I.T.O. Ward 1 Ahmednagar, Ahmednagar V. Kotuleshwar Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit, Ahmednagar

ITA 543/PUN/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3311 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT KUMAR LEUVA
• Keywords: Bonafide belief; Reasonable cause; Non compliance; Ignorance of law
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER I.T.A. NO. 543/PN/2010: A.Y. 2003-04 I.T.O. WARD 1, AHMEDNAGAR APPELLANT VS. KOTULESHWAR GRAMIN BIGAR SHETI SAHAKARI PAT SANSTHA MARYADIT AT AKOLE DIST. AHEMDNAGAR PAN AAAAK 4281 E RESPONDENT APPELLANT BY: SHRI HEMANT KUMAR LEUVA RESPONDENT BY: NONE ORDER PER I.C. SUDHIR, JM THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIF IED IN DELETING THE IMPUGNED PENALTY OF RS. 3,19,293/- U/ S 271D OF THE INCOME-TAX ACT, 1961 IMPOSED ON THE ASSESSEE . THE ASSESSMENT YEAR INVOLVED IS 2003-04. 2. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY A GREES THAT THE ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE DEC ISION OF THIS BENCH IN THE CASE OF VISHAL PURANDAR NAGARI SAHAKAR I PAT SANSTHA PAGE 2 OF 6 ITA NO.543/PN/2010 KOTULESHWAR GRAMIN BIGAR SHETI SAH. PAT SANSTHA MARYADIT A.Y. 2003-04 MARYADIT IN ITA NO. 1290/PN/2008 AND 1291/PN/2008 F OR A.Y 2005-06 WHICH WE HAVE DECIDED IN FAVOUR OF THE ASSE SSEE BY WAY OF AN ORDER DATED 22ND DECEMBER 2008. IN THE SAID ORD ER WE HAVE INTER-ALIA OBSERVED AS UNDER: '5. WE HAVE HEARD THE RIVAL CONTENTIONS AT CONSIDERABLE LENGTH. WE HAVE ALSO PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATR IX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. THE ASSESSEE, AS WE HAVE NOTED EARLIER, IS A CRE DIT COOPERATIVE SOCIETY, - PAT SANSTHAN, AS IT IS KNO WN IN THE VERNACULAR LANGUAGE. THESE PAT SANSTHANS ARE QUITE A COMMON PHENOMENON IN THIS PART OF THE COUNTRY AND THEY RENDER SERVICES WHICH ARE SOMEWHAT CLOSE TO THE SERVICES USUALLY RENDERED BY THE COOPERATIVE BANKS, IN THE SENSE THEY ACCEPT DEPOSIT S FROM THE MEMBERS AND GIVE LOANS TO THE MEMBERS. THESE INSTITUTIONS USUALLY WORK AT THE LEVEL OF TAL UKAS AND MOFFUSIL TOWNS. THERE IS NO DOUBT THAT THESE AR E NOT BANKS AND ARE NOT PERMITTED TO CARRY OUT THE BANKING BUSINESS, BUT IT IS ALSO TRUE THAT THERE IS A FAIR DEGREE OF SIMILARITY IN THE SERVICES RENDERED BY THESE CREDIT COOPERATIVE SOCIETIES AND COOPERATIVE BANKS. IN THESE CIRCUMSTANCES, THE BONAFIDES OF ASSESSEES BELIEF FOR BEING ENTITLED TO THE SAME TREATMENT AS BANKING INSTITUTIONS CANNOT BE REJECTE D OUTRIGHT . THIS IS SURELY AN INCORRECT VIEW, BUT WH EN AN AUTHORITY IS EXAMINING AN EXPLANATION IN THE CONTEXT OF A PENALTY PROCEEDINGS, ALL THAT THE AUTH ORITY HAS TO SEE IS WHETHER OR NOT SUCH AN EXPLANATION STANDS THE PREPONDERANCE OF PROBABILITIES, AND WHETHER THERE ARE ANY INCONSISTENCIES OR FALLACIES IN SUCH AN EXPLANATION WHICH DEMONSTRATE THAT THE EXPLANATION IS A MAKE BELIEVE STORY. 