The Tapasya Shiksha Samiti, Bhopal V. The Addl. CIT, Bhopal

ITA 417/IND/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7133 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Keywords: Reasonable cause; Non compliance
• Section: 273B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.417/IND/2009 A.Y. 2005-06 TAPASYA SHIKSHA SAMITI, BHOPAL PAN AAAAT 6145 J APPELLANT VS ADDL. CIT, CIRCLE-3, BHOPAL RESPONDENT ASSESSEE BY : SHRI PRAKASH JAIN, CA DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 18.8.2011 DATE OF PRONOUNCEMENT : 15.9.2011 O R D E R PER JOGINDER SINGH THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, BHOPAL, DATED 1.4.2009, ON THE G ROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE LEVY OF PENALTY IMPOSED U/S 271D OF RS. 2 6,13,790/- WITHOUT APPRECIATING THE FACTS, SUBMISSI ONS OF THE ASSESSEE AND THE IMPUGNED ORDER IS BASED UPON INCOR RECT INTERPRETATION OF LAW. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I PRAKASH JAIN, LD. COUNSEL FOR THE ASSESSEE AND SHRI ARUN DEWAN, LD. SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE TRANSACTION IS GENUINE AND THE RE IS REASONABLE AND SUFFICIENT CAUSE IN ACCEPTING THE LO AN IN CASH, THEREFORE, THERE IS NO VIOLATION U/S 69SS OF THE AC T, WHICH RESULTED IN TO IMPOSITION OF PENALTY U/S 271D OF TH E ACT. 3. ON THE OTHER HAND, THE LD. SR. DR, SHRI ARUN DEW AN, DEFENDED THE IMPOSITION OF PENALTY BY PLACING RELIA NCE UPON THE IMPUGNED ORDER. THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE DECISION FROM HONBLE RAJASTHAN HIGH COURT IN THE C ASE OF CIT VS. MAHESHWARI NIRMAN UDYOG (2008) 302 ITR 201 (RAJ ). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE STAND OF THE REVENUE IS THAT THE ASSESSEE COMMITTED DEFAULT U/S 269SS BY 3 ACCEPTING LOAN IN CASH ABOVE THE PRESCRIBED LIMIT O F RS. 20,000/-, THEREFORE, THE PENALTY WAS RIGHTLY LEVIAB LE. WE FIND THAT IN REPLY TO SHOW CAUSE NOTICE, THE ASSESSEE CL AIMED THAT THE AMOUNT OF RS. 6,13,790/- PAID BY SHRI SANJEEV S AXENA, IN CASH, OUT OF HIS AGRICULTURAL INCOME AND THE SITUAT ION OCCURRED DUE TO THE NEED OF THE CIRCUMSTANCES I.E. THERE WER E SEVERAL PAYMENTS OF COLLEGE, WHICH WERE DUE TO BE PAID BEFO RE 31.3.2007 AND SINCE THE ASSESSEE SAMITI WAS SHORT O F FUNDS, THE LOAN HAD TO BE TAKEN IN CASH FROM THE OFFICE BE ARER OF THE ASSESSEE SOCIETY AND FURTHER IT WAS NOT POSSIBLE FO R THE SAMITI TO RECEIVE AN ACCOUNT PAYEE CHEQUE AND TO WAIT FOR ITS CLEARANCE. THIS EXPLANATION OF THE ASSESSEE COULD N OT FIND FAVOUR IN THE HANDS OF THE LD. ASSESSING OFFICER, W HO IMPOSED PENALTY OF RS. 6,13,790/- U/S 271D OF THE ACT. THE PENALTY ORDER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO AFF IRMED THE SAME, THEREFORE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. BEFORE COMING TO ANY CONCLUSION, WE ARE R EPRODUCING HEREUNDER SECTION 271D OF THE ACT :- 4 [ PENALTY FOR FAILURE TO COMPLY WITH THE PROVISIONS O F SECTION 269SS . 271D . 79 [(1)] IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPO SIT 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 TH E LOAN OR DEPOSIT SO TAKEN OR ACCEPTED.] 80 [(2) ANY PENALTY IMPOSABLE UNDER SUB-SECTION (1) SH ALL BE IMPOSED BY THE 81 [JOINT] COMMISSIONER.] WE ARE ALSO REPRODUCING HEREUNDER SECTION 269SS OF THE ACT:- 60 269SS . NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRED TO AS TH E DEPOSITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BA NK DRAFT IF, ( A ) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGA TE AMOUNT OF SUCH LOAN AND DEPOSIT ; OR ( B ) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR D EPOSIT, ANY LOAN OR DEPOSIT 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 CLAUSE ( A ) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE ( B ), IS 61 [TWENTY] THOUSAND RUPEES OR MORE : PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM, OR ANY LOAN OR DEPOSIT TAKEN OR ACCE PTED BY, ( A ) GOVERNMENT ; ( B ) ANY BANKING COMPANY, POST OFFICE SAVINGS BANK OR CO-OPERATIVE BANK ; ( C ) ANY CORPORATION ESTABLISHED BY A CENTRAL, STATE O R PROVINCIAL ACT ; ( D ) ANY GOVERNMENT COMPANY 62 AS DEFINED IN SECTION 617 OF THE COMPANIES ACT, 19 56 (1 OF 1956) ; ( E ) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CL ASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITING, NOTIFY 63 IN THIS BEHALF IN THE OFFICIAL GAZETTE : 64 [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHOM THE LOAN OR DEPOSIT IS T AKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCEPTED ARE B OTH HAVING AGRICULTURAL INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABLE TO TAX UNDER THIS ACT.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, 5 65 [( I ) BANKING COMPANY MEANS A COMPANY TO WHICH THE BA NKING REGULATION ACT, 1949 (10 OF 1949), APPLIES AND INCLUDES ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT ;] ( II ) CO-OPERATIVE BANK SHALL HAVE THE MEANING ASSIGN ED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949) ; ( III ) LOAN OR DEPOSIT MEANS LOAN OR DEPOSIT OF MONEY. ] 5. IF THE AFORESAID SECTIONS ARE ANALYZED, IT IS C LEAR THAT UNDER THE PROVISIONS OF SECTION 269SS OF THE A CT, NO PERSON SHALL, AFTER 30 TH JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON, ANY LOAN OR DEPOSIT, OTHERWISE THAN B Y AN ACCOUNT PAYEE CHEQUE AND ACCOUNT PAYEE DRAFT, IF SU CH LOAN OR DEPOSIT IS OF RS. 20,000/- OR MORE. ADMITTEDLY, PENALTY IS IMPOSABLE U/S 271D FOR VIOLATION OF THE PROVISIO NS OF SECTION 269SS. HOWEVER, SECTION 269SS HAS TO BE REA D ALONGWITH SEC. 273B OF THE ACT AND AT THE TIME OF T HE IMPOSITION OF PENALTY, THE AUTHORITIES REQUIRED TO CONSIDER WHETHER THERE WAS A REASONABLE CAUSE FOR THE SAID F AILURE AS ENVISAGED U/S 269SS. SECTION 273B TALKS ABOUT SCORE OF EXPRESSION REASONABLE CAUSE. THE WORDS REASONABL E CAUSE IN SECTION 273B MUST NECESSARILY HAVE A RELAT ION TO 6 THE FAILURE ON THE PART OF THE ASSESSEE TO COMPLY W ITH THE REQUIREMENT OF LAW, WHICH HE HAS FAILED TO COMPLY W ITH. HOWEVER, IN CASES WHERE THE CAUSE IS SHOWN IS SUCH AS TO EXPLAIN TO MITIGATE THE GRAVITY OF NON COMPLIANCE. REASONABLE CAUSE, AS APPLIED TO HUMAN ACTION IS THA T WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AN D ORDINARY PRUDENCE. THE EXPRESSION REASONABLE IS N OT SUSCEPTIBLE OF A CLEAR AND PRECISE DEFINITION. THE WORD REASONABLE HAS IN LAW THE PRIMA FACIE MEANING OF REASONABLE WITH REGARD TO THOSE CIRCUMSTANCES OF WH ICH THE ACTOR, CALLED ON TO ACT REASONABLY, KNOWS OR OUGHT TO KNOW. REASONABLE CAUSE, MAY REASONABLY, SAID TO BE A CAUS E, WHICH PREVENT A MAN OF ORDINARY PRUDENCE AND AVERAG E INTELLIGENCE, ACTING UNDER NORMAL CIRCUMSTANCES, WI THOUT NEGLIGENCE OR INACTION FOR WANT OF BONA FIDES. IN THE PRESENT APPEAL, THE ASSESSEE HAD TO TAKE LOAN IN CA SH FROM ITS OFFICE BEARERS, BEING THE LAST DAY OF THE FINAN CIAL YEAR, AND IT WAS NOT POSSIBLE FOR THE SAMITI TO RECEIVE A N ACCOUNT 7 PAYEE CHEQUE AND WAIT FOR ITS CLEARANCE. THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SK YLINE AUTO PRODUCTS (P) LIMITED 271 ITR 335, LAID DOWN A RATIO THAT WHEN MISTAKE IS BONA FIDE, RATHER THAN A DELIB ERATE MISTAKE ON THE PART OF THE ASSESSEE, SUCH GROUND CA NNOT BE A GOOD GROUND FOR IMPOSING PENALTY. THE RATIO LAID DOWN BY HONBLE RAJASTHAN HIGH COURT IN MAHESHWARI NIRMA N UDYOG (SUPRA) ON THE ISSUE OF DEPOSIT OR LOAN IN CA SH EXCEEDING PRESCRIBED LIMIT HELD THAT SECTION 269SS MUST BE READ WITH SECTION 273B AND IF THEY ARE ADEQUATE REA SON, PENALTY CANNOT BE IMPOSED U/S 271D OF THE ACT. IDEN TICAL RATIO WAS LAID DOWN BY HONBLE APEX COURT IN ASSIST ANT DIRECTOR OF INSPECTION (INVESTIGATION) VS. KUM. A. B. SHANTHI, 255 ITR 258 (S.C.) AND CIT VS. BHAGWATI PD . BAJORIYA (HUF), 263 ITR 487 (GAU). 6. THE MAIN OBJECT OF SECTION 269SS IS TO CURB T HE MENACE OF MAKING FALSE ENTRY IN THE ACCOUNT BOOKS A ND TO CHECK THE INFLOW OF BLACK MONEY, BUT AT THE SAME TI ME, THE 8 LD. ASSESSING OFFICER IS EXPECTED TO BE REASONABLE AND NOT TO BECOME HYPER-TECHNICAL IN GENUINE CASES, WHEN TH ERE IS REASONABLE CAUSE. THEREFORE, IN ORDER TO MITIGATE H ARDSHIP, SECTION 273B WAS INSERTED BY THE TAXATION LAWS (AMENDMENT & MISC. PROVISIONS) ACT, 1986, W.E.F. 10.9.1986. SECTION 269SS OF THE ACT PRESCRIBES THE MODE OF TAKING OR ACCEPTING CERTAIN LOANS OR DEPOSIT. TH E OBJECT OF INTRODUCING THIS SECTION IS TO ENSURE THAT A TAX PAYER IS NOT ALLOWED TO GIVE FALSE EXPLANATION FOR HIS UNACC OUNTED MONEY OR IF HE MAKES SOME FALSE ENTRY, HE SHALL NOT ESCAPE BY GIVING FALSE EXPLANATION FOR THE SAME. NOW QUEST ION ARISES WHETHER THERE WAS A REASONABLE CAUSE FOR THE CASH TRANSACTION ? WE FIND THAT THE CASH LOAN OF RS. 6,1 3,790/- WAS RECEIVED FROM SHRI SANJEEV SAXENA, PRESIDENT OF THE ASSESSEE SOCIETY AND THE AMOUNT WAS CLAIMED TO BE GIVEN OUT OF AGRICULTURAL INCOME OF THE CONCERNED YEAR. T HE TRANSACTION TOOK PLACE DUE TO COMPELLING SITUATION AS THE ASSESSEE SAMITI WAS SHORT OF FUND AND WAS TO MAKE T HE 9 PAYMENT BEFORE 31.3.2007, BEING THE LAST DAY OF THE FINANCIAL YEAR, IT WAS NOT POSSIBLE TO RECEIVE THE AMOUNT THROUGH ACCOUNT PAYEE CHEQUE. EVEN THE LD. ASSESSIN G OFFICER HAS NEITHER DISPUTED THE SOURCE OF AMOUNT N OR CONTRADICTED THE CLAIM OF THE ASSESSEE. AS THERE IS NO SUCH FINDING IN THE ASSESSMENT ORDER AS WELL AS IN THE I MPUGNED ORDER. IN SUCH A SITUATION, IF THE SCOPE OF SECTION 273B IS ANALYZED, THEN THE LD. ASSESSING OFFICER HAS DISCRE TION NOT TO LEVY PENALTY, ESPECIALLY WHEN THE TRANSACTION WA S GENUINE AND THERE WAS A REASONABLE CAUSE OF PAYMENT IN CASH. IN SUCH A SITUATION, THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF SHRI BHAGWATI PD. BAJORIY A (HUF) COMES TO THE RESCUE OF THE ASSESSEE, BECAUSE PRESIDENT OF THE SOCIETY IS A PERSON, WHO IS PART A ND PARTIAL OF THE SOCIETY AND AT THE TIME OF NEED, IT IS EXPEC TED THAT THE SOCIETY IS HELPED, ESPECIALLY WHEN THE TRANSACT ION WAS NOT INGENUINE. A HARMONIOUS CONSTRUCTION OF SECTION 269SS, 271D AND 273B IS THAT A CONSTRUCTION, WHICH 10 PRESERVE THE EXERCISE OF POWER IN FAVOUR OF ASSESSE E UNDER THE CIRCUMSTANCES, WHICH WARRANT IT IS TO BE PREFER RED TO A CONSTRUCTION, WHICH WOULD RESULT TO NON-DENIAL OF R ELIEF AND VICE VERSA IS NOT THE INTENTION OF THE LEGISLAT URE, OTHERWISE THERE WAS NO NEED TO BRING SECTION 273B O N THE STATUTE, CONSEQUENTLY, WE DIRECT THE LD. ASSESSING OFFICER TO DELETE THE PENALTY. 7. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH SEPTEMBER, 2011. SD SD (R.C.SHARMA) (JOGINDER SI NGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.9.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE CPU*