PANKAJ INVESTMENTS, MUMBAI V. ADDL CIT 16(3), MUMBAI

ITA 2967/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3430 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Search and seizure; Principle of natural justice; Bonafide belief; Reasonable cause; Condonation of delay; Bonafide mistake; Ignorance of law
• Section: 273B; 143(3)

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER . / I.T.A. NO. / ASSESSMENT YEAR / APPELLANT / RESPONDENT 1986/MUM/2013 2005 - 06 M/S. PANKAJ INVESTMENTS, C/O. M/S. CHANDRAVIJAY SHAH & CO., CHARTERED ACCOUNTANTS, 401, RAINBOW CHAMBERS, SV ROAD, NR. MTNL KANDIVLI (W), MUMBAI-400 067 ADDL. COMMISSIONER OF INCOME TAX-16(3), MATRU MANDIR, TARDEO, MUMBAI-400 007 2967/MUM/2013 2005 - 06 ./ PAN :AAAFP2940G ASSESSEE BY : SHRI HARI S. RAHEJA, AR R E VENUE BY : SHRI C.W. ANGOLKAR, DR ! / DATE OF HEARING : 29.10.2015 '# ! / DATE OF PRONOUNCEMENT : 19-01-2016 $% / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE FIRM, BEING ITA NOS. 1986/MUM/2013 & 2967/MUM/2013 , BOTH FOR THE ASSESS MENT YEAR 2005- 06 ARE FILED AGAINST SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-28,MUMBAI DATED 27-03-2012 AND LEARNE D COMMISSIONER OF ITA NOS. 1986 & 2967/M/2013 2 INCOME TAX(APPEALS)-27, MUMBAI DATED 23.12.2011 RES PECTIVELY (HEREINAFTER CALLED THE CIT(A)). 2. THE ASSESSEE FIRM HAS RAISED THE FOLLOWING CONCI SE GROUNDS OF APPEAL IN THE MEMO OF APPEALS FILED WITH THE TRIBUNAL :- ITA NO. 1986/M/2013: (CONCISE GROUNDS) 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-28, MUMBAI [CIT(A)] ERRED IN NOT TAKING INTO COGNISANCE THE FACT AND TH E SUPPORTING DOCUMENTS PLACED BEFORE HIM TO THE EFFECT THAT OUT OF CASH OF RS. 10,00,000 RECEIVED FOR THE FIRST TIME DURING THE YEAR FROM M/S. LAXMI TRADING COMPANY, RS. 7,03,368/- WAS TOWARDS THE REPAYMENT OF LOAN DUE BY M/S. LAXMI TRADING COMPANY TO THE APPELLANT AS ON THE 1 ST DAY OF THE YEAR AND IT WAS ONLY NET AMOUNT OF RS. 2,96,632 OF CASH LOAN THAT WAS RECEIVED BY THE APPE LLANT AND NOT RS. 10,00,000 AND HENCE, WITHOUT PREJUDICE TO OTHER GRO UNDS OF APPEAL, SECTION 271D WAS NOT ATTRACTED TO RS. 7,03,368. 2.WITHOUT PREJUDICE TO OTHER GROUNDS OF APPEAL., THE LEARNED CIT(A) FA ILED TO APPRECIATE THE REASONABLE CAUSE PLEADED BEFORE HIM IN THE CORRECT PERSPECTIVE AND HE ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY ORDER UNDER SECTION 271D OF THE ACT PASSED BY THE LEARNED ADDL. CIT TO THE TUNE OF RS.48,60,000 WHICH IS UNJUSTIFIED AND IS BASED ON SURMISES AND C ONJECTURE WITHOUT REFERRING TO THE FACTS OF THE MATTER AND WITHOUT CONSIDERING THE PLEA OF THE APPELLANT. 3. THE APPELLANT SUBMITS THAT THE TRANSACTION IS GE NUINE AND HAS NOT BEEN DOUBTED NOR IS THERE ANY ALLEGATION OF ANY MALA FID E. THE APPELLANT PRAYS THAT THE VIOLATION HAS NOT CAUSED ANY LOSS TO THE REVENU E AND THAT PENALTY BE DELETED. 4. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, WITHD RAW AND / OR MODIFY ANY ONE / MORE OR ALL THE ABOVE GROUNDS OF APPEAL ON OR BEF ORE THE DATE OF FINAL HEARING. ITA NO. 2967/M/2013: (CONCISE GROUNDS) 1.WITHOUT PREJUDICE TO OTHER GROUNDS OF APPEAL., THE LEARNED COMMISSIO NER OF INCOME TAX(APPEALS)-27 , MUMBAI (CIT(A)) FAILED T O APPRECIATE THE REASONABLE CAUSE PLEADED BEFORE HIM IN THE CORRECT PERSPECTIVE AND HE ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY ORDER UNDER SECTION 271E OF THE ACT PASSED BY THE LEARNED ADDL. CIT TO THE TUNE OF RS.5,00,000 WH ICH IS UNJUSTIFIED AND IS ITA NOS. 1986 & 2967/M/2013 3 BASED ON SURMISES AND CONJECTURE WITHOUT REFERRING TO THE FACTS OF THE MATTER AND WITHOUT CONSIDERING THE PLEA OF THE APPELLANT. 2. THE APPELLANT SUBMITS THAT THE TRANSACTION IS GE NUINE AND HAS NOT BEEN DOUBTED NOR IS THERE ANY ALLEGATION OF ANY MALA FID E. THE APPELLANT PRAYS THAT THE VIOLATION HAS NOT CAUSED ANY LOSS TO THE REVENU E AND THAT PENALTY BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, WITHD RAW AND / OR MODIFY ANY ONE / MORE OR ALL THE ABOVE GROUNDS OF APPEAL ON OR BEF ORE THE DATE OF FINAL HEARING. 3. IN BOTH THESE APPEALS BEARING ITA NOS. 1986/MUM/ 2013 & 2967/MUM/2013, THE ASSESSEE FIRM HAS FILED APPLICAT ION/PETITION(S) ALONG WITH SEPARATE AFFIDAVITS FOR CONDONATION OF DELAY OF 283 DAYS AND 370 DAYS RESPECTIVELY WITH RESPECT TO THE TWO APPEALS STATIN G THEREIN THAT DUE TO THEIR ACCOUNTANT HAVING RESIGNED IN THE MONTH OF JUNE 201 2, THE DELAY HAS OCCURRED, AS THE FILES WAS RETAINED BY THE ACCOUNTA NT AND WAS NOT HANDED OVER TO THE CHARTERED ACCOUNTANT IN TIME FOR PREPAR ING AND FILING OF AN APPEAL WITH THE TRIBUNAL AND IMMEDIATELY, WHEN THE MATTER CAME TO THE NOTICE OF THE ASSESSEE FIRM ON AN ENQUIRY MADE BY CHARTERED ACCOU NTANT WITH RESPECT TO FILING OF APPEALS WITH THE TRIBUNAL , IMMEDIATE AC TION HAS BEEN TAKEN BY THE ASSESSEE FIRM IN FILING BOTH THE APPEALS. THE ASSE SSEE FIRM HAS REQUESTED FOR CONDONATION OF DELAY IN FILING OF THE APPEAL(S) AND PRAYED THAT IN THE INTEREST OF JUSTICE , THESE DELAY SHOULD BE CONDONED. THE AS SESSEE FIRM RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CO LLECTOR , LAND ACQUISITION V. MST.KATIJI (1987) 167 ITR 471; HONBLE SUPREME C OURT IN THE CASE OF N BALKRISHNAN V. M KRISHNAMURTHY (1998) 7 SCC 123 AND HONBLE SUPREME COURT IN THE CASE OF RAFIQ C MUNSHILAL AIR 1981 SC 1400(1401) AND IN CONCORD OF INDIA INSURANCE CO. LTD. V. MRS. NIRMALA DEVI & SONS (1979) 118 ITR 507(SC).WE HAVE CONSIDERED THE PRAYER(S) OF THE ASSESSEE FIRM WITH RESPECT TO BOTH THE APPEALS ALONG WITH THE AFFIDAVI TS FILED BY THE ASSESSEE FIRM AND THE REASONS/EXPLANATIONS SUBMITTED BY THE ASSES SEE FIRM AND WE HOLD ITA NOS. 1986 & 2967/M/2013 4 THAT THIS DELAY IN FILING OF THE APPEAL NEED TO BE CONDONED IN THE INTEREST OF JUSTICE AND THE APPEAL BE ADMITTED AND BE HEARD ON MERITS , AS IN OUR CONSIDERED OPINION THE ASSESSEE WAS PREVENTED IN FI LING THE APPEAL IN TIME AS PROVIDED UNDER THE INCOME TAX ACT , 1961 DUE TO BON A-FIDE AND SUFFICIENT CAUSE SHOWN AND STATED BY THE ASSESSEE FIRM IN ITS AFFIDAVIT AS THE ACCOUNTANT HAVING RESIGNED IN JUNE 2012 BUT DID NOT HAND OVER THE FILES IN TIME, AS PER CAUSE SHOWN BY THE ASSESSEE FIRM , LEADING TO DELAY IN FILING OF BOTH THESE APPEALS AND ONCE THE MATTER CAME TO NOTICE OF THE A SSESSE FIRM ON BEING ENQUIRED BY CHARTERED ACCOUNTANT, THE ASSESEE FIRM TOOK IMMEDIATE ACTION TO FILE THE INSTANT APPEALS. ITA NO. 1986/M/2013: 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM FILED ITS RETURN OF INCOME ON 31-10-2005 WHEREIN THE INCOME WAS DECLARE D AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND IT WAS OBSERVED BY TH E LEARNED ASSESSING OFFICER(HEREINAFTER CALLED THE AO) DURING THE CO URSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT) ON SCRUTINY OF THE AUDIT REPORT , FILED VIDE FORM NO. 3CD , AS PER PARA 24 (ANNEXURE-IV) TH AT THE ASSESSEE FIRM HAS RECEIVED CASH LOANS OF RS. 73.8 LAKHS FROM M/S. LAX MI TRADING COMPANY IN CONTRAVENTION TO THE PROVISIONS OF SECTION 269SS OF THE ACT. THE PENALTY PROCEEDINGS U/S. 271D OF THE ACT WAS INITIATED AGAI NST THE ASSESSEE FIRM AND THE STATUTORY NOTICE WAS DULY SERVED ON THE ASSESS EE FIRM. THE ASSESSEE FIRM SUBMITTED THAT THE ASSESSEE FIRM HAS RECEIVED CASH LOAN FROM M/S. LAXMI TRADING COMPANY OF RS. 48.6 LAKHS DURING THE PREVIO US YEAR AS AGAINST THE FIGURE OF CASH LOAN OF RS. 73.8 LAKHS SHOWN IN THE AUDIT REPORT. THE ASSESSEE FIRM FILED CORRIGENDUM DOCUMENT DULY SIGNED BY THE AUDITORS REFLECTING THAT RS. 48.6 LAKHS WAS RECEIVED AS CASH LOAN BY THE ASS ESSEE FIRM FROM M/S LAXMI TRADING COMPANY DURING THE PREVIOUS YEAR. TH E ASSESSEE FIRM ITA NOS. 1986 & 2967/M/2013 5 SUBMITTED THAT THERE IS NO MALA-FIDE INTEREST IN AC CEPTING THE CASH LOANS AND THEY WERE TAKEN ON THE GROUND OF URGENT BUSINESS NE CESSITY AND COMMERCIAL EXIGENCY. THE CASH DEPOSITS WERE TAKEN TO PREVENT BOUNCING OF CHEQUES ISSUED BY THE ASSESSEE FIRM ON THE GROUND OF INSUFF ICIENCY OF FUNDS. THE ASSESSEE FIRM SUBMITTED THAT IT WAS UNDER A BONA-FI DE BELIEF THAT ACCEPTING OF CASH LOAN TO MEET URGENT REQUIREMENT/NECESSITY IN B USINESS DO NOT VIOLATE ANY PROVISIONS OF THE LAW AND IT IS MERELY A TECHNI CAL OR VENIAL BREACH OF LAW BEING BONA-FIDE MISTAKE ON ACCOUNT OF IGNORANCE OF THE PROVISIONS OF LAW WHICH IS A REASONABLE CAUSE WITHIN THE MEANING OF S ECTION 273B OF THE ACT. THE ASSESSEE FIRM SUBMITTED THAT IT WAS RUNNING CUR RENT ACCOUNT TRANSACTIONS WITH M/S. LAXMI TRADING COMPANY, WHERE BY THERE IS A CONTINUOUS FLOW OF FUNDS BETWEEN THE TWO CONCERNS A S AND WHEN THE FUNDS ARE REQUIRED . HENCE AS PER THE ASSESSEE FIRM, THE SE CURRENT ACCOUNTS TRANSACTIONS BETWEEN THE TWO CONCERNS COULD NOT BE REGARDED AS LOANS OR DEPOSITS AS CONTEMPLATED IN SECTION 269SS OF THE ACT AS THESE ARE BUSINESS TRANSACTIONS AS THE ASSESSEE FIRM IS IN THE BUSINES S OF ACCEPTING AND ADVANCING OF LOANS , IT DOES NOT COME WITHIN THE PU RVIEW OF VIOLATION AS CONTEMPLATED UNDER SECTION 269SS OF THE ACT. THE A SSESSEE FIRM IN ORDER TO PREVENT THE BOUNCING OF CHEQUES ISSUED BY THE ASSES SEE FIRM HAS UNDERTAKEN THESE CASH TRANSACTIONS, OTHERWISE THERE WOULD HAVE BEEN PENAL CONSEQUENCES U/S. 138 OF THE NEGOTIABLE INSTRUMENTS ACT. THE ASSESSEE FIRM SUBMITTED THAT THIS IS MERELY A TECHNICAL OR VENIAL BREACH OF PROVISIONS OF THE ACT , WHICH RESULTED IN INFRACTION OF LAW AND IT DI D NOT PREJUDICE THE INTEREST OF REVENUE AS NO TAX AVOIDANCE OR TAX EVASION WAS INVO LVED. THE AO CONSIDERED THE REPLIES OF THE ASSESSEE FIRM ALONG WITH THE LEDGER A/C OF M/S. LAXMI TRADING COMPANY AND BANK ACCOUNT STAT EMENT AND HELD THAT SECTION 269SS OF THE ACT PROHIBITS LOAN TRANSACTION S EXCEEDING RS. 20,000/-. THE AO HELD THAT THE ASSESSEE FIRM IS IN THE BUSINE SS OF ADVANCING LOANS FOR A NUMBER OF YEARS, HIS ACCOUNTS ARE AUDITED EVERY YEA R AND SERVICE OF ITA NOS. 1986 & 2967/M/2013 6 PROFESSIONAL CHARTERED ACCOUNTANT ARE AVAILED BY TH E ASSESSEE FIRM AND THE PLEA OF IGNORANCE OF LAW CANNOT BE ACCEPTED. THE A SSESSEE FIRM HAS RECEIVED/REPAID LOANS DURING THE YEAR FROM/TO 78 PA RTIES AND THE TOTAL OF SUCH LOANS RECEIVED DURING THE YEAR IS RS. 47,93,06,544/ - AND THE TOTAL AMOUNT OF LOAN REPAID DURING THE YEAR IS RS. 20,87,10,785/- A ND TOTAL TRANSACTIONS RAISING AND REPAYMENT OF THE LOAN IS AROUND RS. 68 CRORES DURING THE PREVIOUS YEAR . OUT OF TRANSACTIONS WITH 78 PARTIES , TRANSACTIONS WITH 77 PARTIES ARE BY CHEQUE AND ONLY WITH M/S. LAXMI TRAD ING COMPANY TRANSACTIONS ARE ENTERED BOTH BY CHEQUE AND CASH. THUS, THE ASSESSEE FIRM COULD NOT TAKE A PLEA THAT THE ASSESSEE FIRM IS NOT AWARE OF THE PROVISIONS OF LAW AS CONTAINED U/S. 269SS OF THE ACT. THE PLEA T AKEN BY THE ASSESSEE FIRM THAT THE TRANSACTIONS WITH M/S. LAXMI TRADING COMPA NY ARE BUSINESS TRANSACTIONS AND HENCE DO NOT FALL WITHIN THE PURVI EW OF SECTION 269SS OF THE ACT WAS ALSO REJECTED BY THE AO, WHEREBY THE AO HEL D THAT ASSESSEE FIRM ITSELF HAS STATED THAT IT IS IN THE BUSINESS OF ADVANCING LOANS AND AS PER AUDIT REPORT IN FORM NO. 3CD THE NATURE OF BUSINESS OR PR OFESSION AS PER COLUMN 8(A) IS STATED TO BE INVESTMENT AND DEALING IN SHA RES AND SECURITIES AND ADVANCEMENT OF LOAN. THE AUDITORS HAVE REPORTED T HAT ALL THE TRANSACTION AS LOAN TRANSACTIONS IN AUDIT REPORT FILED IN COMPLIAN CE TO SECTION 44AB OF THE ACT. THUS, THIS PLEA OF THE ASSESSEE FIRM WAS REJE CTED BY THE AO HOLDING THAT CASH LOAN FROM M/S. LAXMI TRADING COMPANY IS A CLEA R BREACH OF THE PROVISIONS OF SECTION 269SS OF THE ACT. THE OTHER PLEA TAKEN BY THE ASSESSEE FIRM THAT IT IS BECAUSE OF BUSINESS URGENCY AND EXI GENCY THAT IT HAS ACCEPTED THE SAID LOANS IN CASH, THE AO HELD THAT NO EVIDENC E HAVE BEEN FILED WITH RESPECT TO THE BUSINESS EXPEDIENCY/EXIGENCY. THE A O ALSO HELD THAT THERE COULD BE BUSINESS URGENCY ON ONE OR TWO INSTANCES B UT REPETITIVE CASH TRANSACTIONS SPREAD OVER A PERIOD OF ABOUT 3 MONTHS IS INEXPLICABLE. FURTHER, IT IS ALSO OBSERVED BY THE AO THAT MOST OF THE CASH LOANS RECEIVED BY THE ASSESSEE FIRM WERE UTILIZED IN REPAYING OR ADVANCIN G FRESH LOANS TO THE SISTER CONCERNS AS SHOWN BELOW: ITA NOS. 1986 & 2967/M/2013 7 I. THREE CASH DEPOSITS TOTALING RS. 10 LAKHS RECEIVED FROM M/S. LAXMI TRADING COMPANY ON 21-04-2004. CHEQUE REPAYMENT OF RS. 10 LAKHS TOWARDS A LOAN FROM THE SISTER CONCERN NAMELY ANISH METALS PVT. LTD. ON 21-04-2014. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE FIRM TH OUGH RECEIVING THE AMOUNTS IN CASH IS REPAYING THE LOAN BY CHEQUE. IT WAS OBSERVED BY THE AO THAT SINCE ANISH METALS PVT. LTD., IS A SISTER CONC ERN THERE IS NO NEED TO ROUTE THE AMOUNT THROUGH THE ASSESSEE FIRM. THE LOAN OF RS. 10 LAKHS COULD HAVE BEEN DIRECTLY TAKEN BY ANISH METALS PVT. LTD. HOWE VER, SINCE THE SISTER CONCERN IS A PVT. LTD. COMPANY, AS PER THE AO, THE SAID COMPANY M/S ANISH METALS PVT. LTD DID NOT WANT ANY VIOLATION OF SECTI ON 269SS OF THE ACT IN THEIR BOOKS OF ACCOUNTS. THEREFORE AS PER AO , THE SAID LOAN WAS ROUTED THROUGH THE BOOKS OF THE ASSESSEE FIRM WHERE THE CASH LOAN WAS RECEIVED AND A CHEQUE WAS ISSUED TO ANISH METALS PVT. LTD. FURTHER, SINC E MOST OF THE TRANSACTIONS ARE WITH SISTER CONCERNS , THE ASSESSEE FIRM COULD HAVE EASILY ANTICIPATED THE SAME AND COULD HAVE EASILY PLANNED THE RECEIPT OF L OANS FROM M/S. LAXMI TRADING COMPANY BY WAY OF CHEQUES. IN ORDER TO ASCERTAIN THE VERACITY OF THIS CLAIM OF THE ASSESSEE , THE BANK STATEMENT OF THE ASSESSEE FIRM WAS SCRUTINIZED BY T HE AO. ONE FACT WHICH CAME TO LIGHT OF THE AO WAS THAT THE ASSESSEE FIRM WAS HAVING TRANSACTIONS WITH M/S. LAXMI TRADING COMPANY BOTH BY WAY OF CASH AND BY WAY OF CHEQUES. FURTHER, ON CAREFUL SCRUTINY IT WAS SEEN BY THE AO THAT M/S. LAXMI TRADING COMPANY WAS ALSO HAVING A BANK ACCOUNT WITH BANK OF BARODA, C.P. TANK BRANCH , WHERE THE BANK ACCOUNT OF THE ASSESSE E FIRM WAS ALSO LOCATED. THIS FACT CAME TO NOTICE OF THE AO FROM THE BANK ST ATEMENT OF THE ASSESSEE FIRM WITH BANK OF BARODA , CP TANK BRANCH, WHEREIN THE ASSESSEE FIRM RECEIVED LOANS BY WAY OF THREE CHEQUES TOTALING TO RS. 2.5 LAKHS FROM M/S. ITA NOS. 1986 & 2967/M/2013 8 LAXMI TRADING COMPANY ON 28-05-2004 BY WAY OF TRANS FER FROM THE BANK ACCOUNT OF LAXMI TRADING COMPANY TO THE BANK ACCOUN T OF THE ASSESSEE FIRM WITH THE SAME BRANCH OF THE BANK OF BARODA. THEREFO RE, THIS CONTENTION WAS ALSO REJECTED BY THE AO AND IT WAS HELD THAT THE AS SESSEE FIRM IN ACCEPTING CASH LOANS FROM M/S. LAXMI TRADING COMPANY TO THE T UNE OF RS. 48.6 LAKHS EXCEEDING RS.20000/- HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT AND HENCE PENALTY U/S. 271D OF THE ACT IS LEVIABLE, WHEREBY THE PENALTY OF RS.48,60,000/- WAS LEVIED BY THE AO VIDE PENALTY OR DERS DATED 26 TH JUNE 2008 PASSED U/S 271D OF THE ACT . 5. AGGRIEVED BY THE PENALTY ORDERS DATED 26 TH JUNE 2008 PASSED U/S 271D OF THE ACT BY THE AO, THE ASSESSEE FIRM FILED THE FIRS T APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THERE WAS AN OPENING BALANCE OF RS. 7,03,368/- DUE TO THE ASSESSEE FIRM FROM M/S. LAXMI TRADING COMPANY A S ON 01-04-2004 AND WHEN THE AMOUNT IN CASH OF RS. 10 LAKHS WAS RECEIVE D, IT WAS IN FACT LOAN OF RS. 2,96,632/- RECEIVED ON 21-04-2004 IN CASH , WHI LE RS.7,03,368/- WAS THE REFUND OF THE AMOUNT DUE TO THE ASSESSEE FIRM FROM THE SAID CONCERN M/S LAXMI TRADING COMPANY. THE ASSESSEE FIRM ALSO SUBM ITTED DULY SIGNED COPY OF THEIR ACCOUNT IN THE BOOKS OF M/S. LAXMI TRADING COMPANY TO SUBSTANTIATE THE CONTENTIONS. THE ASSESSEE FIRM ALSO SUBMITTED THAT CASH LOANS WE RE UTILIZED FOR BUSINESS EXIGENCY AS UNDER : A) AGGREGATE AMOUNT OF LOAN ADVANCED/LOAN REPAID TO SI STER CONCERNS RS.23,91,632/-. B) RS.4,50,000/- WAS PAID TO MAJOR METALS TOWARDS SHAR E APPLICATION. ITA NOS. 1986 & 2967/M/2013 9 THE ASSESSEE FIRM ALSO SUBMITTED THAT RS. 28,95,00 0/- WAS FURTHER ADVANCED TO SISTER CONCERN TO MEET THEIR URGENT NEED . THE ASSESSEE FIRM SUBMITTED THAT IGNORANCE OF PROVI SIONS OF LAW CONSTITUTE REASONABLE CAUSE AND NO PENALTY IS LEVIABLE IN VIEW OF PROVISIONS OF SECTION 273B OF THE ACT. THE ASSESSEE FIRM RELIED ON THE C ASE OF VIR SALES CORPORATION V. ACIT [50 TTJ 130](AHD. TRIB.). THE ASSESSEE FIR M SUBMITTED THAT PROVISIONS OF SECTION 269SS OF THE ACT ARE BROUGHT IN THE STAT UTE TO COUNTER THE EVASION OF TAXES AND SUBMITTED THAT WITH REFERENCE TO CONJO INT READING OF SECTION 271D ,271E AND 273B OF THE ACT CLEARLY REVEALS THAT THE USE OF THE EXPRESSION SHALL BE LIABLE TO PAY IS TO BE INTERPRETED IN A WAY THAT NO PENALTY WOULD BE LEVIABLE IF THE PERSON CONCERNED PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE, WHICH CLEARLY INDICATE THAT THESE PROVISIONS GIVE A DISCRETION TO AUTHORITIES TO IMPOSE THE PENALTY OR NOT TO IMPO SE THE PENALTY , PROVIDED REASONABLE CAUSE IS SHOWN BY THE TAXPAYER AS STIPUL ATED U/S 273B OF THE ACT. SUCH DISCRETION HAS TO BE EXERCISED WITH WISDOM AND IN A JUST AND FAIR MANNER BY THE AUTHORITIES HAVING REGARD TO THE ENTI RE RELEVANT FACTS AND MATERIALS EXISTING ON RECORDS. THE ASSESSEE FIRM S UBMITTED THAT ON PERUSAL OF THE BOOKS OF M/S. LAXMI TRADING COMPANY WHICH ARE F URNISHED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CLEARLY REVEALS THAT THESE REPRESENTS TRANSACTIONS IN CURRENT ACCOUNTS WHICH REPRESENT FL OW OF FUNDS BETWEEN TWO CONCERNS AS AND WHEN THE FUNDS WERE NEEDED. HENCE, ENTRIES IN THE CURRENT ACCOUNT OF THESE TWO CONCERNS CANNOT BE REGARDED AS LOANS OR DEPOSITS AS CONTEMPLATED IN SECTION 269SS OF THE ACT. THEREFOR E, NO PENALTY IS LEVIABLE U/S.271D OF THE ACT. THE ASSESSEE FIRM SUBMITTED T HAT ON THE DATES ON WHICH CASH LOAN WAS TAKEN, THE BANK BALANCE WAS QUITE INS UFFICIENT TO PAY TO THE PAYEES IN QUESTION. FOR THE PURPOSE, A COPY OF BAN K STATEMENTS OF THE ASSESSEE FIRM FROM APRIL TO SEPTEMBER, 2004 WAS FUR NISHED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEE FIRM SUBM ITTED THAT AS THE TRANSACTIONS ARE BONA-FIDE AND GENUINE AND ARE MADE WHEN THE URGENT ITA NOS. 1986 & 2967/M/2013 10 BUSINESS EXIGENCY EXISTED , THERE WAS NO GUILTY MIN D ON THE PART OF THE ASSESSEE FIRM. THE CIT(A) HELD THAT THERE IS NO MER IT IN THE CONTENTIONS OF THE ASSESSEE FIRM, THE ONUS IS ON ASSESSEE FIRM TO SHOW THE EXISTENCE OF A REASONABLE AND SUFFICIENT CAUSE AS PROVIDED UNDER S ECTION 273B OF THE ACT, NOT EVEN THE SINGLE INSTANCE HAS BEEN SHOWN BY THE ASSESSEE FIRM TO EXIST TO PROVE BUSINESS EXIGENCY/EXPEDIENCY BY THE ASSESSEE FIRM. ON THE OTHER HAND, THE AO HAS ELABORATELY DISCUSSED THE ISSUE AN D HAS COME TO THE CONCLUSION THAT THERE IS A VIOLATION OF SECTION 269 SS OF THE ACT AND THERE WAS NO NEED FOR THE ASSESSEE FIRM TO TAKE CASH LOAN FRO M M/S. LAXMI TRADING COMPANY AND THE ASSESSEE FIRM COULD HAVE GOT THE FU NDS TRANSFERRED IMMEDIATELY THROUGH CHEQUE TO THE BANK ACCOUNTS OF THE ASSESSEE FIRM FROM M/S LAXMI TRADING COMPANY AS THE BANK ACCOUNTS OF B OTH THE ASSESSEE FIRM AND M/S LAXMI TRADING COMPANY EXISTED WITHIN THE SA ME BRANCH OF THE SAME BANK I.E. BANK OF BARODA, CP TANK BRANCH. THE CIT(A ) OBSERVED THAT AFTER RECEIVING CASH LOAN FROM M/S LAXMI TRADING COMPANY, THE ASSESSEE FIRM HAS MAINLY ADVANCED THE AMOUNTS TO ITS SISTER CONCERNS. THE CIT(A) HELD THAT IF THERE IS A REQUIREMENT OF SISTER CONCERNS, IT IS A SEPARATE TAXABLE ENTITY, LOAN COULD HAVE BEEN TAKEN DIRECTLY BY SISTER CONCERNS F ROM M/S LAXMI TRADING COMPANY WITHOUT INVOLVING THE ASSESSEE FIRM AND HE NCE THE BUSINESS NEED OF THE SEPARATE TAXABLE ENTITY CANNOT BECOME BUSINESS NEED OF THE ASSESSEE FIRM. THUS, THERE IS NO EVIDENCE ON RECORD TO SHOW ANY BU SINESS EXIGENCY/EXPEDIENCY EVEN OF THE SISTER CONCERN TO T AKE THESE CASH LOANS . THE CIT(A) ALSO HELD THAT ASSESSEE FIRM CANNOT TAKE PLE A THAT THE ASSESSEE FIRM IS NOT AWARE OF THE LAW AND THE ONUS IS ON THE ASSESSE E FIRM TO SHOW THE REASONABLE CAUSE AND THE ASSESSEE FIRM HAS FAILED T O MAKE OUT A CASE OF EXISTENCE OF REASONABLE CAUSE ON ACCOUNT OF WHICH I T FAILED TO FOLLOW THE PROVISIONS OF SECTION 269SS OF THE ACT AND THE REVE NUE HAS RIGHTLY LEVIED PENALTY WHICH WAS CONFIRMED BY THE CIT(A) VIDE ORDE RS DATED 27-03-2012. AS REGARDS THE ASSESSEES CONTENTION THAT IT HAD DEBIT BALANCE OF RS. 7,03,368/- WITH M/S. LAXMI TRADING COMPANY AND HENCE NET LOAN TAKEN WAS NOT RS. ITA NOS. 1986 & 2967/M/2013 11 10,00,000/- BUT RS. 2,96,632/-. THE CIT(A) HELD TH AT THE ONUS IS ON THE ASSESSEE TO PROVE THAT IT HAD NOT TAKEN LOAN OF RS. 10,00,000/- IN CASH BUT THERE WAS CASH LOAN OF RS. 2,96,632/- ONLY OBTAINED BY THE ASSESSEE FIRM AND M/S. LAXMI TRADING COMPANY RETURNED THE MONEY TO TH E ASSESSEE FIRM IN VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT TO THE EXTENT OF RS. 7,03,368/-. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THERE WAS REPAYMENT OF LOAN OF RS. 7,03,368/- IN VIOLATION OF PROVISIONS OF SECTION 269T OF THE ACT BY M/S. LAXMI TRADING COMPANY. THE CIT(A ) HELD THAT MERE GENUINENESS OF THE TRANSACTION OR TRANSACTION BEING WITH SISTER CONCERN DOES NOT MITIGATE THE RIGOURS OF SECTION 269SS OF THE A CT. THE CIT(A) HELD THAT PENALTY U/S. 271D OF THE ACT IS EXIGIBLE IN SUCH CA SES. HENCE, THERE IS NO NEED FOR REVENUE TO PROVE MENS REA ON THE PART OF ASSESSEE FIRM BEFORE LEVYING PENALTY U/S.271D OF THE ACT. THUS, THE CIT(A) CONFI RMED VIDE ORDERS DATED 27- 03-2012 THE PENALTY OF RS.48,60,000/- LEVIED BY THE AO U/S 271D OF THE ACT FOR VIOLATION OF SECTION 269SS OF THE ACT. 6. AGGRIEVED BY THE ORDERS DATED 27.03.2012 OF THE CIT(A) , THE ASSESSEE FIRM IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE FIR M REITERATED ITS SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE ASSESSEE FIRM SUBMITTED THAT THERE WAS A GENUINE MISTAKE ON THE PART OF THE ASSESSEE FIRM IN HAVING RECEIVED CASH LOAN FROM M/S. LAXMI TRADING COMPANY, HOWEVER, THESE TRANSACTIONS ARE GE NUINE TRANSACTIONS AND ARE NOT BOGUS TRANSACTIONS AS NO SUCH FINDINGS HAVE BEEN MADE BY THE AO OR BY THE CIT(A) THAT THESE TRANSACTIONS ARE NOT GENUI NE OR ARE BOGUS TRANSACTIONS. THE ASSESSEE FIRM SUBMITTED THAT THER E IS A OPENING DEBIT BALANCE OF RS. 7,03,368/- FOR WHICH THERE WAS A REF UND/RETURN OF AMOUNT BY M/S. LAXMI TRADING COMPANY ON 21.04.2004 OF RS. 7,0 3,368/- , OUT OF RS.10,00,000/- RECEIVED BY THE ASSESSEE FIRM FROM M /S LAXMI TRADING COMPANY ON 21.04.2014 AND TO THAT EXTENT OF RS.7,03 ,368/- , PENALTY CANNOT BE LEVIED AS THERE IS NO BREACH OR VIOLATION OF SEC TION 269SS OF THE ACT SO FAR ITA NOS. 1986 & 2967/M/2013 12 AS THE ASSESSEE FIRM IS CONCERNED. THE ASSESSEE FI RM CONTENDED THAT THE OBJECT OF INTRODUCTION OF SECTION 269SS AND 271D OF THE ACT IS TO CURB EVASION OF TAXES AND CIRCULATION OF UN-ACCOUNTED MONEY AND GENUINE BUSINESS TRANSACTIONS ARE NOT HIT BY SECTION 269SS AND 271D OF THE ACT AND HENCE , THE ASSESSEE FIRM CANNOT BE PENALIZED FOR SUCH GENU INE MISTAKE AND DISCRETION IS WITH THE AUTHORITIES U/S. 273B OF THE ACT , NOT TO IMPOSE PENALTY IN GENUINE CASES WHERE REASONABLE CAUSE IS SHOWN. 7. LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES AND ALSO RECEIVING LOANS AND ADVANCING LOANS . PERUSAL OF THE STATEMENT OF ACCOUNT OF THE ASSESSEE FIRM WITH M/S LAXMI TRADING COMPANY WHICH IS PLACED AT PAPER BOOK, PAGE 2 CLEARLY REVEALS THAT THERE NO BUSINESS/ COMMERCIAL TRANSACTIONS ENTERED BY THE ASSESSEE FIRM WITH M/S LAXMI TRADING COMPANY BUT RATHER THESE TRA NSACTIONS ARE IN THE NATURE OF RECEIVING OR ADVANCING OF MONEY BY WAY OF LOANS AND REPAYMENTS OF LOANS WHICH ALSO HAPPENS TO BE BUSINESS OF THE ASSE SSES FIRM. THE ASSESSEE FIRM HAS ENTERED INTO TRANSACTIONS OF LOANS WITH 78 PARTIES DURING THE PREVIOUS YEAR AGGREGATING TO RECEIVING AND REPAYMEN T OF LOANS OF RS 68 CRORES WHEREBY WITH RESPECT TO 77 PARTIES, THE DEALINGS WE RE BY CHEQUES WHILE ONLY WITH M/S LAXMI TRADING COMPANY, THE ASSESSEE FIRM D EALT WITH BOTH IN CHEQUES AND CASH. THE ACCOUNTS OF THE ASSESSEE FIRM WERE AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT WHO HAS GIVEN A REPO RT IN FORM NO 3CD HIGHLIGHTING THE VIOLATIONS OF SECTION 269T OF THE ACT WHICH IS PLACED AT PAPER BOOK, PAGE 10. THE ASSESSEE FIRM HAS DURING THE PREVIOUS YEAR RECE IVED LOAN IN CASH OF RS. 48.6 LAKHS. OUT OF THIS AMOUNT OF RS. 48.6 LAKHS, RS. 7,03,368/- WAS STATED ITA NOS. 1986 & 2967/M/2013 13 TO HAVE BEEN RECEIVED AS RETURN OF AMOUNT AGAINST O PENING DEBIT BALANCE RECEIVABLE BY THE ASSESSE FIRM FROM M/S. LAXMI TRAD ING COMPANY, FOR WHICH, THE ASSESSEE FIRM HAS PLACED ON RECORD A COPY OF LE DGER A/C OF THE ASSESSEE FIRM IN THE BOOKS OF LAXMI TRADING COMPANY BEFORE U S WHICH IS PLACED AT PG. 2 OF THE PAPER BOOK FILED BEFORE US. WE ARE OF THE CONSIDERED OPINION THAT NO PENALTY CAN BE LEVIED AS FAR AS RETURN OF AMOUNT OF RS. 7,03,368/- BEING OPENING DEBIT BALANCE RECEIVABLE FROM M/S. LAXMI TR ADING COMPANY, HAVING BEEN RECEIVED DURING THE PREVIOUS YEAR AS THE SAME IS NOT HIT BY PROVISIONS OF SECTION 269SS/269T OF THE ACT. THE RELIANCE IS ALSO PLACED ON THE DECISION OF HYDERABAD TRIBUNAL IN THE CASE OF DCIT V. ANKUSH RA O INGLE (2010) 39 SOT 263(HYD.) IN THIS REGARD . IN OUR CONSIDERED VIEW, IN ANY CASE IF THE PENALTY OF RS. 7,03,368/- IS TO BE LEVIED WITH RESPECT TO OPEN ING DEBIT BALANCE RECEIVABLE BY THE ASSESSEE FIRM FROM M/S LAXMI TRADING COMPANY , HAVING BEING RECEIVED IN CASH BY THE ASSESSEE FIRM FROM M/S LAXM I TRADING COMPANY DURING THE PREVIOUS YEAR, THE PENALTY CAN BE LEVIED ONLY AGAINST M/S. LAXMI TRADING COMPANY, AS PER THE PROVISIONS OF SECTION 2 69T OF THE ACT R.W.S. 271E OF THE ACT , FOR REPAYMENT OF LOAN IN CASH OF RS 20000/- OR MORE . HOWEVER, WE HAVE OBSERVED THAT NO SUCH PLEA WITH RE SPECT TO RETURN OF RS.7,03,368/- BEING OPENING DEBIT BALANCE WAS TAKEN BY THE ASSESSEE FIRM BEFORE THE AO AS PER FACTS EMANATING FROM RECORDS A ND HENCE FOR LIMITED PURPOSE OF VERIFYING AND CONFIRMING THE EXISTENCE O F OPENING DEBIT BALANCE OF RS.7,03,368/- BEING RECEIVABLE BY THE ASSESSEE FIRM FROM M/S LAXMI TRADING COMPANY AS AT 01-04-2004 IN THE BOOKS OF THE ASSESS EE FIRM, WE ARE REMITTING THE MATTER TO THE FILE OF AO AND ALLOW THE AFORE-ST ATED RELIEF AFTER DUE VERIFICATION BY AO. THE ASSESSEE FIRM IS DIRECTED T O APPEAR BEFORE THE AO AND SATISFY THE AO ABOUT THE EXISTENCE OF OPENING DEBIT BALANCE OF RS.7,03,368/- BEING RECEIVABLE FROM M/S LAXMI TRADING COMPANY AS AT 01-04-2004 IN THE BOOKS OF THE ASSESSEE FIRM. THE AO SHALL GRANT NECE SSARY OPPORTUNITY OF HEARING TO THE ASSESSE FIRM IN ACCORDANCE WITH LAW TO COMPLY PRINCIPLES OF NATURAL JUSTICE. WE ORDER ACCORDINGLY. ITA NOS. 1986 & 2967/M/2013 14 HOWEVER, WITH RESPECT TO THE REMAINING BALANCE AMOU NT OF RS. 41,56,632/- I.E. RS. 48.6 LAKHS LESS 7,03,368/- BEING RECEIVED AS LOAN IN CASH BY THE ASSESSEE FIRM FROM M/S LAXMI TRADING COMPANY DURING THE PREVIOUS YEAR, WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY OF R S.41,56,632/- HAS BEEN RIGHTLY IMPOSED BY THE AO AND CONFIRMED/SUSTAINED B Y THE CIT(A) AS THE ASSESSEE FIRM BY ACCEPTING CASH LOAN OF RS 20000 OR MORE FROM LAXMI TRADING COMPANY TO TUNE OF RS.41,56,632/- DURING THE PREVIO US YEAR HAS CONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE ACT AND PENA LTY IS RIGHTLY LEVIED BY THE REVENUE U/S. 271D OF THE ACT , BEING 100% OF THE AM OUNT OF CASH LOAN RECEIVED OF RS. 20000 OR MORE IN CONTRAVENTION OF S ECTION 269SS OF THE ACT, AS THE ASSESSEE FIRM HAS NOT BEEN ABLE TO SHOW ANY REA SONABLE CAUSE AS STIPULATED UNDER THE PROVISIONS OF SECTION 273B OF THE ACT AS PROVISIONS OF SECTION 269SS OF THE ACT ARE VERY CLEAR WHICH PROHI BITS RECEIVING CASH OF RS. 20,000/- OR MORE AS LOAN . THUS, THIS RECEIPT OF LO AN OF RS.41,56,632/-IN CASH BY THE ASSESSEE FIRM FROM M/S LAXMI TRADING COMPANY DURING THE PREVIOUS YEAR IS IN VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. THE ASSESSEE