7. THE QUESTION WHETHER OR NOT THE LEGAL POSITION ADOPTED BY THE ASSESSEE IS CORRECT OR NOT CANNOT BE THE ONLY BASIS ON WHICH PENALTY MATTERS ARE DECIDED, OR ELSE THERE IS NO NEED FOR ANY HEARING ONCE THE LAPS E ON PAGE 3 OF 6 ITA NO.543/PN/2010 KOTULESHWAR GRAMIN BIGAR SHETI SAH. PAT SANSTHA MARYADIT A.Y. 2003-04 THE PART OF THE ASSESSEE IS ESTABLISHED, NOR CAN SE CTION 273 B HAVE ANY RELEVANCE IN SUCH A SITUATION. IT IS IMPORTANT TO BEAR IN MIND THAT SECTION 273 B COMES INTO PLAY WHEN THE ASSESSEE HAS COMMITTED A LAPSE B UT THE ASSESSEE CAN DEMONSTRATE THAT THERE WAS REASONABLE CAUSE FOR HAVING COMMITTED THAT LAPSE. T HE FACTS RELATING TO THE FACTORS LEADING TO A LAPSE CA N ONLY BE KNOWN TO THE PERSONS COMMITTING THAT LAPSE ARE BEST IN THE KNOWLEDGE OF PERSON COMMITTING THE LAPS E, AND, THEREFORE, THE ONUS ON HIM TO ELABORATE THE SA ME. HOWEVER, IT IS INHERENTLY IMPOSSIBLE FOR ANYONE TO SUBSTANTIATE, WITH COGENT EVIDENCE AND MATERIAL A S BEING INSISTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, SOMETHING LIKE A BONAFIDE BELIEF WH ICH IS A STATE OF MIND. ALL THAT CAN BE DONE IN SUCH A SITUATION IS TO EXPLAIN THE CIRCUMSTANCES AND FACTO RS LEADING TO SUCH A BELIEF, AND, IN OUR CONSIDERED VI EW, UNLESS A FALLACY OR INCONSISTENCY IS FOUND IN THE S AME, OR UNLESS SUCH AN EXPLANATION FAILS THE TEST OF PROBABILITIES, THE SAME IS TO BE TREATED AS A REASO NABLE EXPLANATION COVERED FOR THE PURPOSES OF SECTION 273 B. 8. THE OTHER ASPECT OF THE MATTER IS WHETHER OR NOT IGNORANCE OF LAW CAN BE AN ACCEPTABLE EXPLANATION, AND WHETHER SUCH AN EXPLANATION CAN BE ACCEPTABLE FOR INDIVIDUALS OR GROUPS OF INDIVIDUALS ALONE AN D NOT JURIDICAL PERSONS. THIS ISSUE IS NOW WELL SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF MOTILAL PADMAPAT SUGAR MILLS (SUPRA) WHEREIN THEIR LORDSHIP S HAVE OBSERVED THAT IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERYONE IS PRESUMED T O KNOW THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT; THERE IS NO SUCH MAXIM KNOWN TO LAW, AN D INTERESTINGLY THESE OBSERVATIONS WERE MADE IN THE CONTEXT OF AN ARTIFICIAL JURIDICAL PERSON, I.E. A COMPANY. REFERRING TO THESE OBSERVATIONS OF THE HONBLE SUPREME COURT, A CO ORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF SUDERSHAN AUTO AND GENERAL FINANCE VS CIT ( 60 ITD 177), OBSERVED AS FOLLOWS: THE IGNORANCE OF LAW MAY OR MAY NOT CONSTITUTE A VALID EXCUSE FOR JUSTIFYING WITH A PROVISION OF THE PAGE 4 OF 6 ITA NO.543/PN/2010 KOTULESHWAR GRAMIN BIGAR SHETI SAH. PAT SANSTHA MARYADIT A.Y. 2003-04 STATUTE. IT WILL DEPEND UPON THE NATURE OF DEFAULT. IF IT IS MERELY TECHNICAL OR VENIAL BREACH, NO PENALTY WO ULD BE IMPOSSIBLE BECAUSE THE LEVY OF PENALTY WOULD NECESSARILY IMPLIES EXISTENCE OF SOME GUILTY INTENT ION ON THE PART OF THE DEFAULTER OR THE OFFENDER. IN OR DER TO DETERMINE THE EXISTENCE OR ABSENCE OF GUILTY INTENT ION ON THE PART OF THE ASSESSEE, ONE WILL HAVE TO CONSI DER ALL THE SURROUNDING FACTS AND CIRCUMSTANCES. WHETHE R BY COMMITTING DEFAULT OF NON COMPLIANCE WITH A STATUTORY PROVISION OF LAW, AN ASSESSEE HAS DERIVED BENEFIT, GAIN OR ADVANTAGE, WHETHER BY SUCH A DEFAU LT OR NON COMPLIANCE THE ASSESSEE HAS DEFRAUDED THE REVENUE OR CAUSED ANY LOSS TO THE REVENUE ? THESE A RE SOME OF THE FACTORS WHICH WILL HAVE TO BE SERIOUSLY CONSIDERED BEFORE CONSIDERING THE FACT AS TO WHETHE R IGNORANCE OF LAW ON THE PART OF THE ASSESSEE OR HIS CONSULTANT CAN CONSTITUTE VALID EXCUSE OR REASONABL E CAUSE FOR THE PURPOSE OF SECTION 273B 9. WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEWS SO STATED BY THE CO ORDINATE BENCH. VIEWED IN THIS PERSPECTIVE AND BEARING IN MIND ENTIRETY OF THE