESSMENT YEAR OF ACCOUNT PAYEE CHEQUES. I T IS ONLY WITH REGARD TO THE CHEQUE DISCOUNTING LINE OF BUSINESS T HAT THE ASSESSEE HAS RECEIVED THE AGGREGATE AMOUNT OF RS.2,20,72,084/- T HROUGH CROSSED CHEQUES (ALTHOUGH NOT ACCOUNT PAYEE CHEQUES). AS EX PLAINED BY THE APPELLANT, THE TOBACCO GROWING FARMERS OF CHAROTAR REGION OF GUJARAT SELL THEIR PRODUCE TO TRADERS, WHO MAKE THE PAYMENT TRADITIONALLY BY WAY OF POST-DATED CROSSED CHEQUES. IN HIS WAY, SUCH TRA DERS AVAIL THE BENEFIT OF CASH FLOW BY RETAINING THE USE OF THE MO NEY FOR LONGER PERIOD. THE AGRICULTURISTS IN TURN TAKE THE CHEQUE TO THE SHROFF FOR DISCOUNTING IT FOR CASH, SINCE THEY NORMALLY DO NOT MAINTAIN ANY B ANK ACCOUNTS AND THEY INSIST ON IMMEDIATE CASH PAYMENT. 5.1 THE CRUX OF THE ISSUE TURNS ON THE VIEW TAKEN B Y THE AO THAT THE DISCOUNTING OF CHEQUE AMOUNTS TO ACCEPTANCE OF DEPO SIT OR LOAN WITHIN THE MEANING OF SEC. 269SS. IT IS THEREFORE NECESSAR Y TO ADVERT TO THE MEANING OF LOAN OR DEPOSIT. LOAN OR DEPOSI T HAS BEEN DEFINED IN EXPLANATION BELOW SEC. 269T WHERE LOAN OR DEPOSIT H AS BEEN DEFINED TO MEAN ANY LOAN OR DEPOSIT OF MONEY WHICH IS REPAYABLE AFT ER NOTICE OR REPAYABLE AFTER A PERIOD AND, IN THE CASE OF A PERS ON OTHER THAN A COMPANY, INCLUDES LOAN OR DEPOSIT OF ANY NATURE . IN THE CASE OF CIT V. NAVJIVAN ROLLER MILLS, 251 ITR 661 , THE JURISDICTIONAL HIGH COURT OF GUJARAT HAD OCCASION TO EXAMINE THE MEANING OF LOAN AND DEPOSIT . REFERRING TO BLACKS LAW DICTIONARY FOR THE DEFINITI ON OF LOAN/DEPOSIT, THE HIGH COURT OBSERVED THAT DEPOSIT IS MADE BY THE DEP OSITOR WHILE LOAN IS OBTAINED BY THE BORROWER HIMSELF. IN THE CASE OF LO AN, IT IS A LENDING FOR THE PURPOSE OF THE BORROWER TO BE RETUNED EITHER ON DEMAND OR AFTER A SPECIFIED TIME. IN THE INSTANT CASE, THE AMOUNT IN QUESTION WAS NOT SOUGHT BY THE ASSESSEE FROM THE FARMER AND NEITHER WAS THEREFORE, AMOUNT IN QUESTION KEPT AS A DEPOSIT WITH THE ASSESSEE BY THE FARMER FOR RETURN AFTER A SPECIFIED PERIOD. HERE, THE NATU RE OF THE TRANSACTION, BEING A CHEQUE DISCOUNTING TRANSACTION, CLEARLY PLA CES THE SUM OUTSIDE THE SCOPE OF EITHER LOAN OF DEPOSIT. IN A CHEQUE DI SCOUNTING TRANSACTION, THE SHROFF MAKES THE PAYMENT AGAINST THE SECURITY O F THE CHEQUE. HENCE, THE TRUE NATURE OF THE TRANSACTION WOULD BE THAT THE CHEQUE AMOUNTS ONLY TO AN INSTRUMENT OF SECURITY WHICH IN TURN IS ENCASHED BY ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 7 THE SHROFF ON THE DUE DATE SOMETIME IN THE FUTURE . IF AT ALL ANY LOAN TRANSACTION TAKES PLACE, IT WOULD BE THE FARMER WHO WOULD BE THE RECIPIENT (ALTHOUGH IT WOULD BE DIFFICULT TO HOLD S O, GIVEN THE FACT THAT THE SAME WOULD BE RECEIVED AGAINST THE SALE OF GOODS AN D NOT BY WAY OF LOAN OR THE DEPOSIT OF MONEY). HENCE, I AM OF THE O PINION THAT THE TRANSACTION IN QUESTION DID NOT AMOUNT TO LOAN OR D EPOSIT IN THE HANDS OF THE ASSESSEE. FROM THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) AS HE HAS RIGHTLY HELD THAT THE TRANSACTIONS IN QUE STION DID NOT AMOUNT TO LOAN OR DEPOSIT IN THE HANDS OF THE ASSESSEE. THUS, THE PROVISIONS OF SECTION 269SS OF THE ACT ARE NOT APPLICABLE. THEREFORE, THE ORDER OF LD. CIT(A) IS HEREBY UPHELD AND THIS GROUND OF REVENUES APPEAL I S DISMISSED. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ITA NO.1429/AHD/2010. 9. THE FACTS ARE IDENTICAL AS IN REVENUES APPEAL I N ITA NO.1428/AHD/2010 THE ISSUE IS WITH REGARD TO DELETI ON OF PENALTY OF RS.2,10,44,348/- LEVIED U/S 271E OF THE ACT FOR REP AYMENT OF LOAN / DEPOSITS IN CASH IN CONTRAVENTION OF PROVISIONS OF SECTION 269T OF THE ACT. 10. LD. CIT-DR SUPPORTED THE ORDER OF ASSESSING OFF ICER. 11. WE HAVE HEARD THE LD. CIT-DR AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. WE FIND THAT IN THIS CASE ALSO THERE IS A W RONG APPLICATION OF LAW BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS DEALT WITH TH IS ISSUE IN PARA-5 TO 5.2 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE FACTS AND THE FACTS OF THE CASE. HERE THE ASSESSEE, BEING A SHROFF , HAS TWO LINES OF BUSINESS CHEQUE DISCOUNTING BUSINESS AND MONEY LENDING BUSINESS. THE TWO LINES OF BUSINESS ARE SEPARATE AN D DISTINCT. SEPARATE LEDGERS ARE MAINTAINED IN RESPECT OF THE TWO LINES OF BUSINESS. IN THE MONEY LENDING BUSINESS, THE ASSESSEE ACCEPTS LOANS/ ADVANCES ON WHICH INTEREST IS PAID AND LENDS OUT MONEY BY WAY O F LOAN ON WHICH ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 8 INTEREST IS CHARGED. IN THIS LINE OF BUSINESS, ALL TRANSACTIONS ABOVE RS.20,000/- HAVE BEEN MADE BY WAY OF ACCOUNT PAYEE CHEQUES. IT IS ONLY WITH REGARD TO THE CHEQUE DISCOUNTING LINE OF BUSINESS THAT THE ASSESSEE HAS PAID OUT THE AGGREGATE AMOUNT OF RS.2, 10,44,348/- IN CASH. AS EXPLAINED BY THE APPELLANT, THE TOBACCO GR OWING FARMERS OF CHAROTAR REGION OF GUJARAT SELL THEIR PRODUCE TO TR ADES, WHO MAKE THE PAYMENT TRADITIONALLY BY WAY OF POST-DATED CROSSED CHEQUES. IN THIS WAY, SUCH TRADERS AVAIL THE BENEFIT OF CASH FLOW BY RETAINING THE USE OF THE MONEY FOR LONGER PERIOD. THE AGRICULTURISTS IN TURN TAKE THE CHEQUE TO THE, SHROFF FOR DISCOUNTING IT FOR CASH, SINCE THEY NORMALLY DO NOT MAINTAIN ANY BANK ACCOUNTS AND THEY INSIST ON IMMED IATE CASH PAYMENT. 5.1 THE CRUX OF THE ISSUE TURNS ON THE VIEW TAKEN B Y THE AO THAT THE DISCOUNTING OF CHEQUE AMOUNTS TO REPAYMENT OF DEPOS IT OR LOAN IN CASH, WITHIN THE MEANING OF SEC. 269T. IT IS THEREFORE NE CESSARY TO ADVERT TO THE MEANING OF LOAN OR DEPOSIT . LOAN OR DEPOSIT HAS BEEN DEFINED IN THE EXPLANATION BELOW SEC.269T TO MEAN ANY LOAN OR DEPOSIT OF MONEY WHICH IS REPAYABLE AFTER NOTICE OR REPAYABLE AFTER A PERIOD AND, IN THE CASE OF A PERSON OTHER THAN A COMPANY, INCLU DES LOAN OR DEPOSIT OF ANY NATURE. IN THE CASE OF CIT V. NAVJIVAN ROLLER MILLS, 251 ITR 661 , THE JURISDICTIONAL HIGH COURT OF GUJARAT HAD OCCASI ON TO EXAMINE THE MEANING OF LOAN AND DEPOSIT . REFERRING TO BLACKS LAW DICTIONARY FOR THE DEFINITION OF LOAN/DEPOSIT, THE HIGH COURT OB SERVED THAT DEPOSIT IS MADE BY THE DEPOSITOR WHILE LOAN IS OBTAINED BY THE BORROWER HIMSELF. IN THE CASE OF LOAN, IT IS A LENDING FOR THE PURPOSE O F THE BORROWER TO BE RETURNED EITHER ON DEMAND OR AFTER A SPECIFIED TIME . IN THE INSTANT CASE, THE AMOUNT IN QUESTION WAS NOT SOUGHT BY THE ASSESS EE FROM THE FARMER AND NEITHER WAS THE AMOUNT IN QUESTION KEPT AS A D EPOSIT WITH THE ASSESSEE BY THE FARMER FOR RETURN AFTER A SPECIFIED PERIOD. HERE, THE NATURE OF THE TRANSACTION, BEING A CHEQUE DISCOUNTI NG TRANSACTION, CLEARLY PLACES THE SUM OUTSIDE THE SCOPE OF EITHER LOAN OR DEPOSIT. IN A CHEQUE DISCOUNTING TRANSACTION, THE SHROFF MAKES TH E PAYMENT AGAINST THE SECURITY OF THE CHEQUE. HENCE, THE TRUE NATURE OF THE TRANSACTION WOULD BE THAT THE CHEQUE AMOUNTS ONLY TO AN INSTRUM ENT OF SECURITY WHICH IN TURN IS ENCASHED BY THE SHROFF ON THE DU E DATE SOMETIME IN THE FUTURE. IF AT ALL ANY LOAN TRANSACTION TAKES PL ACE, IT WOULD BE THE FARMER WHO WOULD BE THE RECIPIENT (ALTHOUGH IT WOUL D BE DIFFICULT TO HOLD SO, GIVEN THE FACT THAT THE SAME WOULD BE RECEIVED AGAINST THE SALE OF GOODS AND NOT BY WAY OF LOAN OR THE DEPOSIT OF MONE Y). HENCE, I AM OF THE OPINION THAT THE TRANSACTION IN QUESTION DID NO T AMOUNT TO LOAN OR DEPOSIT IN THE HANDS OF THE ASSESSEE. ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 9 5.2 ANOTHER ASPECT OF THE MATTER IS WHETHER THE TRA NSACTIONS OF BILL/CHEQUE DISCOUNTING WERE INTENDED BY THE LEGISL ATURE TO BE WITHIN THE AMBIT OF THE SECTION. ION THIS REGARD REFERENCE CAN BE MADE TO CIRCULAR NO. 345 DATED 28 TH JUNE, 1982, EXPLAINING THE SCOPE AND EFFECT OF SECTION 269T. THE RELEVANT PORTION IS REPRODUCED BE LOW FOR EASE OF REFERENCE:- 2.1 THE PROLIFERATION OF BLACK MONEY POSES A SERIO US THREAT TO THE NATIONAL ECONOMY AND IT WAS CONSIDERED NECESSARY TO TAKE EFFECTIVE STEPS TO CONTAIN AND COUNTER THIS MAJOR E CONOMIC EVIL. THE GOVERNMENT HAVE, IN RECENT PAST, TAKEN SEVERAL LEGISLATIVE AND ADMINISTRATIVE MEASURES TO UNEARTH BLACK MONEY. THE INCOME-TAX (SECOND AMENDMENT) ACT, 1981 (HEREINAFTE R REFERRED TO AS THE AMENDING ACT), REPRESENTS ANOTHER STEEP I N THE SAME DIRECTION. 2.2 IT CAME TO GOVERNMENTS NOTICE THAT A SUBSTANTI AL AMOUNT OF BLACK MONEY WAS DEPOSITED BY TAX EVADERS WITH BANKS , COMPANIES, CO-OPERATIVE SOCIETIES AND PARTNERSHIP F IRMS EITHER IN THEIR OWN NAMES OR IN BENAMI NAMES. THE INCOME-TAX (SECOND AMENDMENT), ACT, 1981, SEEKS TO COUNTER ATTEMPTS TO CIRCULATE BLACK MONEY IN THIS MANNER. FROM THE ABOVE, WE DO NOT FIND ANY INFIRMITY INTO T HE ORDER PASSED BY LD. CIT(A) AS THE PENALTY U/S. 271E OF THE ACT IS ATTRA CTED WHEN THERE IS A CONTRAVENTION OF PROVISIONS OF SECTION 269T OF THE ACT. SECTION 269T MANDATES NO BRANCH OF BANKING COMPANY OR CO-OPERATI VE BANK AND NO OTHER COMPANY OR CO-OPERATIVE SOCIETY AND NO FIRM OR OTHE R PERSON SHALL REPAY ANY LOAN OR DEPOSIT MADE WITH IT OTHERWISE THAN BY ACCO UNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAME OF THE P ERSON WHO HAS MADE LOAN OR DEPOSIT IF THE AMOUNT OF LOAN OR DEPOSIT TO GETHER WITH THE INTEREST, IF ANY, PAYABLE THEREON BE OR (A) THE AMOUNT OF LOAN O R DEPOSIT PAYABLE THEREIN OR (B) THE AGGREGATE OF LOAN OR DEPOSIT HELD BY PER SON WITH THE BRANCH OF THE BANKING COMPANY OR CO-OPERATIVE BANK OR COMPANY OR CO-OPERATIVE SOCIETY OR FIRM OR OTHER PERSONS EITHER JOINTLY WITH ANY OTHER PERSON ON THE DATE OF SUCH REPAYMENT TOGETHER WITH LOAN OR DEPOSIT IS OF RS.20 ,000/- OR MORE. IN THE CASE IN HAND, THE ASSESSEE HAS NOT REPAID THE LOAN ON TH E CONTRARY, THE FARMERS HAD REPAID THE LOAN TO THE ASSESSEE. THEREFORE, THE AO HAS WRONGLY APPLIED THE ITA NO.1428-1429/AHD/2010 A.Y. 2006-07 ITO WD-3(3) PETLAD V. DINESHCHANDRA S SHAH (HUF) PAGE 10 PROVISIONS OF SECTION 269T OF THE ACT. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A) A ND SAME IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 13. IN COMBINED RESULT, BOTH THE APPEAL OF REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP #$%- 07/12/2012 +,- . ' ' ' ' //0 //0 //0 //0 10 10 10 10 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $-$/4 5 / CONCERNED CIT 4. 5- / CIT (A) 5. 0 89 ///4, /4!, +,- / DR, ITAT, AHMEDABAD 6. 9<= >? / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ @/+ $ /4!, +,- . STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 05/12 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 05/12 4) DATE OF CORRECTION 06/12 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 06/12 7) ORDER UPLOADED ON 07/12 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 07/12