FIRM HAS MADE BALD STATEMENT WITH RESPECT TO BUSI NESS EXIGENCY/EXPEDIENCY WITHOUT SHOWING THE URGENCY IN THE MATTER AND THE E XPLANATION OFFERED DOES NOT , IN OUR CONSIDERED VIEW, CONSTITUTE REASONABLE CAUSE AS STIPULATED UNDER SECTION 273B OF THE ACT . ON THE OTHER HAND, ASSES SEE FIRM HAS RECEIVED CASH LOAN FROM M/S. LAXMI TRADING COMPANY WHO IS ALSO ST ATED TO BE MAINTAINING BANK ACCOUNT WITH BANK OF BARODA, C.P. TANK BRANCH WHERE THE ASSESSEE FIRM IS ALSO MAINTAINING BANK ACCOUNT WITH THE SAME BRANCH OF THE SAME BANK AND THE ASSESSEE FIRM HAS NOT SHOWN REASONABLE CAUSE AS STIPULATED UNDER SECTION 273B OF THE ACT AS TO WHAT PREVENTED THE ASSESSEE FIRM TO RECEIVE THE SAID LOAN BY CROSS ACCOUNT PAYEE CHEQUE OR DRAFT/PAY ORDER FROM M/S LAXMI TRADING COMPANY . THE SAID CASH LOANS AR E STATED TO BE UTILIZED MAINLY BY THE ASSESSEE FIRM FOR ADVANCING MONEY TO SISTER CONCERNS FOR WHICH NO REASONABLE CAUSE IS SHOWN AS TO WHY THE ASSESSEE FIRM ITSELF RAISED THE ITA NOS. 1986 & 2967/M/2013 15 MONEY IN CASH AND THEN DISBURSED THE AMOUNT TO SIST ER CONCERN BY CHEQUE THROUGH BANK. HENCE, THE SISTER CONCERN OF THE ASS ESSEE FIRM COULD HAVE ITSELF BORROWED LOAN FROM M/S. LAXMI TRADING COMPANY DIREC TLY INSTEAD OF ROUTING THE MONEY THROUGH THE ASSESSEE FIRM . THE ASSESSEE FIRM HAS TAKEN A PLEA THAT THESE LOANS ARE GENUINE AND HENCE NO PENALTY I S LEVIABLE. IT IS OUR CONSIDERED VIEW THAT PROVISIONS OF SECTION 269SS OF THE ACT ARE STRICT PROVISIONS MAKING TAXPAYER LIABLE FOR PENALTY FOR T AKING LOAN OR DEPOSIT OF RS.20,000/- OR MORE IN CASH . THERE ARE PROVISIONS U/S 273B OF THE ACT WHEN THE REASONABLE CAUSE IS SHOWN , THEN THE PENALTY IS NOT EXIGIBLE. THE PROVISIONS WERE ENACTED TO CHECK THE MENACE OF TAX EVASION SO THAT THE TAXPAYER IS NOT ALLOWED TO GIVE A FALSE EXPLANATION FOR HIS UN-ACCOUNTED MONEY OR IF HAS INTRODUCED SOME FALSE ENTRIES IN HIS ACCO UNTS, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATIONS. THUS, IT IS NOT ONLY THE LOAN TRANSACTION WHICH SHOULD BE GENUINE BUT THE TAXPAYER SHOULD COME FORW ARD WITH REASONABLE CAUSE AS PROVIDED U/S 273B OF THE ACT TO GET OUT OF CLUTCHES OF SECTION 269SS OF THE ACT READ WITH SECTION 271D OF THE ACT. THUS, BOTH THE ABOVE CONDITIONS ARE TO BE CUMULATIVELY SATISFIED BY THE TAXPAYER. HONBLE SUPREME COURT IN THE CASE OF ASSISTANT DIRECTOR OF INSPECTION V. KUM . A.B.SHANTHI (2002) 255 ITR 258(SC) HAS EXPLAINED THE REASONS AND CONSEQUEN CES OF SECTION 269SS OF THE ACT ,271D AND 273B OF THE ACT : 8. THE CONTENTION OF THE APPELLANTS COUNSEL HAS NO F ORCE. THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSURE THAT A TAXPA YER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNT ED MONEY, OR IF HE HAS GIVEN SOME FALSE ENTRIES IN HIS ACCOUNTS, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. DU RING SEARCH AND SEIZURES, UNACCOUNTED MONEY IS UNEARTHED AND TH E TAXPAYER WOULD USUALLY GIVE THE EXPLANATION THAT HE HAD BORR OWED OR RECEIVED DEPOSITS FROM HIS RELATIVES OR FRIENDS AND IT IS EASY FOR THE SO-CALLED LENDER ALSO TO MANIPULATE HIS RECORDS LATER TO SUIT THE PLEA OF THE TAXPAYER. THE MAIN OBJECT OF SECTIO N 269SS WAS TO CURB THIS MENACE. AS REGARDS THE TAX LEGISLATIONS, IT IS A POLICY MAT TER, AND IT IS FOR THE PARLIAMENT TO DECIDE IN WHICH MAN NER THE LEGISLATION ITA NOS. 1986 & 2967/M/2013 16 SHOULD BE MADE. OF COURSE, IT SHOULD STAND THE TEST OF CONSTITUTIONAL VALIDITY. 9. A CONSTITUTION BENCH OF THIS COURT IN S.K. DUTTA, ITO V. LAWARENCE SINGH INGTY, TREASURY OFFICER [1968] 68 ITR 272 HELD : 'IT IS NOT IN DISPUTE THAT TAXATION LAWS MUST ALSO PASS THE TEST OF ARTICLE 14. THAT HAS BEEN LAID DOWN BY THIS COURT IN MOOPIL NAIR V. STATE OF KERALA [1961] 3 SCR 77. BUT AS OBSERVED BY THIS COU RT IN EAST INDIA TOBACCO CO. V. STATE OF ANDHRA PRADESH [1963] 1 SCR 404, 409 IN DECIDING WHETHER THE TAXATION LAW IS DISCRIMINATORY OR NOT IT IS NECESSARY TO BEAR IN MIND THAT THE STATE HAS A WIDE DISCRETIO N IN SELECTING PERSONS OR OBJECTS IT WILL TAX, AND THAT A STATUTE IS NOT O PEN TO ATTACK ON THE GROUND THAT IT TAXES SOME PERSON OR OBJECTS AND NOT OTHERS; IT IS ONLY WHOM WITHIN THE RANGE OF ITS SELECTION, THE LAW OPE RATES UNEQUALLY, AND THAT CANNOT BE JUSTIFIED ON THE BASIS OF ANY VALID CLASSIFICATION, THAT IT WOULD BE VIOLATIVE OF ARTICLE 14. IT IS WELL SETTLE D THAT A STATE DOES NOT HAVE TO TAX EVERYTHING IN ORDER TO TAX SOMETHING. I T IS ALLOWED TO PICK AND CHOOSE DISTRICTS, OBJECTS, PERSONS, METHODS AND EVE N RATES FOR TAXATION IF IT DOES SO REASONABLY.' (P. 275) THE ABOVE DICTUM APPLIES IN FULL FORCE AS REGARDS T HE PRESENT CASE. THE OBJECT SOUGHT TO BE ACHIEVED WAS TO SYNDICATE THE E VIL PRACTICE OF MAKING OF FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIV ING EXPLANATION FOR THE SAME. TO A GREAT EXTENT, THE PROBLEM COULD BE SOLVE D BY THE IMPUGNED PROVISION. 10. THE VERY SAME PROVISION WAS EARLIER CHALLENGED IN ANOTHER WRIT PETITION BEFORE THE HIGH COURT OF MADRAS AND THE DI VISION BENCH OF THE MADRAS HIGH COURT HAD UPHELD THE CONSTITUTIONAL VAL IDITY OF SECTION 269SS IN K.R.M.V. PONNUSWAMY NADAR SONS (FIRM) V. U NION OF INDIA [1992] 196 ITR 431 1 DECIDED ON 11-9-1989. DESPITE THIS DECISION OF THE DIVISION BENCH, THE LEARNED SINGLE JUDGE QUASHE D THE PROCEEDINGS INITIATED AGAINST THE RESPONDENT UNDER SECTION 269S S. 11. A DIVISION BENCH OF THE GUJARAT HIGH COURT IN SUKH DEV RATHI V. UNION OF INDIA [1995] 211 ITR 157 2 ALSO UPHELD THE CONSTITUTIONAL VALIDITY OF SECTION 269SS. SPEAKING FOR THE BENCH, ACTING CHIEF JUSTICE G.T. NANAVATI (AS HE THEN WAS) HELD : ITA NOS. 1986 & 2967/M/2013 17 '. . . A BORROWER BY ADOPTING THE DEVICE OF GIVING A FALSE EXPLANATION OR MAKING FALSE ENTRIES OR BY OBTAINING CONFIRMATORY L ETTERS IS FOUND EVADING PAYMENT OF TAX. THUS, THE BORROWER AS A CLASS IS FO UND TO BE INDULGING IN SUCH PRACTICES. BY MAKING SUCH FALSE ENTRIES OR BY GIVING FALSE EXPLANATIONS OR BY CREATING FALSE EVIDENCE, IT IS T HE BORROWER WHO WAS FOUND TO BE EVADING PAYMENT OF TAX. IN THE CASE OF A LENDER, WE FAIL TO APPRECIATE HOW WHILE LENDING MONEY BY NOT MAKING PA YMENT BY A CHEQUE OR A DRAFT, HE WOULD EVADE PAYMENT OF INCOME -TAX. THEREFORE, THOUGH THE TRANSACTION OF LOAN CAN BE REGARDED AS A SINGLE TRANSACTION, AND THE BORROWER AND THE LENDER CAN BE SAID TO BE E QUAL INTEGRAL PARTS, WHEN WE VIEW THEM FROM THE ANGLE OF TAX EVASION, WE FIND THAT THEY CANNOT BE REGARDED AS EQUAL OR SIMILARLY SITUATED. COMPARED TO THE CLASS CONSISTING OF LENDERS, THE CLASS CONSISTING OF BORR OWERS CAN BE SAID TO BE IN A POSITION TO EVADE TAX BY ADOPTING THE DEVICES, FOR CURBING WHICH PROVISIONS HAVE BEEN MADE IN CHAPTER XX-B BY INSERT ING SECTION 269SS AND OTHER SECTIONS. . . .' (P. 162) IN VIEW OF THE AFORESAID CIRCUMSTANCES, WE DO NOT T HINK THAT SECTION 269SS IS, IN ANY WAY, VIOLATIVE OF ARTICLE 14 AND, CONSEQUENTLY, QUASHING OF THE PROCEEDINGS BY THE LEARNED SINGLE JUDGE OF T HE MADRAS HIGH COURT FOR THIS REASON IS NOT LEGALLY SUSTAINABLE. .. 19. IT IS IMPORTANT TO NOTE THAT ANOTHER PROVISION, NA MELY, SECTION 273B OF THE ACT WAS ALSO INCORPORATED WHICH PROVIDES THAT N OTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF SECTION 271 D, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CAS E MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISION IF HE PRO VES THAT THERE WAS REASONABLE CAUSE FOR SUCH FAILURE AND IF THE ASSESS EE PROVES THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO TAKE A LOAN OTH ERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DEMAND DRAFT, THEN THE PENALTY MAY NOT BE LEVIED. THEREFORE, UNDUE HARDSHIP IS VER Y MUCH MITIGATED BY THE INCLUSION OF SECTION 273B. IF THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND IF FOR ANY REASON THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASONS, THE AUTHORITY VESTED WITH T HE POWER TO IMPOSE PENALTY HAS GOT DISCRETIONARY POWER. ITA NOS. 1986 & 2967/M/2013 18 AS WE HAVE ALREADY HELD VIDE DETAILED REASONS IN T HE PRECEDING PARAS ABOVE THAT THE ASSESSEE FIRM IS NOT ABLE TO SHOW THE REAS ONABLE CAUSE AS IS REFERRED TO IN SECTION 273B OF THE ACT FOR TAKING THE LOAN R S.41,56,632/- IN CASH FROM M/S LAKSHMI TRADING COMPANY IN VIOLATION OF SECTION 269SS OF THE ACT READ WITH SECTION 271D OF THE ACT, THUS, IN OUR CONSIDER ED VIEW THE PENALTY IMPOSED BY THE AUTHORITIES BELOW NEED TO BE CONFIRM ED TO THE EXTENT OF RS.41,56,632/- , WHILE THE PENALTY OF RS.7,03,368/- AS DETAILED ABOVE FOR REASONS AND MANNER OF DELETION AS STATED ABOVE BY U S IN PRECEDING PARAS IS HEREBY DELETED. WE ORDER ACCORDINGLY. 9. IN THE RESULT APPEAL OF THE ASSESSEE FIRM IS PAR TLY ALLOWED. ITA NO. 2967/M/2013: 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE FIRM HAS REPAID LOANS TO THE E XTENT OF RS. 5 LAKHS TO M/S. LAXMI TRADING COMPANY IN CASH IN CONTRAVENTION OF PROVISIONS OF SECTION 269T OF THE ACT WHICH WAS OBSERVED BY THE A O ON SCRUTINY OF THE AUDIT REPORT AS PER PARA 24 FILED IN COMPLIANCE OF SECTION 44AB OF THE ACT. THE ASSESSEE FIRM ARGUED THAT THERE WAS NO MALA-FID E INTEREST IN REPAYING THE SAID LOANS OF RS.5,00,000/- IN CASH. THE SAME WER E REPAID IN CASH ON THE GROUND OF URGENCY, BUSINESS NECESSITY AND COMMERCIA L EXIGENCY. THE CASH LOAN REPAYMENT WAS MADE TO PREVENT BOUNCING OF THE CHEQUE WHICH WOULD HAVE BEEN ISSUED BY THE ASSESSEE FIRM TO M/S LAXMI TRADING COMPANY, DUE TO INSUFFICIENCY OF FUNDS. THE ASSESSEE FIRM WAS UNDE R A BONAFIDE BELIEF THAT REPAYING THE LOAN IN CASH ON ACCOUNT OF URGENT BUSI NESS NECESSITY DID NOT VIOLATE ANY PROVISIONS OF THE LAW AND EVEN IF IT WA S A MISTAKE IT AMOUNTED TO A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF SEC TION 269T OF THE ACT. THE SAME BEING A BONA-FIDE MISTAKE ON ACCOUNT OF IGNORA NCE OF LAW , AS PER THE ASSESSEE FIRM , IT CONSTITUTED A REASONABLE CAUSE W ITHIN THE MEANING OF ITA NOS. 1986 & 2967/M/2013 19 SECTION 273B OF THE ACT. THE ASSESSEE FIRM REITERAT ED ITS SUBMISSIONS WHICH ARE SIMILAR TO THOSE AS WAS ADVANCED WITH RESPECT T O RAISING OF THE LOAN IN CASH FROM THE SAME CONCERN M/S. LAXMI TRADING COMPA NY WHICH ARE DETAILED IN THE PRECEDING PARAS CONCERNING APPEAL NO. ITA 1 986/MUM/2013 AND ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE AO HAS R EJECTED THE CONTENTION OF THE ASSESSEE FIRM ON THE SIMILAR GROUNDS AND REASONING AS IN THE CASE OF EARLIER ITA NO. 1986/MUM/2013 WITH RESPECT TO RAISING OF CA SH LOAN OF RS.48.6 LAKHS BY THE ASSESSEE FIRM FROM THE SAME CO NCERN M/S. LAXMI TRADING COMPANY WHICH ARE DETAILED IN PRECEDI NG PARAS AND ARE NOT REPEATED FOR SAKE OF BREVITY AND PENALTY OF RS.5 LA KHS WAS LEVIED U/S271E OF THE ACT FOR THE VIOLATION OF PROVISIONS OF SECTION 269T FOR REPAYING CASH LOAN OF RS.20000/- OR MORE IN CASH AGGREGATING TO RS. 5 LAK HS TO M/S. LAXMI TRADING COMPANY VIDE ORDERS DATED 27/06/2008 PASSED BY AO U/S 271E OF THE ACT. THE AO ALSO HAVING NOTED THAT THE ASSESSEE FIRM HAS WITHDRAWN RS.5 LACS IN CASH ON 23.7.2004 FROM THE BANK ACCOUNT VID E CHEQUE , WHICH THE ASSESSEE FIRM INSTEAD OF WITHDRAWING THE CASH FROM ITS BANK ACCOUNT COULD HAVE TRANSFERRED THE AMOUNT VIDE CHEQUE FROM THE SA ME BANK TO M/S LAXMI TRADING COMPANY AS THE ASSESSEE FIRM REPAID THE LOA N ON 23-07-2004 ITSELF IN CASH AND BOTH THE ASSESSEE FIRM AND M/S LAXMI TR ADING COMPANY ARE MAINTAINING BANK ACCOUNTS WITH THE SAME BRANCH OF T HE SAME BANK. THE ASSESSEE FIRM REPAID THEREAFTER TO M/S LAXMI TRADIN G COMPANY, LOANS VIDE CHEQUE ON 09.08.2004 AND 01.09.2004. 11.AGGRIEVED BY THE PENALTY ORDERS DATED 27-06-2008 PASSED U/S 271E OF THE ACT, THE ASSESSEE FIRM FILED THE FIRST APPEAL BEFOR E THE CIT(A) AND REITERATED THE SAME SUBMISSIONS AS WAS MADE BEFORE THE AUTHORITIES BELOW. THE ASSESSEE FIRM SUBMITTED THAT CASH LOAN OF RS.5 LACS WAS REPA ID TO M/S LAXMI TRADING COMPANY TO MEET URGENT NEED TO COMPLETE THE BUSINES S TRANSACTION. THE ASSESSEE FIRM SUBMITTED THAT IT WAS IGNORANT OF PRO VISIONS OF LAW IN THIS RESPECT AND THEREFORE MISTAKE OCCURRED DUE TO BONAF IDE BELIEF ON THE PART OF ITA NOS. 1986 & 2967/M/2013 20 THE ASSESSEE FIRM THAT LOAN CAN BE REPAID IN CASH. THE ASSESSEE FIRM SUBMITTED THAT IGNORANCE OF LAW IS A REASONABLE CAU SE AND THEREFORE NO PENALTY IS EXIGIBLE. THE ASSESSEE FIRM SUBMITTED TH AT TRANSACTIONS WITH THE SAID CONCERN M/S LAXMI TRADING COMPANY ARE IN THE N ATURE OF CURRENT ACCOUNT AND CANNOT BE REGARDED AS LOANS OR DEPOSITS AS CONTEMPLATED U/S 269T OF THE ACT . THE ASSESSEE FIRM SUBMITTED THAT IT IS A TECHNICAL OR VENIAL BREACH OF PROVISIONS OF LAW AND NO PENALTY IS EXIGI BLE. 12.THE CIT(A) CONFIRMED THE PENALTY LEVIED U/S. 271 E OF THE ACT OF RS. 5 LAKHS FOR VIOLATION OF SECTION 269T OF THE AC T FOR REPAYMENT OF LOANS OF RS. 5 LAKHS IN CASH TO M/S. LAXMI TRAD ING COMPANY ON 23- 07-2004 . THE CIT(A) HELD THAT IGNORANCE OF LAW IS NO EXCUSE. THE ASSESSEE FIRM BEING IN BUSINESS OF ADVANCING LOANS AND REPAY ING LOANS FOR NUMBER OF YEARS . THE ACCOUNTS OF THE ASSESSEE FIRM ARE AUDIT ED BY A QUALIFIED CHARTERED ACCOUNTANT . THE TOTAL LOAN AVAILED AND REPAID DURI NG THE YEAR BEING RS 68 CRORES WITH 78 PARTIES. THE ASSESSEE FIRM HAS COMPL IED WITH REQUIREMENTS OF SECTION 269SS AND 269T OF THE ACT WITH RESPECT TO I TS DEALING WITH 77 PARTIES AND HAS VIOLATED THE PROVISIONS OF THE ACT WITH RES PECT TO ONLY ONE PARTY NAMELY LAXMI TRADING COMPANY. THUS,THE CIT(A) HELD CONTENTION OF THE ASSESSEE FIRM THAT IT IS NOT AWARE OF THE PROVISION S OF THE LAW IS NOT CORRECT. THE ASSESSEE FIRM ITSELF HAVING STATED THAT IT IS I N BUSINESS OF ADVANCING AND RECEIVING LOANS WHICH IS ALSO STATED BY AUDITORS TO BE BUSINESS OF THE ASSESSEE FIRM IN THEIR AUDIT REPORT AND THE AUDITORS HAVING REPORTED THESE TRANSACTIONS AS LOAN TRANSACTION, IT IS NOW INCORRECT TO SAY ON PART OF THE ASSESSEE FIRM THAT THE TRANSACTIONS WITH M/S LAXMI TRADING COMPANY ARE BUSINESS TRANSACTIONS RATHER THESE ARE LOAN TRANSACTIONS AS HELD BY THE C IT(A). THE CONTENTIONS OF THE ASSESSEE FIRM THAT THERE IS BUSINESS URGENCY WA S ALSO REJECTED BY THE CIT(A) HOLDING THAT NO SUCH EVIDENCE IS FILED BY TH E ASSESSEE FIRM SHOWING URGENCY IN REPAYMENT OF LOAN IN CASH ON 23-07-2004. THE ASSESSEE FIRM REPAID THEREAFTER TO M/S LAXMI TRADING COMPANY, LOANS VIDE CHEQUE ON 09.08.2004 ITA NOS. 1986 & 2967/M/2013 21 AND 01.09.2004. THE ASSESSEE FIRM COULD HAVE ISSUED THE CHEQUE TO M/S LAXMI TRADING COMPANY INSTEAD OF REPAYING LOAN BY C ASH AND RATHER DEPOSITED CASH IN ITS OWN BANK ACCOUNT.THE CIT(A) H ELD THAT BUSINESS URGENCY IN PAYING LOAN TO SISTER CONCERN IS ENEXPLI CABLE. BOTH M/S LAXMI TRADING COMPANY AND THE ASSESSEE FIRM ARE MAINTAINI NG BANK ACCOUNT WITH THE SAME BRANCH OF THE SAME BANK AND THE ASSESSEE F IRM COULD HAVE ISSUED CHEQUE AND TRANSFERRED THE MONEY TO M/S LAXMI TRADI NG COMPANY THROUGH TRANSFER WITH IN THE SAME BANK INSTANTLY FROM ONE B ANK ACCOUNT TO ANOTHER IN THE SAME BRANCH OF THE SAME BANK. THE CONTENTION OF THE ASSESSEE FIRM THAT TO AVOID BOUNCING OF CHEQUE , IT REPAID LOAN IN CAS H WAS ALSO REJECTED BY THE CIT(A) AS THE ASSESSEE FIRM HAS WITHDRAWN CASH OF R S.5,00,000/- ON 23-07- 2004 I.E. THE SAME DAY WHEN THE LOAN WAS REPAID IN CASH. THUS, THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271E OF THE ACT, VIDE ORDERS DATED 23-12-2011. 13. AGGRIEVED BY THE ORDERS DATED 23-12-2011 PASS ED BY THE CIT(A), THE ASSESSEE FIRM IS IN APPEAL BEFORE THE TRIBUNAL . 14. THE ASSESSEE FIRM REITERATED THE SUBMISSIONS AS MADE BEFORE AUTHORITIES BELOW . THE ASSESSEE FIRM SUBMITTED THAT THERE IS U RGENCY, BUSINESS NECESSITY AND COMMERCIAL EXIGENCY. THE ASSSESSEE FIRM SUBMIT TED THAT THE MISTAKE BEING TECHNICAL AND VENIAL BREACH OF PROVISIONS OF SECTION 269T OF THE ACT, IS A BONAFIDE MISTAKE WHEREBY THE ASSESSEE FIRM WAS NOT AWARE THAT REPAYMENT OF LOAN OF RS.20000 OR MORE IN CASH TO M/S. LAXMI TRA DING COMPANY WILL ATTRACT PENALTY U/S 269T OF THE ACT READ WITH SECTI ON 271E OF THE ACT AND PENALTY LEVIED U/S. 271E OF THE ACT OF RS. 5 LAKHS FOR BREACH OF PROVISIONS OF SECTION 269T OF THE ACT SHOULD BE DELETED. 15. THE LD. DR RELIED ON THE ORDER OF THE AUTHORITI ES BELOW. ITA NOS. 1986 & 2967/M/2013 22 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES AND ALSO RECEIVING LOANS AND ADVANCING LOANS. PERUSAL OF THE STATEMENT OF ACCOUNT OF THE ASSESSEE FIRM WITH M/S LAXMI TRADING COMPANY WHICH IS PLACED AT PAPER BOOK,PAGE 2 CLEARLY REVEALS THAT THERE NO BUSINESS/ COMMERCIAL TRANSACTIONS ENTERED BY THE ASSESSEE FIRM WITH M/S LAXMI TRADING COMPANY BUT RATHER THESE TRA NSACTIONS ARE IN THE NATURE OF RECEIVING LOANS AND REPAYMENTS OF LOANS W HICH ALSO HAPPENS TO BE BUSINESS OF THE ASSESSES FIRM.THUS, THIS PAYMENT OF RS.5,00,000/- IN CASH BY THE ASSESSEE FIRM TO M/S LAXMI TRADING COMPANY ON 2 3-07-2004 IS REPAYMENT OF LOAN WHICH IS IN VIOLATION OF PROVISIO NS OF SECTION 269T OF THE ACT. THE ASSESSEE FIRM HAS ENTERED INTO TRANSACTION S OF LOANS WITH 78 PARTIES AGGREGATING TO RECEIVING AND REPAYMENT OF LOANS OF RS 68 CRORES WHEREBY WITH RESPECT TO 77 PARTIES, THE DEALINGS WERE BY CHEQUES WHILE DEALING WITH M/S LAXMI TRADING COMPANY, THE ASSESSEE FIRM DEALT WITH BOTH CHEQUES AND CASH. THE ACCOUNTS OF THE ASSESSEE FIRM WERE AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT WHO HAS GIVEN A REPORT IN FORM NO 3CD HI GHLIGHTING THE VIOLATIONS OF SECTION 269T OF THE ACT WHICH IS PLACED AT PAPER BOOK, PAGE 10. WE ARE OF THE CONSIDERED OPINION THE PENALTY OF RS.5,00,000/- U/S 271E OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 269T OF THE ACT, HAS BEEN RIGHTLY IMPOSED BY THE AO AND CONFIRMED/SUSTAINED BY THE CI T(A) AS THE ASSESSEE FIRM BY REPAYING LOAN AGGREGATING TO RS.5,00,000/- IN CASH , REPAYMENT BEING RS 20000 OR MORE TO M/S LAXMI TRADING COMPANY IN CA SH HAS CONTRAVENED THE PROVISIONS OF SECTION 269T OF THE ACT AND PENAL TY OF RS.5,00,000/- IS RIGHTLY LEVIED U/S. 271E OF THE ACT , BEING 100% OF THE AMOUNT OF LOAN RETURNED IN CASH IN CONTRAVENTION OF SECTION 269T O F THE ACT, THE ASSESSEE FIRM HAS NOT BEEN ABLE TO SHOW ANY REASONABLE CAUSE SO FAR AS THE AMOUNT OF RS. 5,00,000/- LOAN RETURNED BY THE ASSESSEE FIRM I N CASH TO M/S. LAXMI TRADING COMPANY, PROVISIONS OF SECTION 269T OF THE ACT ARE VERY CLEAR WHICH PROHIBITS REPAYING CASH OF RS. 20,000/- OR MORE L OAN IN CASH AND NO ITA NOS. 1986 & 2967/M/2013 23 REASONABLE CAUSE HAS BEEN SHOWN BY THE ASSESSEE FIR M. THE ASSESSEE FIRM HAS MADE BALD STATEMENT WITH RESPECT TO BUSINESS EXIGENCY/EXPEDIENCY WITHOUT SHOWING THE URGENCY IN THE MATTER AND THE E XPLANATION OFFERED DOES NOT , IN OUR CONSIDERED VIEW, CONSTITUTE REASONABLE CAUSE AS STIPULATED UNDER SECTION 273B OF THE ACT . ON THE OTHER HAND, THE A SSESSEE FIRM HAS REPAID IN CASH LOAN TO M/S. LAXMI TRADING COMPANY WHO IS ALSO STATED TO BE MAINTAINING BANK ACCOUNT WITH BANK OF BARODA, C.P. TANK BRANCH WHERE THE ASSESSEE FIRM IS ALSO MAINTAINING BANK ACCOUNT IN T HE SAME BRANCH WHEREBY THESE TRANSACTIONS COULD HAVE EASILY BEEN CARRIED O UT THROUGH TRANSFER FROM THE BANK ACCOUNT OF THE ASSESSEE FIRM TO THE BANK A CCOUNT OF M/S LAXMI TRADING COMPANY BY TRANSFER WITHIN SAME BRANCH OF T HE SAME BANK AND MORE SO THERE WAS SUFFICIENT BALANCE IN THE BANK ACCOUNT OF THE ASSESSEE FIRM ON 23-07-2004 AS THE ASSESSEE FIRM WITHDREW RS.5,00,00 0/- ON 23-07-2004 AND THE RE-PAYMENT OF LOAN OF RS.5,00,000/- IN CASH ALS O HAVING BEEN MADE ON 23-07-2004, NO REASON / EXPLANATION AS TO WHAT PREV ENTED THE ASSESSEE FIRM FROM PAYING THE SAID AMOUNT BY CROSSED ACCOUNT PAYE E CHEQUE OR PAYORDER/DEMAND DRAFT HAS BEEN FURNISHED BY THE ASS ESSEE FIRM. THE ASSESSEE FIRM HAS TAKEN A PLEA THAT THESE LOANS AGA INST WHICH RE-PAYMENT OF RS 5,00,000/- IS MADE ARE GENUINE AND HENCE NO PENA LTY IS LEVIABLE. IN OUR CONSIDERED VIEW , THE PROVISIONS OF SECTION 269T OF THE ACT ARE STRICT PROVISIONS MAKING TAXPAYER LIABLE FOR PENALTY FOR R EPAYING LOAN OR DEPOSIT OF RS.20,000/- OR MORE IN CASH. THERE ARE PROVISIONS U /S 273B OF THE ACT WHEN THE REASONABLE CAUSE IS SHOWN , THEN THE PENALTY IS NOT EXIGIBLE. THE PROVISIONS WERE ENACTED TO CHECK THE MENACE OF TAX EVASION SO THAT THE TAXPAYER IS NOT ALLOWED TO GIVE A FALSE EXPLANATION FOR HIS UN-ACCOUNTED MONEY OR IF HAS INTRODUCED SOME FALSE ENTRIES IN HIS ACCO UNTS, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION. THUS, IT IS NOT ONLY THE LOAN TRANSACTION WITH RESPECT TO WHICH REPAYMENT OF LOAN HAS BEEN MADE WHICH SHOU LD BE GENUINE BUT THE TAXPAYER SHOULD COME FORWARD WITH REASONABLE CAUSE AS PROVIDED U/S 273B OF THE ACT CUMULATIVELY TO GET OUT OF CLUTCHES OF SECT ION 269T OF THE ACT READ ITA NOS. 1986 & 2967/M/2013 24 WITH SECTION 271E OF THE ACT. HONBLE SUPREME COURT IN THE CASE OF ASSISTANT DIRECTOR OF INSPECTION V. KUM. A.B.SHANTHI (2002) 2 55 ITR 258(SC) HAS EXPLAINED THE REASONS AND CONSEQUENCES OF SECTION 2 69SS OF THE ACT , 271D AND 273B OF THE ACT , WHICH IS EQUALLY APPLICABLE T O SECTION 269T OF THE ACT READ WITH SECTION 271E OF THE ACT : 8. THE CONTENTION OF THE APPELLANTS COUNSEL HAS NO F ORCE. THE OBJECT OF INTRODUCING SECTION 269SS IS TO ENSURE THAT A TAXPA YER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACCOUNTED MONEY, O R IF HE HAS GIVEN SOME FALSE ENTRIES IN HIS ACCOUNTS, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. DURING SEARCH AND SEIZURE S, UNACCOUNTED MONEY IS UNEARTHED AND THE TAXPAYER WOULD USUALLY G IVE THE EXPLANATION THAT HE HAD BORROWED OR RECEIVED DEPOSITS FROM HIS RELATIVES OR FRIENDS AND IT IS EASY FOR THE SO-CALLED LENDER ALSO TO MAN IPULATE HIS RECORDS LATER TO SUIT THE PLEA OF THE TAXPAYER. THE MAIN OBJECT O F SECTION 269SS WAS TO CURB THIS MENACE. AS REGARDS THE TAX LEGISLATIONS, IT IS A POLICY MATTER, AND IT IS FOR THE PARLIAMENT TO DECIDE IN WHICH MAN NER THE LEGISLATION SHOULD BE MADE. OF COURSE, IT SHOULD STAND THE TEST OF CONSTITUTIONAL VALIDITY. 9. A CONSTITUTION BENCH OF THIS COURT IN S.K. DUTTA, ITO V. LAWARENCE SINGH INGTY, TREASURY OFFICER [1968] 68 ITR 272 HELD : 'IT IS NOT IN DISPUTE THAT TAXATION LAWS MUST ALSO PASS THE TEST OF ARTICLE 14. THAT HAS BEEN LAID DOWN BY THIS COURT IN MOOPIL NAIR V. STATE OF KERALA [1961] 3 SCR 77. BUT AS OBSERVED BY THIS COU RT IN EAST INDIA TOBACCO CO. V. STATE OF ANDHRA PRADESH [1963] 1 SCR 404, 409 IN DECIDING WHETHER THE TAXATION LAW IS DISCRIMINATORY OR NOT IT IS NECESSARY TO BEAR IN MIND THAT THE STATE HAS A WIDE DISCRETIO N IN SELECTING PERSONS OR OBJECTS IT WILL TAX, AND THAT A STATUTE IS NOT O PEN TO ATTACK ON THE GROUND THAT IT TAXES SOME PERSON OR OBJECTS AND NOT OTHERS; IT IS ONLY WHOM WITHIN THE RANGE OF ITS SELECTION, THE LAW OPE RATES UNEQUALLY, AND THAT CANNOT BE JUSTIFIED ON THE BASIS OF ANY VALID CLASSIFICATION, THAT IT WOULD BE VIOLATIVE OF ARTICLE 14. IT IS WELL SETTLE D THAT A STATE DOES NOT HAVE TO TAX EVERYTHING IN ORDER TO TAX SOMETHING. I T IS ALLOWED TO PICK AND CHOOSE DISTRICTS, OBJECTS, PERSONS, METHODS AND EVE N RATES FOR TAXATION IF IT DOES SO REASONABLY.' (P. 275) THE ABOVE DICTUM APPLIES IN FULL FORCE AS REGARDS T HE PRESENT CASE. THE OBJECT SOUGHT TO BE ACHIEVED WAS TO SYNDICATE THE E VIL PRACTICE OF MAKING ITA NOS. 1986 & 2967/M/2013 25 OF FALSE ENTRIES IN THE ACCOUNT BOOKS AND LATER GIV ING EXPLANATION FOR THE SAME. TO A GREAT EXTENT, THE PROBLEM COULD BE SOLVE D BY THE IMPUGNED PROVISION. 10. THE VERY SAME PROVISION WAS EARLIER CHALLENGED IN ANOTHER WRIT PETITION BEFORE THE HIGH COURT OF MADRAS AND THE DI VISION BENCH OF THE MADRAS HIGH COURT HAD UPHELD THE CONSTITUTIONAL VAL IDITY OF SECTION 269SS IN K.R.M.V. PONNUSWAMY NADAR SONS (FIRM) V. U NION OF INDIA [1992] 196 ITR 431 1 DECIDED ON 11-9-1989. DESPITE THIS DECISION OF THE DIVISION BENCH, THE LEARNED SINGLE JUDGE QUASHE D THE PROCEEDINGS INITIATED AGAINST THE RESPONDENT UNDER SECTION 269S S. 11. A DIVISION BENCH OF THE GUJARAT HIGH COURT IN SUKH DEV RATHI V. UNION OF INDIA [1995] 211 ITR 157 2 ALSO UPHELD THE CONSTITUTIONAL VALIDITY OF SECTION 269SS. SPEAKING FOR THE BENCH, ACTING CHIEF JUSTICE G.T. NANAVATI (AS HE THEN WAS) HELD : '. . . A BORROWER BY ADOPTING THE DEVICE OF GIVING A FALSE EXPLANATION OR MAKING FALSE ENTRIES OR BY OBTAINING CONFIRMATORY L ETTERS IS FOUND EVADING PAYMENT OF TAX. THUS, THE BORROWER AS A CLASS IS FO UND TO BE INDULGING IN SUCH PRACTICES. BY MAKING SUCH FALSE ENTRIES OR BY GIVING FALSE EXPLANATIONS OR BY CREATING FALSE EVIDENCE, IT IS T HE BORROWER WHO WAS FOUND TO BE EVADING PAYMENT OF TAX. IN THE CASE OF A LENDER, WE FAIL TO APPRECIATE HOW WHILE LENDING MONEY BY NOT MAKING PA YMENT BY A CHEQUE OR A DRAFT, HE WOULD EVADE PAYMENT OF INCOME -TAX. THEREFORE, THOUGH THE TRANSACTION OF LOAN CAN BE REGARDED AS A SINGLE TRANSACTION, AND THE BORROWER AND THE LENDER CAN BE SAID TO BE E QUAL INTEGRAL PARTS, WHEN WE VIEW THEM FROM THE ANGLE OF TAX EVASION, WE FIND THAT THEY CANNOT BE REGARDED AS EQUAL OR SIMILARLY SITUATED. COMPARED TO THE CLASS CONSISTING OF LENDERS, THE CLASS CONSISTING OF BORR OWERS CAN BE SAID TO BE IN A POSITION TO EVADE TAX BY ADOPTING THE DEVICES, FOR CURBING WHICH PROVISIONS HAVE BEEN MADE IN CHAPTER XX-B BY INSERT ING SECTION 269SS AND OTHER SECTIONS. . . .' (P. 162) IN VIEW OF THE AFORESAID CIRCUMSTANCES, WE DO NOT T HINK THAT SECTION 269SS IS, IN ANY WAY, VIOLATIVE OF ARTICLE 14 AND, CONSEQUENTLY, QUASHING OF THE PROCEEDINGS BY THE LEARNED SINGLE JUDGE OF T HE MADRAS HIGH COURT FOR THIS REASON IS NOT LEGALLY SUSTAINABLE. .. ITA NOS. 1986 & 2967/M/2013 26 19. IT IS IMPORTANT TO NOTE THAT ANOTHER PROVISION, NA MELY, SECTION 273B OF THE ACT WAS ALSO INCORPORATED WHICH PROVIDES THAT N OTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF SECTION 271 D, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CAS E MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISION IF HE PRO VES THAT THERE WAS REASONABLE CAUSE FOR SUCH FAILURE AND IF THE ASSESS EE PROVES THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO TAKE A LOAN OTH ERWISE THAN BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE DEMAND DRAFT, THEN THE PENALTY MAY NOT BE LEVIED. THEREFORE, UNDUE HARDSHIP IS VER Y MUCH MITIGATED BY THE INCLUSION OF SECTION 273B. IF THERE WAS A GENUINE AND BONA FIDE TRANSACTION AND IF FOR ANY REASON THE TAXPAYER COULD NOT GET A LOAN OR DEPOSIT BY ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT FOR SOME BONA FIDE REASONS, THE AUTHORITY VESTED WITH T HE POWER TO IMPOSE PENALTY HAS GOT DISCRETIONARY POWER. THUS , IN OUR CONSIDERED VIEW AND DETAILED REASONIN G VIDE PRECEDING PARAS, THIS PENALTY OF RS.5,00,000/- IMPOSED BY THE AUTHOR ITIES BELOW NEED TO BE CONFIRMED/SUSTAINED AS PER DETAILED ORDERS OF THE A UTHORITIES BELOW AS THE ASSESSEE FIRM HAS FAILED TO SHOW REASONABLE CAUSE A S STIPULATED UNDER SECTION 273B OF THE ACT AND WE DO NOT FIND ANY INFIRMITY IN THEIR ORDERS. WE ORDER ACCORDINGLY. 17. IN THE RESULT , THE APPEAL FILED BY THE ASSESSE E FIRM IS DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FIRM VIDE ITA NO.1986/MUM/2013 IS PARTLY ALLOWED WHILE THE APPEAL FILED BY THE ASSESSEE FIRM VIDE ITA NO. 2967/MUM/2013 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY , 2016 $% '# & '( )$ * 19-01-2016 # + , ITA NOS. 1986 & 2967/M/2013 27 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) ( RAMIT KOCHAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER ' = MUMBAI ; )$ DATED 19/01/2016 .../ TNMM/ TNMM/ TNMM/ TNMM/ R.K. R.K. R.K. R.K. , SR. PS *+, - ./012 3+240 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 21, MUMBAI 4. > / CIT- 10, MUMBAI 5. ?@+ A , ! A , ' = / DR, ITAT, MUMBAI A BENCH 6. +C D / GUARD FILE. *+,5 6 / BY ORDER, ? //TRUE COPY// 7/68 9 ( DY./ASSTT. REGISTRAR) , ' = / ITAT, MUMBAI