CAS E, AS ALSO THE FACT THAT THE ASSESSING OFFICER HAS IN SOME OF THE CASES ACCEPTED THE SAME EXPLANATION IN THE OTHER YEARS, WE ARE OF THE CONSIDERED VIEW THAT THE EXPLANATION OF THE ASSESSEE DESERVES TO BE ACCEPTED . IT WAS A WIDESPREAD, EVEN IF ERRONEOUS, BELIEF THAT TH E PROVISIONS OF SECTION 269-SS DO NOT APPLY TO THE CR EDIT COOPERATIVE SOCIETIES, AND IT IS ALSO EVIDENT FROM THE FACT THAT EVEN THE CBDT HAS TAKEN NOTICE OF IMPOSIT ION OF RESULTANT PENALTIES IN LARGE NUMBER OF CASES, AN D ISSUED A CIRCULAR HIGHLIGHTING THAT THESE PENALTIES SHOULD NOT BE IMPOSED INDISCRIMINATELY AND WITHOUT CONSIDERING THE SCHEME OF SECTION 273 B. SUCH A WIDESPREAD BELIEF, BY ITSELF, CAN BE VIEWED AS A REASONABLE CAUSE FOR ASSESSEES BONAFIDE BELIEF. 10. HAVING SAID THAT, WE MAY ALSO ADD THAT IT IS NO T A CASE WHERE EVEN AFTER THE ASSESSEE AFTER HAVING CO ME TO KNOW OF THE CORRECT LEGAL POSITION DUE TO INCOME TAX DEPARTMENTS ACTION AGAINST HIM CONTINUES TO FOLLOW THE SAME PRACTICE. ONCE THE ASSESSEE COMES TO KNOW AS TO WHAT IS THE CORRECT LEGAL POSITION OR AT LEAS T THE PAGE 5 OF 6 ITA NO.543/PN/2010 KOTULESHWAR GRAMIN BIGAR SHETI SAH. PAT SANSTHA MARYADIT A.Y. 2003-04 REVENUES STAND ON THAT ISSUE, THERE IS NO QUESTION OF HIS HAVING BONAFIDE BUT INCORRECT BELIEF ABOUT THE LEGAL POSITION. THAT IS A DIFFERENT SITUATION AND WE ARE NOT AT ALL CONCERNED WITH SUCH A SITUATION IN THE PRESENT CASE. THIS DECISION CANNOT HAVE ANY PRECEDENCE VAL UE IN SUCH A SITUATION. 11. WITH THE AFORESAID CAVEAT, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY. THE ASSESSE E GETS THE RELIEF ACCORDINGLY.' 3. THE VIEW SO TAKEN IN THE ABOVE CASES HAS BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 18-3-2009 IN THE CASE OF CIT VS. BANDHKAM KHATE SEVAKANCHI SAHAKARI PATSANSTHA MARYADIT WHEREIN THEIR LORDSHIPS HAVE HELD THAT AF TER POSITION OF LAW IS BROUGHT TO THE NOTICE OF THE ASS ESSEE THE ASSESSEE HAS STARTED TAKING MONEY BY CHEQUE, IN SUC H A SITUATION TRIBUNAL'S CANCELING PENALTY U/S 271D DOE S NOT CALL FOR ANY INFERENCE. KEEPING THIS IN VIEW ALSO THE PENALTY INDEED DESERVES TO BE DELETED. 4. RESPECTFULLY FOLLOWING THE AFORESAID VIEW TAKEN BY US IN THE CASE OF VISHAL PURANDAR NAGARI SAHAKARI PAT SANSTHA MARYADIT (SUPRA), WE DECIDE THE MATTER IN FAVOUR OF THE ASSE SSEE AND HOLD THAT THE PENALTY WAS NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. OUR ATTENTION HAS NOT BEEN INVITED TO AN Y VARIATIONS IN PAGE 6 OF 6 ITA NO.543/PN/2010 KOTULESHWAR GRAMIN BIGAR SHETI SAH. PAT SANSTHA MARYADIT A.Y. 2003-04 THE MATERIAL FACTS OF THE PRESENT CASE VIZ-A-VIS TH E CASE OF VISHAL PURANDAR NAGARI SAHAKARI PAT SANSTHA MARYADIT AND A S SUCH THERE IS NO REASON TO TAKE ANY OTHER VIEW IN THE MATTER T HAN THE VIEW SO TAKEN BY US IN THE TRIBUNALS ORDER MENTIONED SUPRA . IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) AND DELETE THE LEVY OF PENALTY U/S 271D OF THE ACT ON THE ASSESSEE. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THE 30 TH DAY OF SEPTEMBER 2010. SD/- SD/- (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR) JUDICIAL MEMBER PUNE DATED THE 30 TH SEPTEMBER 2010 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)- I, PUNE 4. THE CIT- I PUNE 5. THE D.R, B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE