Shri Mahendra J. Yeole, Pune V. ACIT, Cent. Cir.,2(2), Pune

ITA 295/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56422 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Bonafide belief; Reasonable cause; Ignorance of law
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO, AM I.T.A. NO. 294 TO 296/PN/2010 A.Y. 2000-01, 2001-02 AND 2004-05 SHRI MAHENDRA J. YEOLE 11 PRERANA SANJEEVAN SOCIETY BHOSALE NAGAR, NEAR CS COLONY, PUNE-411 007 PAN AARPY 4544 Q APPELLANT VS. ADDL. CIT CENT. R-2, PUNE RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY: SMT. ANN KAPTHUAMA DATE OF HEARING : 25-8-2011 DATE OF PRONOUNCEMENT: 30-8-2011 ORDER PER SHRI SHAILENDRA KUMAR YADAV, JM ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE ON T HE SAME POINT. SO, THESE ARE BEING DISPOSED OFF BY THI S CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE IN THESE APPEALS IS WITH REGARDS TO PENALTY UNDER THE PROVISIONS OF SECTION 271D OF THE ACT. 3. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE AROSE IN THE CASE OF SNEH BUILDERS IN ITA NO. 456/P N/2008 FOR ITA NO. 294 TO 296/PN/10 MAHENDRA J YEOLE A.Y. 2000-01, 2001-02 & 2004-05 , 2 A.Y. 2004-05 WHEREIN THE TRIBUNAL VIDE ITS ORDER DA TED 20-5- 2011 HAS DISPOSED OFF AND DECIDED SIMILAR ISSUE BY OBSERVING AS UNDER: 11. AFTER HEARING SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SCHELL INTERNATIONAL (2005) 278 ITR 630 (BOM) HAS HELD THA T THE ASSESSEE WAS NOT AWARE THAT UNDER THE PROVISIONS OF THE INCOME-TAX ACT, HE WAS REQUIRED TO SUBMIT THE STATE MENTS WITHIN 30 DAYS FROM THE EXPIRY OF THE RELEVANT ASSE SSMENT YEAR. AS SOON AS HE GOT THE SHOW CAUSE NOTICE, HE SUBMITTED THE STATEMENTS. THE EXPLANATION APPEARED TO BE REASONABLE AND THE HONBLE HIGH COURT UPHELD THE OR DER OF THE TRIBUNAL WHEREBY THE ORDER OF THE PENALTY LEVIE D U/S 272A(2) AND 285B OF THE ACT WAS QUASHED. 12. WE ALSO FIND THAT HONBLE SUPREME COURT IN THE CASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD. VS. STATE OF UTTAR PRADESH (1979) 118 ITR 326 (SC) HAS OBSERVED AS UND ER: MOREOVER, IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERY ONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT : THERE IS NO SUCH MAXIM KNOWN TO THE LAW. OVER A HUNDRED AND THIRTY YEARS AGO, MAULA J. POINTED OUT IN MARTINDAL E V. FALKNER (1846) 2 CB 706 : THERE IS NO PRESUMPTIO N IN THIS COUNTRY THAT EVERY PERSON KNOWS THE LAW : I T WOULD BE CONTRARY TO COMMON SENSE AND REASON IF IT WERE SO SCRUTTON L.J. ALSO ONCE SAID : IT IS IMPOSSIBLE TO KNOW ALL THE STATUTORY LAW, AND NOT V ERY POSSIBLE TO KNOW ALL THE COMMON LAW; BUT IT WAS LOR D ATKIN WHO, AS IN SO MANY OTHER SPHERES, PUT THE POINT IN ITS PROPER CONTEXT WHEN HE SAID IN EVANS V . BARTLAM (1937) AC 473 (HL). THE FACT IS THAT THER E IS NO AND NEVER HAS BEEN A PRESUMPTION THAT EVERY ONE KNOWS THE LAW. THERE IS THE RULE THAT IGNORANCE OF THE LAW DOES NOT EXCUSE, A MAXIM OF VERY DIFFERE NT SCOPE AND APPLICATION 13. WE ALSO FIND THAT IN THE CASE OF ACIT VS. CHANDRAKANT KASHINATH KELE (HUF) THE PUNE BENCH OF THE TRIBUNAL HAS DECIDED SIMILAR ISSUE BY OBSERVING AS UNDER: ON HEARING THE SUBMISSIONS OF BOTH THE SIDES IN TH E LIGHT OF THE FACTUAL MATRIX OF THE CASE AND THE PRECEDENT S CITED, ITA NO. 294 TO 296/PN/10 MAHENDRA J YEOLE A.Y. 2000-01, 2001-02 & 2004-05 , 3 WE ARE OF THE CONSIDERED VIEW THAT THERE WAS A REAS ONABLE CAUSE, DUE TO WHICH, THE ASSESSEE WAS COMPELLED TO ACCEPT THE LOAN THROUGH BEARER CHEQUE. SOME OF THE FINDIN GS ON FACTS SUCH AS AVAILABILITY OF A MEAGER AMOUNT OF A FEW HUNDRED RUPEES AS OUTSTANDING BALANCE IN THE BANK ACCOUNT OF THE ASSESSEE, DEFINITELY ESTABLISH THE F INANCIAL CONSTRAINS OF THE ASSESSEE. ANOTHER UNCONTROVERTED FACTUAL FINDING THAT THE ASSESSEE HAD ALREADY ISSUE D CHEQUES FAVOURING AFORE MENTIONED THREE PARTIES HAD TO BE HONOURED AND TO FULFILL ITS COMMITMENT, THE FUNDS W ERE URGENTLY REQUIRED, THEREFORE, A BEARER CHEQUE WAS ACCEPTED, ALSO LEADS TO A CONCLUSION THAT THE ASSES SEE HAS PROVED THAT THERE WAS A REASONABLE CAUSE FOR THE SA ID FAILURE, IF ANY, HENCE ENTITLED FOR RELIEF AS PRESC RIBED U/S 273B OF THE ACT. NOW BEFORE US A DECISION OF HONBL E MADHYA PRADESH HIGH COURT HAS ALSO BEEN CITED IN TH E CASE OF CIT VS. MAKHIJA CONSTRUCTION CO. 257 ITR PA GE 8, WHEREIN IT WAS HELD THAT FOR A MINOR DEVIATION ON T HE PART OF THE ASSESSEE, AS OTHERWISE THE TRANSACTION APPEA RED TO BE GENUINE, PROPER AND BONAFIDE, THE PENALTY NEED N OT TO BE IMPOSED IN VIOLATION OF SECTION 269SS OF I.T. AC T. TAKING A SHELTER OF THIS DECISION WE HEREBY HOLD TH AT LEARNED CIT(A) HAS RIGHTLY RELIED UPON SEVERAL OTHE R DECISIONS AS CITED IN THE IMPUGNED APPELLATE ORDER, HENCE WE HEREBY CONFIRM HIS FINDINGS. THIS GROUND OF THE REVENUE HAS NO FORCE, HENCE DISMISSED. THUS, APPEAL WAS DECIDED IN FAVOUR OF ASSESSEE IN C ASE OF CHANDRAKANT K. KELE (HUF) (SUPRA). SIMILARLY, IN THE CASE OF SHIROLI BUDRUK KRISHAK SE VA SANGH IN I.T.A. NO. 1101/PN/2010 : A.Y. 2006-07, D ATED 16-12-2010 IT WAS HELD AS UNDER: CONSIDERING THE ABOVE SUBMISSIONS, THERE IS NO DOUB T THAT IGNORANCE OF LAW CAN ALWAYS BE TREATED A REASONABLE CAUSE TO JUSTIFY THE NON-ATTRACTION OF PENAL PROVISIONS U/S 271D OF THE ACT BUT THE LEGISLATURE KEEPING IN MIND POSSIBILITY OF IT HAS G IVEN DISCRETION TO THE DEPARTMENT U/S 273B OF THE ACT, N OT TO LEVY U/S 271D OF THE ACT. THUS, FOR AVAILING THE BENEFIT U/S 273B OF THE ACT, THE ASSESSEE IS REQUIR ED TO ESTABLISH THAT THERE WAS REASONABLE CAUSE FOR IT S FAILURE IN COMPLYING WITH THE PROVISIONS OF SECTION 269T OF THE ACT. IN THE PRESENT CASE, WE DO NOT FI ND REASON TO DOUBT THE ABOVE SAID REASONABLE CAUSE FURNISHED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT IT BEING A CREDIT CO-OPERATIVE SOC IETY ITA NO. 294 TO 296/PN/10 MAHENDRA J YEOLE A.Y. 2000-01, 2001-02 & 2004-05 , 4 DEALING ONLY WITH ITS MEMBERS, WAS UNDER IMPRESSION THAT THE PROVISIONS OF SEC. 269SS AND 269T OF THE A CT WERE INAPPLICABLE TO IT. THIS EXPLANATION FINDS STRENGTH FROM THIS VERY FACT THAT NEITHER THE STATU TORY AUDITORS NOR THE TAX AUDITORS OF THE ASSESSEE SOCIE TY APPRAISED IT ABOUT THE CORRECT LEGAL PROVISIONS IN THIS REGARD, AS SUBMITTED BY THE LEARNED AR. IN THE CAS E OF CIT VS. EETAHI AGENCIES (SUPRA) THERE WAS FAILUR E TO COMPLY WITH THE PROVISIONS OF SECTION 269T OF THE A CT AND PENALTY U/S 271E WAS LEVIED. THE TRIBUNAL FOUND THAT THE ASSESSEE HAD COMMITTED VIOLATION OF SECTION 269T UNDER A GENUINE BELIEF THAT SEC. 269T HAD NO APPLICATION TO DEPOSITS AND THAT IT ONLY APPLIED TO LOANS. THE DEPARTMENT PREFERRED APPEAL AGAINST SAID ORDER OF THE TRIBUNAL BEFORE THE HONB LE HIGH COURT WHEREIN, THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD THAT THE PENALTY WAS RIGHT LY DELETED BY THE TRIBUNAL. AGAIN IN THE CASE OF CIT VS. JAYABHAWANI GRAMIN BIGAR SHETI SAHAKARI PAT SANSTHA LTD. (SUPRA) THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO UPHOLD THE DECISION OF THE TRIBUNAL ACCEPTING REASONABLE CAUSE U/S 273B IN CASE OF VIOLATION OF THE PROVISIONS OF SEC. 269SS O F THE ACT. THE DEPARTMENT HAD PREFERRED SLP BEFORE THE HONBLE SUPREME COURT AGAINST THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT WHICH HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN (2010) 322 ITR 12 (STATUTE). RESPECTFULLY FOLLOWING DECISIONS OF THE HONBLE COURTS, WE ARE OF THE VIEW THAT THERE WAS REASONABLE CAUSE WITH THE ASSESSEE I N NURTURING A BONAFIDE BELIEF THAT THE PROVISIONS OF SEC. 269T WERE NOT APPLICABLE IN ITS CASE. WE, THEREFOR E, UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE PENA LTY OF RS. 2,01,031/- LEVIED U/S 271D OF THE ACT. THE GROUNDS RAISED ARE ACCORDINGLY DISMISSED. 14. IN VIEW OF ABOVE LEGAL AND FACTUAL DISCUSSIONS PENALTY IN QUESTION IS DELETED BECAUSE, THE ASSESSEE WAS UN DER BONAFIDE IMPRESSION THAT TRANSACTION BY WAY OF BEAR ER CHEQUE IS NOT VIOLATION OF PROVISIONS OF SECTION 26 9SS OF THE ACT. MOREOVER, THIS GENUINE TRANSACTION RECORD ED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THIS POINT H AS NOT BEEN RAISED EVEN BY THE AUDITORS AS THE SAME WAS DO NE IN THE NORMAL COURSE OF ASSESSEES BUSINESS SINCE LONG . BEFORE PARTING THIS DECISION, IT IS PERTINENT TO ME NTION THAT WE ARE AWARE OF THE FACT THAT IN GENERAL, IGNORANCE OF LAW IS NO EXCUSE BUT UNDER CERTAIN CIRCUMSTANCES IT MAY BE SO. IN THE PRESENT CASE, IGNORANCE OF LAW MAY BE DEFENS E, BUT ONE SHOULD BE CAUTIOUS WHILE APPLYING THIS PROPOSIT ION. IT ITA NO. 294 TO 296/PN/10 MAHENDRA J YEOLE A.Y. 2000-01, 2001-02 & 2004-05 , 5 SHOULD BE RARELY USED AS SPECIFIC CIRCUMSTANCE. IT IS SETTLED LAW THAT EACH CASE IS DECIDED IN THE FACTS AND CIRCUMSTANCES. IT IS ALSO MADE CLEAR THAT CASE LAW S RELIED ON BY BOTH THE PARTIES HAVE BEEN TAKEN INTO ACCOUNT , THOUGH SAME HAVE NOT BEEN SPECIFICALLY MENTIONED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHILE APPEAL OF ASSESSEE IS ALLOWED. NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE BY THE L EARNED DR. 4. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASO NING, WE HOLD THAT THE ASSESSEE WAS UNDER BONAFIDE IMPRESSIO N THAT THE TRANSACTION BY WAY OF BEARER CHEQUE IS NOT VIOLATIO N OF PROVISIONS OF SECTION 269SS OF THE ACT. MOREOVER, THESE GENUINE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE WHICH WAS NOT POINTED OUT EVEN BY THE AUDI TORS AS THE SAME WAS DONE IN THE NORMAL COURSE OF ASSESSEES BU SINESS SINCE LONG. BEFORE PARTING WITH THIS DECISION, WE WOULD LIKE TO MENTION THAT WE ARE AWARE OF THE FACT THAT IN GENER AL, IGNORANCE OF LAW IS NO EXCUSE BUT UNDER CERTAIN CIRCUMSTANCES , IT MAY BE SO. IN THE PRESENT CASE, IGNORANCE OF LAW MAY BE D EFENSE, BUT ONE SHOULD BE CAUTIONS WHILE APPLYING THIS PROPOSIT ION. IT IS SETTLED LEGAL POSITION THAT EACH CASE IS DECIDED ON THE FACTS AND CIRCUMSTANCES OF ITS CASE. UNDER FACTS AND CIRCUMST ANCES ALL THESE APPEALS ARE ALLOWED. ITA NO. 294 TO 296/PN/10 MAHENDRA J YEOLE A.Y. 2000-01, 2001-02 & 2004-05 , 6 5. IN THE RESULT, ALL THESE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011. SD/- SD/- (D. KARUNAKARA RAO ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 30 TH AUGUST 2011 ANKAM COPY FORWARDED TO: (1) ASSESSEE (2) DEPARTMENT (3) CIT- CENTRAL PUNE (4) CIT(A)- IV PUNE (5) THE D.R. ITAT PUNE BENCH B , PUNE TRUE COPY BY ORDER, ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL, PUNE BENCHES, PUNE