Monarch Dyestuff Industries & Exports Ltd., Ahmedabad V. The Jt.CIT, Range-2(1), Ahmedabad

ITA 397/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8304 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: T P HEMANI
• Keywords: Income from undisclosed sources; Question of law; Reasonable cause; Difference of opinion
• Section: 273B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.397 AND 398/AHD/2016 / ASSTT. YEAR: 2009-2010 MONARCH DYESTUFF INDUSTRIES & EXPORTS LTD. 301, SHAGUN COMPLEX NR. ST. XAVIERS LADIES HOSTEL NAVRANGPURA AHMEDABAD 380009. PAN : AABCM 8936 F VS. JCIT, RANGE - 2(1) AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI T.P. HEMANI, AR REVENUE BY : SHRI V.K. SINGH, SR.DR / DATE OF HEARING : 19/03/2018 / DATE OF PRONOUNCEMENT: 22/05/2018 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST SEPARATE ORDERS OF THE LD.CIT(A) DATED 6.11.2015 PA SSED FOR THE ASSTT.YEAR 2009-10. 2. THOUGH THE ASSESSEE HAS TAKEN FOUR GROUNDS OF AP PEAL IN EACH APPEAL, BUT ITS SOLITARY GRIEVANCE RELATES TO CONFIRMATION OF PENALTY UNDER SECTION 271D AND 271E OF THE INCOME TAX ACT AMOUNTING TO RS .1,74,99,700/- AND RS.51,16,065/- RESPECTIVELY. ITA NO.397 AND 398/AHD/2016 2 3. THE FACTS ON ALL VITAL POINTS ARE COMMON. PENAL TY HAS BEEN IMPOSED FOR VIOLATION OF SECTION 269SS AND 269T OF THE INCOME T AX ACT, 1961. IN OTHER WORDS, ACCORDING TO THE LD.AO THE ASSESSEE HAS OBTA INED LOAN/DEPOSITS IN CASH AND VIOLATED PROVISIONS OF SECTION 269SS, THEREFORE , DESERVES TO BE VISITED WITH PENALTY UNDER SECTION 271D. SIMILARLY, IT HAS REPAID ALLEGED LOAN/DEPOSITS IN CASH AND ALLEGED TO HAVE VIOLATED SECTION 269T. THE LD.AO HAS IMPOSED PENALTY OF RS.51,16,065/- UNDER SECTION 271E OF THE ACT. THUS, SHORT CONTROVERSY INVOLVED IN BOTH APPEALS RELATES TO, WHETHER THE ASSESSEE IS ABLE TO ESTABLISH REASONABLE CAUSE FOR ACCEPTING AL LEGED LOANS OR DEPOSITS IN CASH AND MAKING REPAYMENT OF SUCH LOANS/DEPOSITS IN CASH FOR ABSOLVING IT FROM VIGOR OF PENALTY IMPOSABLE UNDER SECTION 271D AND 271E OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT ON PERUSAL OF T HE AUDIT REPORT IN FORM NO.3CD FOR THE F.Y.2008-09, IT REVEALED TO THE AO T HAT AT CLAUSE (3) OF ITEM NO.24, THE ASSESSEE HAD SHOWN LOANS/DEPOSITS RECEIV ED BY IT WHICH FALL WITHIN THE AMBIT OF SECTION 269SS, AS SUM ACCEPTED OR TAKE N OTHERWISE BY CROSSED- CHEQUES. THE LIST OF SUCH AMOUNTS IS AS UNDER: AKHSARSHROFF : RS.69,60,700/- AMIT K. SHAH : RS.11,00,000/- ARUNLALCHIMANLAL : RS.20,00,000/- ROYAL DYECHEMLNDST. : RS.27,35,000/- GOKULFINANCE : RS.7,75,000/- KIRTIPAL K. SHAH - : RS.6,95,000/- BHARTIBEN K. SHAH- : RS.9,50,000/- NIRAJK.SHAH : RS.13,00,000/- AKHANIFINANCE : RS.9,84,000/- TOTAL : RS.1,74,99,700/- 5. SIMILARLY, IT REVEALED TO THE AO THAT IT HAS MAD E PAYMENT OF ALLEGED LOANS/DEPOSITS IN CASH. DETAILS OF SUCH PAYMENT NO TICED BY THE AO READ AS UNDER: ITA NO.397 AND 398/AHD/2016 3 SI. NO. NAME OF THE PERSON PAN AMOUNT OF LOAN/DEPOSIT REPAID DURING PREVIOUS YEAR (RS.) 1. ROYAL DYECHEM INDUSTRIES NOT AVAILABLE 5200000 2. KIRTIPAL K SHAH AKUPS3853M 175512 3. BHARTIBEN KSHAH ALIPS8949K 43100 4. NIRAJKSHAH ANYPS3197B 97453 TOTAL 55,16,065 6. THE LD.AO VIDE SHOW CAUSE NOTICE DATED 11.6.2014 ISSUED UNDER SECTION 274 R.W.S. SECTION 271D AND 271E INVITED EXPLANATIO N OF THE ASSESSEE AS TO WHY THE ASSESSEE SHOULD NOT BE VISITED WITH PENALTY UNDER SECTIONS 271D AND 271E FOR VIOLATION OF SECTIONS 269SS AND 269T OF TH E ACT. THE ASSESSEE MADE DETAILED WRITTEN SUBMISSIONS WHICH WERE CONSIDERED BY THE AO, BUT SOMEHOW THE LD.AO DID NOT CONVINCE WITH THE CONTENTIONS OF THE ASSESSEE AND IMPOSED PENALTY OF RS.1,74,99,700/- UNDER SECTION 271D AND RS.55,16,065/- UNDER SECTION 271E OF THE ACT. 7. DISSATISFIED WITH THE PENALTY ORDER, THE ASSESSE E HAD FILED TWO SEPARATE APPEALS BEFORE THE LD.CIT(A). IT FILED WRITTEN SUB MISSIONS IN BOTH THE APPEALS, WHICH HAVE BEEN REPRODUCED BY THE LD.CIT(A). THE L D.CIT(A) HAS GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE BUT DID NOT ACCEPT THEM. THE LD.CIT(A) CONCUR WITH THE AO AND CONFIRMED PENALTY BY WAY OF IMPUGNED ORDERS PASSED INDEPENDENTLY ON EACH APPEALS OF THE ASSESSEE. 8. DISSATISFIED WITH THE ORDERS OF THE LD.CIT(A) AS SESSEE HAS COME UP IN APPEALS BEFORE THE TRIBUNAL. WHILE IMPUGNING ORDER OF THE LD.CIT(A), THE LD.COUNSEL FOR THE ASSESSEE RAISED MULTI-FOLD SUBMI SSIONS. WITH REGARD TO THE ITA NO.397 AND 398/AHD/2016 4 PENALTY IMPOSED UNDER SECTION 271D, HE CONTENDED TH AT PENALTY ORDER IS TIME BARRED. ACCORDING THE LD.COUNSEL FOR THE ASSESSEE, ACTION UNDER SECTION 271D HAS BEEN TAKEN IN THE ASSESSMENT YEAR 2009-10. PEN ALTY ORDER HAS BEEN PASSED ON 8.12.2014. THOUGH, ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE, THERE IS NO TIME LIMIT PRESCRIBED UNDER STATUTE FOR PASSING PENALTY ORDER UNDER SECTION 271D, BUT MUST BE PASSED WITHIN A REASONABLE TIME. ON THE STRENGTH OF FOLLOWING DECISIONS: NHK JAPAN BROADCASTING CORPN., 305 ITR 137 (DEL); CIT VS. HUTCHISON ESSAR TELECOM LTD., 323 ITR 230 ( DEL); ITO VS. VISHAL FABRICS P.LTD., ITA NO.448/A/2007; LEELA SHIP RECYCLING P.LTD., ITA NO.2011/AHD/2015; H.AJITBHAI & CO., VS. ACIT, 45 ITD 262 (AHD) HE CONTENDED THAT WHERE NO TIME LIMIT HAS BEEN PRES CRIBED IN THE INCOME TAX ACT, FOR TAKING ACTION BY THE AUTHORITIE S, THEN HONBLE COURTS HAVE CONTEMPLATED A REASONABLE TIME PERIOD OF FOUR YEARS. IN THE PRESENT CASE, FOUR YEARS WOULD EXPIRE ON 31.3.2014 I.E. FOUR YEAR S FROM 31.3.2010 WHEN THE ASSESSMENT YEAR 2009-10 ENDED. PENALTY ORDER HAS B EEN PASSED ON 8.12.2014 WHICH IS TIME BARRED. IN HIS SECOND FOLD OF CONTEN TIONS, HE APPRAISED US REASONABLE CAUSE AVAILABLE WITH THE ASSESSEE WITHIN THE MEANING OF SECTION 273B OF THE ACT FOR ACCEPTING ALLEGED AMOUNT IN CAS H AS WELL AS PAYMENT IN CASH. FOR BUTTRESSING THIS CONTENTIONS, HE TOOK US THROUGH WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(A) WHOSE COPY IS AVAILABLE AT PAGE NOS.180 TO 214 OF THE PAPER BOOK. HE CONTENDED THAT THESE SUBMISSION S HAVE BEEN EXTRACTED BY THE LD.CIT(A) WHILE DEALING PENALTY IMPOSED UNDER S ECTION 271D OF THE ACT. THE LD.COUNSEL FOR THE ASSESSEE HAS SUB-DIVIDED HIS CONTENTIONS ON THE SECOND FOLD OF SUBMISSIONS I.E. REASONABLE CAUSE. HE POIN TED OUT THAT OUT OF NINE PERSONS FROM WHOM ALLEGED LOANS HAVE BEEN ACCEPTED BY THE ASSESSEE, THREE ARE DIRECTORS VIZ. (I) KIRTIPAL K. SHAH, (II) BHART IBEN K. SHAH, AND (III) NIRAJ K. ITA NO.397 AND 398/AHD/2016 5 SHAH. THEY WERE MAINTAINING CURRENT ACCOUNT WITH A SSESSEE COMPANY. THEY HAVE DEPOSITED CASH AND ALSO WITHDRAWN THE AMOUNT I N CASH. PENALTY UNDER SECTION 271E HAS ALSO BEEN IMPOSED QUA THE SUMS TAKEN BY THEM IN CASH. IT WAS ALSO CONTENDED THAT AMOUNTS WERE RECEIVED BY TH E ASSESSEE EITHER FROM RELATIVES OR ASSOCIATED CONCERNS, AND IN CASE FUNDS ARE RECEIVED FROM RELATIVES OR ASSOCIATED CONCERNS, THEN SUCH TRANSACTIONS ARE NOT HIT BY SECTION 271D OF THE ACT. FOR BUTTRESSING HIS CONTENTIONS, HE MADE REFERENCE TO THE FOLLOWING DECISIONS: I) CIT VS. SUNIL KUMAR GEOL, 315 ITR 163 (P&H); II) MAHMOOD ASSOCIATES P.LTD. VS. JCIT, ITA NO.1112/KOL /2012; III) ZODIAC DEVELOPERS P.LTD. VS. ACIT, ITA NO.31/MUM/20 11. 9. FURTHER, THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(A). ALONG WITH CASE LAWS SUBMITTED BEFORE US, HE FILED A BRIEF NOTE DEMONSTRATING REAS ONABLE CAUSE AVAILABLE WITH THE ASSESSEE FOR ACCEPTING THESE LOANS IN CASH AND REPAYMENT OF SUCH IN CASH. TAKING INTO CONSIDERATION THE DETAILED SUBMISSION F ILED BEFORE THE LD.CIT(A) FOR BREVITY OF REPETITION, WE DEEM IT APPROPRIATE T O TAKE NOTE OF THESE SUBMISSIONS SUBMITTED BY THE LD.COUNSEL FOR THE ASS ESSEE AT THE TIME OF HEARING. IT READS AS UNDER: O ASSESSEE IS A PUBLIC LIMITED COMPANY. INITIALLY, A SSESSEE CARRIED OUT ITS BUSINESS AS A PARTNERSHIP FIRM IN THE NAME AND STYLE OF 'MONARCH DYESTUFFS INDUSTRIES'. THE THEN FIRM WAS E XPORTING DYES AND DYES INTERMEDIARIES SINCE 1980. THERE WERE NO LOCAL SALES. IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING AND ITS ACCOUNTS WERE ALSO AUDITED U/S 44AB OF THE ACT. O LATER, THE FIRM WAS CONVERTED INTO COMPANY WHICH CA ME TO BE INCORPORATED ON 25.09.94 UNDER PART IX OF THE COMPA NIES ACT. 1956. AFTER INCORPORATION OF THE COMPANY, APPELLANT CONTINUED THE BUSINESS EARLIER CARRIED OUT AS A PARTNERSHIP F IRM. AS STATED EARLIER, THERE WERE NO LOCAL SALES. ITA NO.397 AND 398/AHD/2016 6 O OWING TO REVALUATION OF CURRENCY IN 1995 IN EURUGAV E, BRAZIL AND OTHER LATIN AMERICAN COUNTRY, ASSESSEE COULD NO T RECOVER MONEY FROM ITS DEBTORS IN TIME AND CERTAIN FUNDS HA VE NOT BEEN RECEIVED TILL DATE. NON-REALIZATION OF FUNDS FROM D EBTORS RESULTED INTO SERIOUS FINANCIAL CRISIS COUPLED WITH FOLLOWIN G CONSEQUENCES: BANK OF BARODA AND BHARAT OVERSEAS BANK STOPPED VARIOUS FACILITIES AND TRIED TO RECOVER ADVANCES F ROM LC PAYMENT RECEIVED BY THE COMPANY; GIIC HAD SANCTIONED LOAN OF RS.1.5 CRORE OF WHICH A SUM OF RS. 75 LACS WAS RELEASED BUT ON ACCOUNT OF THE A BOVE EXPLAINED SET BACK, IT REFUSED TO ISSUE FURTHER SAN CTIONED LOAN AMOUNT; SOME OF THE NBFCS FILED LIQUIDATION PROCEEDINGS BEF ORE HON 'BLE THE GUJARAT HIGH COURT; VARIOUS SUITS WERE FILED BY NBFCS AND SOME OF THE CREDITORS BEFORE CITY CIVIL COURTS AND METROPOLITAN MAGISTRATE COURTS; CONCENTRATION OF STOCK ON HAND ERODED AND THE SAME BECAME ALMOST WORTHLESS SINCE REACTIVE DYES HAVE A SHORT SPAN OF LIFE AFTER WHICH IT STARTS DECOMPOSING. O ON ACCOUNT OF THE ABOVE, ASSESSEE SUFFERED HEAVY LO SSES AND, IN DUE COURSE, IT BECAME FINANCIALLY SICK. HON'BLE THE GUJARAT HIGH COURT ORDERED FOR PROVISIONAL LIQUIDATION AND HENCE , LIQUIDATOR TOOK INVENTORY OF STOCK AND ASSETS OF THE APPELLANT AND SEALED ITS FACTORY. AT THE TIME OF FURTHER HEARING, SECURED CR EDITORS OF THE APPELLANT OBJECTED LIQUIDATION OF THE APPELLANT AND UPON ASSURANCE GIVEN BY THE MANAGING DIRECTOR AS TO PAYI NG OFF DUES OF CREDITORS IN INSTALLMENTS, HON'BLE THE GUJARAT H IGH COURT ORDERED DE-LIQUIDATION OF THE APPELLANT COMPANY. CO PIES OF ORDERS PASSED BY HON'BLE GUJARAT HIGH COURT AS WELL AS VARIOUS REPORTS OF LIQUIDATOR, ETC. ARE PLACED AT PGS.9-22 OF P/B. O SINCE THE APPELLANT DEFAULTED IN MAKING PAYMENTS TO SECURED CREDITORS (VIZ. NATIONALIZED BANKS, PRIVATE BANKS A ND OTHER NBFCS), NO OTHER NATIONALIZED BANKS, PRIVATE BANKS, NBFC OR ANY OTHER FINANCIAL INSTITUTION WERE READY TO ADVAN CE FURTHER ITA NO.397 AND 398/AHD/2016 7 FUNDS TO THE APPELLANT. HENCE, IT BECAME EXTREMELY DIFFICULT FOR THE APPELLANT TO RUN THE COMPANY. THE SURVIVAL OF T HE APPELLANT WAS AT STAKE. O IN SUCH A SCENARIO, SHROFFS IN THE MARKET, IN SPIT E OF BEING WORST FINANCIERS, WERE THE ONLY RAY OF HOPE SO AS REVIVE THE APPELLANT COMPANY AND GET IT BACK IN GOOD WORKING CONDITION. ASSESSEE STARTED ITS ACTIVITIES BY OBTAINING JOB WORK IN THE SAME LINE OF BUSINESS. AS AND WHEN EXPORT ORDERS WERE RECEIVED, THE SAME WERE EXECUTED. NO LOCAL SALES WERE EVER MADE. HOWEV ER, SITUATIONS DIDN'T IMPROVE TO THE EXPECTATIONS OF TH E APPELLANT. HENCE, ASSESSEE APPLIED FOR REGISTRATION AS SICK CO MPANY WITH BIFR IN 1998-99. BIFR REGISTERED THE ASSESSEE AS SI CK INDUSTRIAL UNIT IN FEBRUARY 2000 VIDE REGISTRATION NO.68/2000. THE ASSESSEE WAS DECLARED SICK ON 04.048.06. THE SCHEME OF BIFR WAS PASSED ON 07.12.11. COPY OF SCHEME OF BIFR DATE D 07.12.11 IS PLACED AT PGS.23-61 OF P/B. O AS PER THE UNDERTAKING GIVEN TO BIFR, ASSESSEE HAD TO REMIT PAYMENT BEING ONE TIME SETTLEMENT TO BOTH THE BANKS , GIIC, AND OTHER NBFCS DURING THE YEAR UNDER CONSIDERATION. AL SO THE ASSESSEE HAD TO IMPROVE ITS PRODUCTIVITY SO AS PAY OFF SUNDRY CREDITORS. THUS, IT WAS AN EXTREME SITUATION WHEREI N ASSESSEE HAD TO ARRANGE FOR FUNDS AND PAY OFF ONE TIME SETTLEMEN T AMOUNT TO VARIOUS INSTITUTIONS, AS STATED ABOVE, OR ELSE THE SETTLEMENT SCHEME, AS FRAMED BY BIFR, WOULD HAVE BEEN CANCELLE D WHICH COULD HAVE MADE THE SCENARIO EVEN WORSE. THUS, IT W AS NO LESS THAN A 'DO OR DIE' SITUATION FOR THE APPELLANT. O FURTHER, APPELLANT WAS PURCHASING RAW MATERIAL FROM LOCAL MARKETS AS WELL AS FOREIGN MARKETS. CREDITORS OF SU CH RAW MATERIALS WERE TO BE PAID WITHIN 15-30 DAYS BY POST -DATED CHEQUES ONLY. APPELLANT HAD NO OPTION BUT TO ENSURE THAT SUCH CHEQUE WERE HONORED SO AS TO ESTABLISH CREDIBILITY IN THE MARKET. FURTHER, APPELLANT WAS EXPORTING GOODS ON A CREDIT PERIOD OF 2-3 MONTHS BUT STILL, SUCH DUES WERE NEVER RECEIVED ON DUE DATES. O ALL SUCH INCIDENTS MADE THE SITUATION VERY GRAVE. O N ONE HAND, NATIONALIZED BANKS, PRIVATE BANKS, AND OTHER SUCH P LAYERS IN THE ORGANIZED SECTOR REFUSED TO EXTEND A HELPING HAND T O THE APPELLANT WHEREAS ON THE OTHER HAND, APPELLANT HAD TREMENDOUS PRESSURE TO ENSURE THAT THE CHEQUE DRAWN BY IT GOT HONORED SO AS TO ESTABLISH ITS CREDIBILITY IN THE MARKET. ITA NO.397 AND 398/AHD/2016 8 O HENCE, MANAGEMENT OF THE APPELLANT WAS LEFT OUT WIT H NO OPTION BUT TO BRING IN FUNDS ON THEIR OWN OR FROM SHROFFS, RELATIVES, ETC, SO AS TO HONOR VARIOUS LEGITIMATE DEMANDS. IT WAS I N SUCH A SCENARIO, DIRECTORS, RELATIVES OF DIRECTORS AND SHR OFFS PUMPED IN FUNDS IN APPELLANT COMPANY FROM TIME TO TIME SO AS TO HONOR VARIOUS CHEQUES DRAWN BY THE APPELLANT TOWARDS ITS LEGITIMATE DUES. FOLLOWING DETAILS/EVIDENCES HAVE BEEN PLACED ON RECORD: DETAILS OF FUNDS PUMPED IN BY VARIOUS PERSONS - PGS .62-70 OF P/B; BANK STATEMENTS OF THE ASSESSEE - PGS.71-110 OF P/B ; STATEMENTS SHOWING DETAILS OF FUNDS RECEIVED FROM CONCERNED PERSONS, DETAILS OF DEPOSIT OF THE SAME I N BANK ACCOUNT AND DETAILS OF CHEQUE HONORED CONSEQUENT TO SUCH CASH DEPOSITS - PGS.111-119 OF P/B. SINCE SUCH FUNDS WERE RECEIVED BY ASSESSEE IN VIOLA TION OF THE PROVISIONS OF S.269SS, AO LEVIED PENALTY OF RS.1,74 ,99,700/- U/S 27 ID OF THE ACT. ASSESSEE MOST RESPECTFULLY SUBMITS THAT, AS EXPLAIN ED HERE-IN- ABOVE, THE SOLE PURPOSE OF ACCEPTING FUNDS OTHERWIS E THAN ACCOUNT PAYEE CHEQUE WAS TO ENSURE THAT THE CHEQUE DRAWN BY THE ASSESSEE TOWARDS ITS LEGITIMATE DUES WERE HONOR ED AS AND WHEN THE SAME WAS PRESENTED BEFORE THE BANK FOR CLE ARING. THERE WAS NO SCOPE OF FETCHING MONEY FROM THE ORGANIZED S ECTOR AT ALL. HENCE, HAD THE DIRECTORS, THEIR RELATIVES AND SHROF FS NOT FUNDED THE APPELLANT, APPELLANT COMPANY COULDN'T HAVE SURV IVED IN SUCH TUFF TIME. THUS, THERE WAS NO MALA FIDE INTENTION B EHIND ACCEPTING MONEY OTHER-WISE THEN ACCOUNT PAYEE CHEQU E. 10. ON THE OTHER HAND, THE LD.DR RELIED UPON THE OR DERS OF THE LD.REVENUE AUTHORITIES. HE CONTENDED THAT PERSONS WHO HAVE GI VEN LOANS TO THE ASSESSEE WERE HAVING BANK ACCOUNT. THE ASSESSEE IS ALSO HAV ING BANK ACCOUNT. WHAT PROHIBITED THE ASSESSEE TO OBTAIN LOANS THROUGH BAN KING CHANNEL ? WHY THE ASSESSEE HAS ACCEPTED THE CASH AND DEPOSITED THE SA ME IN THE BANK ACCOUNTS AND CLEARED CHEQUE ISSUED BY IT. ALL THESE TRANSAC TIONS COULD BE CARRIED OUT THROUGH BANKING CHANNEL. ITA NO.397 AND 398/AHD/2016 9 11. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND G ONE THROUGH THE RECORD. IT IS IMPERATIVE UPON US TO TAKE NOTE OF R ELEVANT PROVISIONS VIZ. SECTIONS 269SS, 269T, 271D AND 271E WHICH READS AS UNDER: SECTION 269SS '269SS. MODE OF TAKING OR ACCEPTING CERTAIN LOANS, DEPOSITS AND SPECIFIED SUM.NO PERSON SHALL TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREIN REFERRED TO AS THE DEPOSITOR), ANY LOAN OR DEPOSIT OR ANY SPECIFIED SUM, OTHERWISE THAN BY AN ACCOUNT PAYEE C HEQUE OR ACCOUNT PAYEE BANK DRAFT OR USE OF ELECTRONIC CLEARING SYST EM THROUGH A BANK ACCOUNT, IF, (A) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR SPECIFIED SUM OR THE AGGREGATE AMOUNT OF SUCH LOAN, DEPOSIT AND SPECIFIE D SUM; OR (B) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR DEP OSIT OR SPECIFIED SUM, ANY LOAN OR DEPOSIT OR SPECIFIED SUM TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT), THE AMOUNT OR THE AGGREGATE AMOUNT REMAINING UNPAID ; OR (C) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN C LAUSE (A) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT RE FERRED TO IN CLAUSE (B), IS TWENTY THOUSAND RUPEES OR MORE: ***** ***** SECTION 269T 269T. MODE OF REPAYMENT OF CERTAIN LOANS OR DEPOSIT S.NO BRANCH OF A BANKING COMPANY OR A CO-OPERATIVE BANK AND NO OTHER COMPANY OR CO- OPERATIVE SOCIETY AND NO FIRM OR OTHER PERSON SHALL REPAY ANY LOAN OR DEPOSIT MADE WITH IT OTHERWISE THAN BY AN ACCOUNT P AYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT DRAWN IN THE NAME OF THE P ERSON WHO HAS MADE THE LOAN OR DEPOSIT IF (A ) THE AMOUNT OF THE LOAN OR DEPOSIT TO GETHER WITH THE INTEREST, IF ANY, PAYABLE THEREON, OR (B ) THE AGGREGATE AMOUNT OF THE LOANS OR DEPOSITS HELD BY SUCH PERSON WITH THE BRANCH OF THE BANKING COMPANY OR CO -OPERATIVE BANK OR, AS THE CASE MAY BE, THE OTHER COMPANY OR C O-OPERATIVE ITA NO.397 AND 398/AHD/2016 10 SOCIETY OR THE FIRM, OR OTHER PERSON EITHER IN HIS OWN NAME OR JOINTLY WITH ANY OTHER PERSON ON THE DATE OF SUCH R EPAYMENT TOGETHER WITH THE INTEREST, IF ANY, PAYABLE ON SUCH LOANS OR DEPOSITS, IS TWENTY THOUSAND RUPEES OR MORE: ***** ***** SECTION 271D (1) IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOS IT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS, HE SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR D EPOSIT SO TAKEN OR ACCEPTED. SECTION 271E 271E. (1) IF A PERSON REPAYS ANY LOAN OR DEPOSIT OR SPECIFIED ADVANCE REFERRED TO IN SECTION 269T OTHERWISE THAN IN ACCOR DANCE WITH THE PROVISIONS OF THAT SECTION, HE SHALL BE LIABLE TO P AY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT OR S PECIFIED ADVANCE SO REPAID. **** 12. A BARE READING OF SECTION 269SS WOULD INDICATE THAT IT WAS INTRODUCED BY THE FINANCE ACT, 1984 W.E.F. 1-4-1984. IT PROVI DES THAT AFTER 30.6.1984 NO PERSON SHALL ACCEPT ANY LOANS OR DEPOSITS FROM ANY OTHER PERSON OF RS.10,000/- OR MORE (WHICH HAS BEEN ENHANCED TO RS.20,000/- W.E .F. 1-4-1989) EXCEPT BY ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. THUS, IT PROHIBITS ACCEPTANCE OF ANY LOAN OR DEPOSITS FROM ANY OTHER P ERSON OF MORE THAN RS.20,000/- EXCEPT BY ACCOUNT PAYEE CHEQUE OR DRAFT . AT THE TIME OF INTRODUCTION, SECTION 276DD PROVIDED CONSEQUENCES FOR VIOLATION OF SECTION 269SS. IT PROVIDED FOR AN IMPRISONMENT WHICH MAY E XTEND UPTO TWO YEARS. HOWEVER, WHILE MAKING AMENDMENT IN SECTION 269SS BY FINANCE ACT, 1987 SECTION 276DD WAS OMITTED AND NEW SECTION 271D WAS BROUGHT INTO THE ITA NO.397 AND 398/AHD/2016 11 STATUTE BOOK WHICH PROVIDES FOR VISITING ASSESSEE W ITH PENALTY BY EQUAL AMOUNT. SIMILAR ARE THE FACTS WITH REGARD TO VIOLA TION OF SECTION 269T, AND IF THE ASSESSEE REPAID LOANS OR DEPOSITS BY ANY OTHER MODE, THAN THE ACCOUNT PAYEE CHEQUE/DRAFT, HE WILL BE VISITED WITH PENALTY AS PROVIDED IN SECTION 271E. THE CONTRAVENTION TO SECTION 269SS AND SECTI ON 269T WOULD NOT AUTOMATICALLY AUTHORISE THE AO TO VISIT THE ASSESSE E WITH PENALTY UNDER SECTION 271D AND 271E, BECAUSE SECTIONS 273B PROVID ED THAT IN CASE ASSESSEE DEMONSTRATE REASONABLE CAUSE FOR VIOLATING THIS P ROVISION, THEN HE COULD BE ABSOLVED FROM VISITING WITH PENALTY. 13. BEFORE WE EMBARK UPON AN INQUIRY ON THE FACTS O F THE PRESENT CASE, IN ORDER TO ASCERTAIN THAT APPELLANT HAS DEMONSTRATED REASONABLE CAUSE FOR ABSOLVING ITSELF FROM LEVY OF PENALTY UNDER SECTION 271D AND 271E, WE DEEM IT APPROPRIATE TO APPRAISE OURSELVES WITH PROPOSITI ON LAID DOWN IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE IN ANALYZING VARIOUS FACT SITUATION, WHEREIN REASONABL E CAUSE DEMONSTRATED BY THE ASSESSEE WERE ACCEPTED. IN OTHER WORDS, HOW DI FFERENT FACTS SITUATIONS HAVE BEEN TAKEN AS REASONABLE CAUSE BY THE HONBL E SUPREME COURT, HIGH COURTS AND ITAT. 14. FIRST DECISION REFERRED BY THE LD.COUNSEL FOR T HE ASSESSEE IS OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . SUNIL KUMAR GEOL, 315 ITR 163. IN THIS CASE, THE ASSESSEE HAS TAKEN LOAN IN CASH ON SEVEN OCCASIONS, DURING THE FINANCIAL YEAR 1990-91 (ASSTT .YEAR 1991-92). THE LD.AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTI ON 271D OF THE INCOME TAX ACT. THE ASSESSEE CONTENDED THAT ON ACCOUNT OF HIS BONA FIDE NEEDS, HE HAS TAKEN LOANS, BUT HIS CONTENTION WAS REJECTED BY THE AO AND PENALTY WAS IMPOSED. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. HOWEVER, ON FURTHER APPEAL, THE TRIBUNAL HAS DELETE D THE PENALTY. REVENUE ITA NO.397 AND 398/AHD/2016 12 TOOK THE MATTER TO THE HONBLE HIGH COURT AND CONTE NDED THAT IMPOSITION OF PENALTY UNDER SECTION 271D IS MANDATORY, IF AN ASSE SSEE HAS VIOLATED SECTION 269SS OF THE ACT IS CONCERNED. THE HONBLE HIGH CO URT HAS REJECTED THE APPEAL OF THE REVENUE AND OBSERVED THAT DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE HAS PRODUCED HIS CASH BOO K DEPICTING LOAN TAKEN BY HIM. THE TRANSACTION OF THE ASSESSEE WAS NOT DOUBT ED. IT IS FOUND TO BE GENUINE. HONBLE HIGH COURT FURTHER OBSERVED THAT THESE TRANSACTIONS WERE BETWEEN FAMILY AND DUE TO BUSINESS EXIGENCY, THERE WAS NO MALA FIDE INTENTION AT THE END OF THE ASSESSEE FOR EVADING TA XES. THE TRIBUNAL HAS MADE REFERENCE TO BACKGROUND IN WHICH SECTIONS 269SS AND 269T WERE INTRODUCED IN THE ACT. THUS, ACCORDING TO THIS DECISION, IF A N ASSESSEE HAS DEMONSTRATED BONA FIDE OF THE TRANSACTION AND BUSINESS EXIGENCY FOR TAKIN G CASH LOANS, THEN ON ACCOUNT OF THIS TECHNICAL BREACH, HE WOULD NOT B E VISITED WITH PENALTY. 15. NEXT JUDGMENT REFERRED BY THE LD.COUNSEL FOR TH E ASSESSEE IS ITAT, CALCUTTA BENCH IN THE CASE OF MAHMOOD ASSOCIATES P. LTD. JCT, 112/KOL/2012 ORDER DATED 29.4.2015. IN THIS CASE ALSO ASSESSEE TOOK A CASH LOAN AND VIOLATED SECTION 269SS OF THE ACT. THE AO HAS IMPOSED PENAL TY OF RS.3,98,719/- UNDER SECTION 271D WHICH WAS CONFIRMED BY THE LD.CI T(A). THE TRIBUNAL WHILE DELETING PENALTY MADE REFERENCE TO THE DECISI ON OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IBDHAYAM PUBLICAT IONS LTD. (2006 285 ITR 221 (MAD) WHEREIN THE HONBLE HIGH COURT HAS HELD A S UNDER: 4. WE HEARD THE ARGUMENTS OF THE LEARNED COUNSEL F OR THE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE IN RECORD. ADM ITTEDLY MR.S.V. S.MANIAN WAS ONE OF THE DIRECTORS. THEREFORE THE OR DER OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CU RRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR. S.V.S.MANIAN. MR.S.V.S.MANIAN USED TO PAY THE MONEY IN THE CURREN T ACCOUNT AND USED TO WITHDRAW THE MONEY ALSO FROM THE CURRENT AC COUNT. THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS . THE DEPOSIT AND ITA NO.397 AND 398/AHD/2016 13 THE WITHDRAWAL OF THE MONEY FROM THE CURRENT ACCOUN T COULD NOT BE CONSIDERED AS A LOAN OR ADVANCE. FURTHER IT WAS ALS O FOUND THAT THE ASSESSEE FILED A LETTER DATED 29.09.97 AND IN THAT LETTER HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR.S.V.S.MANIAN HAD B EEN SHOWN AS 'UNSECURED LOAN FROM DIRECTORS' IN THE BALANCE SHEE T. AS PER THE COMPANIES ACT, UNDER COMPANIES (ACCEPTANCE OF D EPOSIT) RULES 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A SHARE HOLDER OF A PRI VATE LIMITED COMPANY. THEREFORE THE TRANSACTION BETWEEN THE APPE LLANT AND THE DIRECTOR CUM SHARE HOLDER IS NOT A LOAN OR DEPOSIT AND IT IS ONLY CURRENT ACCOUNT IN NATURE AND NO INTEREST BEING CHA RGED FOR THE ABOVE TRANSACTION. 5. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW THAT, SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEANING OF LOA N OR ADVANCE, THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIBUNAL THE SAME REQUIRE S NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CO NSIDERATION OF THIS COURT. ACCORDINGLY, WE DISMISS THE ABOVE TAX CASE. 16. THE HONBLE HIGH COURT WAS OF THE VIEW THAT IF DIRECTORS ARE HAVING RUNNING ACCOUNT IN THE BOOKS OF ACCOUNTS OF THE ASS ESSEE-COMPANY, THEN THE TRANSACTIONS BETWEEN THE DIRECTORS OF THE COMPANY W OULD NOT BE CONSIDERED AS OF LOAN AND DEPOSITS. IN THE PRESENT CASE ALSO THE RE WERE THREE DIRECTORS WHO HAVE ADVANCED MONEY TO THE ASSESSEE-COMPANY AND THE Y HAVE BEEN REPAID IN CASH. THUS, QUA THESE TRANSACTIONS, THIS DECISION OF THE HONBLE M ADRAS HIGH COURT IS DIRECTLY APPLICABLE. 17. NEXT DECISION REFERRED BY THE LD.COUNSEL FOR TH E ASSESSEE IS ITAT, MUMBAI BENCH IN THE CASE OF ZODIAC DEVELOPERS P.LTD . VS. ADCIT, ITA NO.31/MUM/2011 ORDER DATED 10.10.2014. IN THIS CAS E ALSO ASSESSEE HAS ACCEPTED CASH LOAN OF RS.19.90 LAKHS. THE AO HAS I NITIATED PENALTY UNDER SECTION 271D AND IMPOSED PENALTY OF RS.19.90 LAKHS WHICH HAS BEEN CONFIRMED BY THE LD.CIT(A). THE TRIBUNAL HAS DELET ED THE PENALTY. THE TRIBUNAL PUT RELIANCE UPON THE DECISION OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF OMEC ENGINEERS VS. CIT, 294 ITR 599. T HE HONBLE HIGH COURT ITA NO.397 AND 398/AHD/2016 14 OBSERVED THAT IF TRANSACTION IS GENUINE THE PENALTY UNDER SECTION 271D WOULD NOT BE IMPOSED. 18. NEXT DECISION REFERRED BY THE LD.COUNSEL FOR TH E ASSESSEE IS ITAT, AHMEDABAD BENCH IN THE CASE OF MARUTI NANDAN FINANC E CAP. P.LTD. VS. ACIT, 114 TTJ 142 (AHD). IN THIS CASE CHEQUE OF RS .10 LAKHS WAS ISSUED. HOWEVER, SINCE THERE WAS A SHORTAGE OF FUND IN THE ACCOUNT, SUM OF RS.5 LAKHS WAS TAKEN IN CASH FROM THE DIRECTORS, WHICH WAS DEP OSITED IN THE ACCOUNT. REASON FOR SUCH ACT WAS THAT CHEQUES SHOULD NOT BOU NCE. ACCORDING TO THE ASSESSEE, HAD IT NOT DEPOSITED MONEY THEN ITS CHEQU E COULD BE BOUNCED. THUS, CONSIDERING GENUINENESS OF THE TRANSACTIONS AND LOA N TAKEN FROM THE DIRECTORS, TRIBUNAL DELETED PENALTY. 19. THE NEXT DECISION REFERRED BY THE LD.COUNSEL FO R THE ASSESSEE IS OF ITAT, MUMBAI BENCH (THIRD MEMBER). IN THIS CASE, T HE ASSESSEE-COMPANY TOOK A CASH LOAN IN VIOLATION OF SECTION 269S. THE ASSESSEE WAS VISITED WITH PENALTY. THERE WAS A DIFFERENCE OF OPINION BETWEEN THE MEMBERS AND ULTIMATELY DISPUTE REFERRED FOR THE OPINION OF THIR D MEMBER. THE LD.THIRD MEMBER HAS OPINED THAT TRANSACTION WAS GENUINE AND UNDER BUSINESS EXIGENCY CASH LOAN WAS TAKEN. IT IS PERTINENT TO TAKE NOTE OF SOME OF THE FACTS. M/S.TENSILE STEEL LTD. (TSL FOR SHORT) IS A PUBLI C LIMITED COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956. ASSESSEE , MRS. RUPALI R. DESAI IS DAUGHTER OF SHRI RAMESH R. DESAI, WHO IS CHIEF PROM OTER AND MANAGING DIRECTOR OF TSL. THE ASSESSEE IS ALSO ONE OF THE P ROMOTERS AND DIRECTORS. TSL WAS A SICK INDUSTRIAL UNIT AND REGISTERED WITH BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR FOR SHORT). ACCOR DING TO THE SCHEME OF RE- SETTLEMENT, THE ASSESSEE HAS TO DEPOSIT RS.1 CRORE IN A NO-LIEN ACCOUNT IN BANK OF INDIA. THE TSL HAD ONLY ONE MONTH TIME TO DEPOS IT RS.1 CRORE WITH BOI IN NO LIEN ACCOUNT. THUS, IT WAS DECIDED BY THE MANAG EMENT THAT INSTEAD OF ITA NO.397 AND 398/AHD/2016 15 MAKING DEPOSITS WITH NATIONALIZED BANK IT SHOULD BE DEPOSITED IN THE NAME OF ONE OF THE PROMOTERS/DIRECTORS WHO WAS NOT A GUARAN TOR TO THE BANK. IN THIS BACKGROUND CASH WAS DEPOSITED IN ACCOUNT OF MRS.RUP ALI R. SHAH ON WHOSE VIOLATION PENALTY UNDER SECTION 271D WAS IMPOSED. THIS PENALTY WAS DELETED BY THE TRIBUNAL AND OBSERVATION OF THE LD.THIRD MEM BER IN THIS BACKGROUND IS WORTH TO READ. IT READS AS UNDER: 10. SECTION 269SS OF THE ACT PUT AN INTERDICT AGAI NST TAKING OR ACCEPTING CERTAIN LOANS AND DEPOSITS IN CASH. TESTI NG THE PROVISIONS ON THE TOUCHSTONE OF HEYDON'S RULE, IT TRANSPIRES THAT PRIOR TO THE INSERTION OF SECTION 269SS OF THE ACT, IT WAS OPEN TO THE ASS ESSEE TO EXPLAIN THE CASH FOUND IN THE COURSE OF SEARCHES REPRESENTING L OANS TAKEN FROM THE DEPOSITS MADE BY VARIOUS PERSONS. 11. THE MISCHIEF OR THE DEFECT FOR WHICH THE LAW DI D NOT PROVIDE REMEDY WAS THAT UNACCOUNTED INCOME SO BROUGHT INTO THE BOO KS IN THE FORM OF LOANS AND DEPOSITS WAS EASY TO EXPLAIN. BECAUSE THE RE WAS NO RESTRICTION ON THE CASH DEPOSITS, IT WAS NOT DIFFIC ULT TO GET CONFIRMATORY LETTERS FROM SUCH PERSONS IN SUPPORT OF THEIR EXPLA NATION. 12. TO CURB THIS MISCHIEF, SECTION 269SS OF THE ACT WAS ENACTED, BY WHICH PROHIBITION WAS LAID AGAINST TAKING OR ACCEPT ING CERTAIN LOANS AND DEPOSITS IN CASH. IT DEBARS PERSONS FROM TAKING OR ACCEPTING, AFTER 30TH JUNE, 1984, FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BA NK DRAFT IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMO UNT OF SUCH LOAN AND DEPOSIT IS RS. 10,000 (RAISED TO RS. 20,000 W.E .F. 1ST APRIL, 1989) OR MORE. THE TRUE REASON FOR ENACTING SECTION 269SS OF THE ACT WAS TO COUNTER THE DEVICE OF TAX EVASION, WHICH ENABLED TH E TAXPAYERS TO EXPLAIN AWAY UNACCOUNTED CASH OR UNACCOUNTED DEPOSI TS. 13. A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSSIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. IT IS VERY I MPORTANT TO KEEP THE STREAM OF JUSTICE CLEAR AND PURE. INNOCENTS SHOULD NOT SUFFER AND RECALCITRANT SHOULD NOT GO SCOT-FREE, LET JUSTICE B E NOT A RIDDLE AND GET LOST IN THE LABYRINTH OF PROCEDURE. JUSTICE DEMANDS FAIRNESS. FAIRNESS ITSELF IS A FLEXIBLE, PRAGMATIC AND RELATIVE, CONCE PT, AND NOT A RIGID, RITUALISTIC OR SOPHISTICATED ABSTRACTION. THE PRIME OBJECT OF LAW IS TO SECURE JUSTICE TO THE PEOPLE. IN VIEW OF THIS THE L EGISLATURE TOOK PROPER SAFEGUARD UNDER SECTION 273B OF THE ACT, WHICH ENUM ERATES THE CASES ITA NO.397 AND 398/AHD/2016 16 WHERE PENALTY IS NOT TO BE IMPOSED. IN SUCH ENUMERA TION, SECTION 271D OF THE ACT ALSO FINDS A PLACE. IT IS PRESCRIBE D UNDER SECTION 273B OF THE ACT THAT PENALTY IS NOT TO BE IMPOSED O N THE ASSESSEE IF HE PROVES THAT THERE EXISTED A REASONABLE CAUSE FOR NO T COMPLYING WITH THE PROVISIONS. 14. BLACK'S LAW DICTIONARY DEFINE THE WORD 'REASONA BLE' AS UNDER: 'REASONABLE FAIR, PROPER, JUST, MODERATE, SUITABLE UNDER THE CIRCUMSTANCES. FIT AND APPROPRIATE TO THE END IN VI EW. HAVING THE FACULTY OF REASON; RATIONAL; GOVERNED BY REASON ; UNDER THE INFLUENCE OF REASON; AGREEABLE TO REASON. THINKING, SPEAKING, OR ACTING ACCORDING TO THE DICTATES OF REASON. NOT IMM ODERATE OR EXCESSIVE, BEING SYNONYMOUS WITH RATIONAL, HONEST, EQUITABLE, FAIR, SUITABLE, MODERATE, TOLERABLE. CASS V. STATE 124 TEX. CR. R. 208, 61 S.W. 2D 500' 15. REASONABLE CAUSE MEANS GENUINE BELIEF BASED ON REASONABLE GROUNDS. TSL WAS ON THE VERGE OF WINDING UP. THE AS SESSEE WAS THE PROMOTER AND DIRECTOR OF TSL. HER FATHER WAS THE CH IEF PROMOTER AND MANAGING DIRECTOR OF TSL. IT WAS A CLOSELY-HELD COM PANY. THE- ASSESSEE-WAS CONCERNED WITH THE REVIVAL OF TSL. IN THE PROCESS OF REVIVAL, THE ASSESSEE TOOK THE CASH LOANS FROM TSL. GENUINENESS OF THE LOAN WAS NOT DOUBTED. THE CIRCUMSTANCES UNDER WHICH THE LOAN WAS TAKEN WERE NOT DISPUTED. THE ASSESSEE FELT THAT, TH E DELAY MAY DEFEAT THE PURPOSE. AS SUCH, TO COMPLY WITH THE COURT ORDERS A ND TO FURNISH THE DEPOSITS AS PER THE DIRECTION OF AAIFR TO TSL, THE ASSESSEE TOOK THE LOAN. THE PURPOSE WAS NOT TAX EVASION. THERE WAS NO ANIMUS TO DEFILE THE PROVISION OF LAW. IT WAS TO REVIVE A SICK COMPA NY IN WHICH THE ASSESSEE WAS INTERESTED. THE ASSESSEE PROVED THE BO NA FIDE BEYOND THE SHADOW OF DOUBT. ONCE THE BONA FIDE IS PROVED, WHAT REMAINS IS ONLY PROCEDURAL DEFAULT, WHICH IS OF A VENIAL NATURE. 'D E MINIMIS NON CURAT LEX' (LAW TAKES NO NOTICE OF TRIVIALITIES) IS THE W ELL KNOWN TENET, OF LAW. THE PROCEDURE SHOULD BE THE MAID AND NOT THE MISTRE SS OF, THE LEGAL JUSTICE. 16. TAKING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE CASE I AM OF THE OPINION THAT THERE EXISTED A REASONABLE CAUSE F OR ACCEPTING THE CASH LOANS. AS SUCH, THE ASSESSEE MAY BE EXONERATED FROM THE RIGOUR OF SECTION 271D OF THE ACT. IN MY OPINION, THE LEAR NED AM WAS CORRECT IN DELETING THE PENALTY. AS SUCH, I CONCUR WITH HIS ORDER. ITA NO.397 AND 398/AHD/2016 17 20. NEXT DECISION REFERRED BY THE LD.COUNSEL FOR TH E ASSESSEE IS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF JCIT VS. B.D. PAT EL & CO., TAX APPEAL NO.1226 OF 2009 AND IN THE CASE OF CIT VS. SHREENAT HJI CORPN., 56 TAXMANN.COM 439 (GUJ). IN THE CASE OF B.D.PATEL (S UPRA), THE HONBLE HIGH COURT HAS ACCEPTED BUSINESS EXIGENCY AND GENUINENES S OF THE TRANSACTION AS REASONABLE CAUSE. IT UPHELD ORDER OF THE ITAT AND DELETED PENALTY UNDER SECTION 271D. SIMILARLY, IN THE CASE OF SHREENATHJ I CORPN. (SUPRA), THE HONBLE COURT HAS ACCEPTED GENUINENESS OF THE TRANS ACTIONS AND BUSINESS EXIGENCY AS REASONABLE CAUSE FOR ACCEPTING CASH LOA NS. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDERS OF THE ITAT IN THE CAS E OF KALPESH K. KINARIWALA VS. ACIT IN ITA NO.316/AHD/2013 ORDER DA TED 2.3.2016 WHEREIN JUDICIAL MEMBER (HEREIN) IS PARTY TO THE ORDER. A CCORDING TO HIM, THE TRIBUNAL HAS CONFIRMED THE PENALTY IMPOSED UNDER SE CTION 271D OF THE ACT. IN THIS CASE, THE TRIBUNAL HAS CONFIRMED PENALTY BE CAUSE THERE WAS NO REASONABLE CAUSE DEMONSTRATED BY THE ASSESSEE FOR A CCEPTING LOANS IN CASH FROM THE SISTER CONCERN. 21. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. WE HAVE EXTRACTED THE EXPLANATION OF THE ASSESSEE S HOWING REASONABLE CAUSE. IT HAS BEEN CONTENDED BY THE ASSESSEE THAT IT CAME INTO EXISTENCE IN 1980. IT HAS BEEN EXPORTING DYES AND INTER-MEDIATORIES. BUS INESS WAS RUNNING SMOOTHLY. SOMEHOW IN 1995 LATIN AMERICAN COUNTRIES HAVE REVALUED THEIR CURRENCY, AND THEREFORE, IT COULD NOT RECOVER ITS D UES FROM THOSE CLIENTS. THE FINANCIAL INSTITUTION PUT PRESSURE FOR REALIZATION OF LOANS AND DUE TO SUCH FINANCIAL CRUNCH, ITS BUSINESS WAS CLOSED DOWN. IT HAS BEEN DECLARED AS A SICK UNIT AND REGISTERED WITH BIFR FOR RESETTLEMENT. TH E ASSESSEE HAS PLACED DETAILS VIDE WHICH AMOUNTS HAVE BEEN DEPOSITED AND HOW CHEQUES HAVE BEEN CLEARED. ALL THESE DETAILS HAVE BEEN COMPILED ON P AGE NOS.111 TO 119 OF THE PAPER BOOK. A PERUSAL OF THESE DETAILS WOULD INDIC ATE THAT CASH LOAN WAS ITA NO.397 AND 398/AHD/2016 18 DEPOSITED IN PROGRESSIVE MERCANTILE CO-OP. BANK AND THEY WERE USED FOR CLEARING CHEQUES. FOR EXAMPLE ON 7.4.2008 AN AMOUN T OF RS.75,000/- WAS DEPOSITED. SIMULTANEOUSLY TWO CHEQUES BEARING NO.0 91199 AND 453007 FOR A SUM OF RS.31,104 AND RS.47,886 WERE CLEARED IN THE NAME OF M.M. AUXITEX AND KIRTI IMPORT & EXPORT. THUS, CONTENTION OF THE ASSESSEE WAS THAT HAD IT USED THROUGH BANKING CHANNEL, MORE PARTICULARLY, TH OSE BANKS TO WHOM IT HAS TO PAY VARIOUS DUES/ OUTSTANDING LOANS, THEN IT WOU LD NOT BE ABLE TO FULFILL ITS PROMISES WITH BIFR FOR ITS REESTABLISHMENT. IT HAS TO MAKE PAYMENT OF CERTAIN AMOUNTS PROMPTLY FOR AVOIDING ADJUSTMENT OF SUCH CA SH ARRANGEMENT BY IT TOWARDS EXISTING LOANS WITH FINANCIAL INSTITUTIONS. THESE TRANSACTIONS OF AVAILING LOANS AND ITS USER BY THE ASSESSEE HAVE NO T BEEN DOUBTED. THESE ARE FOUND TO BE GENUINE. ONLY ALLEGATION AGAINST THE A SSESSEE IS OF VENIAL AND TECHNICAL BREACH. NO DOUBT BREACH IS THERE, BUT TH E ASSESSEE HAS A PLAUSIBLE EXPLANATION. IT HAS BEEN IN THE BUSINESS SINCE 198 0 IN EXPORTING DYES AND INTERMEDIATRIES. THUS, IN ORDER TO RE-ESTABLISH IT SELF, IT HAS AVAILED CERTAIN CASH LOANS WHICH HAS BEEN USED FOR FULFILLMENT OF PROMIS ES GIVEN FOR THE PURPOSE OF BIFR. AN IDENTICAL SITUATION HAS BEEN EVALUATED BY ITATS THIRD MEMBER DECISION IN THE CASE OF MRS.RUPALI R. DESAI (SUPRA) . AS FAR AS REPAYMENT OF CASH LOANS IS CONCERNED, IDENTICAL CIRCUMSTANCES AR E AVAILABLE WITH THE ASSESSEE, THEREFORE, WE ARE OF THE VIEW THAT THE AS SESSEE HAS BEEN ABLE TO DEMONSTRATE REASONABLE CAUSE FOR NOT VISITING THE A SSESSEE WITH PENALTY UNDER SECTION 271D AND 271E OF THE ACT. WE ALLOW BOTH TH E APPEALS OF THE ASSESSEE AND DELETE PENALTY. 22. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 22 ND MAY, 2018 AT AHMEDABAD. SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 22/05/2018