INCOME TAX ACT, 1961

--Penalty under section 271E/271D--Violation of provisions of sections 269SS/269T Reasonable cause--The assessee was a public limited company engaged in the business of mobilisation of deposits from its members. It is registered as a mutual benefit company under section 620A of the Companies Act, 1956. It can accept deposits only from its share holders/members and nobody else. The court may take up the appeals for the assessment year 1993-94 (ITA Nos. 846 & 849/2011) as the lead matter. While completing the assessment under section 144 read with section 148 and section 251, the assessing officer noticed that the assessee had collected deposits in contravention of the provisions of section 269SS and that it had also repaid them in violation of section 269T. He, therefore, referred the matter to the Addl. Commissioner, Lucknow who is the competent authority for imposing the penalty. Before him, the assessee submitted a list, duly certified by its Chartered Accountant, along with the ledgers containing the details for the acceptance of the deposits in cash. Similar details and ledgers were also produced in respect of the default in repayment of the deposits. A reply was filed before the Addl. Commissioner giving reasons as to why penalty should not be imposed under sections 271D and 271E. The summary of the reply is as follows : (a) The assessee, being a mutual benefit company under the Companies Act, can accept the loans or deposits only from its shareholders or members who are known and identifiable. The deposits are thus genuine. It amounts to the company taking deposits from itself. (b) The deposits are mobilized under various saving schemes collected through more than 600 branches of the agents spread across the country. They are located in remote areas where the savings and the contributions to the schemes are small. The field workers motivate the members/shareholders to effect savings and deposit them with the assessee. The procedural formalities are more or less the same as in the case of opening an account in the banks. (c) In several cases, the agents of the assessee had faced difficulties in opening bank accounts since banks refused to accommodate the agents who were seen as competitors affecting the business of the banks. The agents could not, therefore, open bank accounts for collection and repayment of the deposits. (d) The branches were situated in rural areas with inadequate banking facilities and it was difficult for the shareholders/members residing in these areas to open bank accounts due to logistics and other problems. There was little exposure to the banking habit. (e) The agents of the assessee were not in a position to refuse to accept legal tender. (f) From the copies of the account opening form, it was possible to identify the depositors. Copies of those forms were submitted wherever the deposits were above Rs. 20,000 (g) 50% of the deposits mobilized during the year was added under section 68 and the addition as well as the equivalent amount of penalty on the same deposits was not warranted and amounted to double jeopardy. The above submissions were considered by the Addl. Commissioner in detail. He was not prepared to look upon the assessee as an entity exempt from the provisions of the Act. According to him the only question was whether there was reasonable cause for the violation and the question of genuineness of the deposits was not material. He further noted that though the correspondence produced showed that some of the public sector banks had refused to open bank accounts, it was difficult to ascertain whether the refusal was oral or was in writing and, therefore, this point could not be considered in favour of the assessee. The Addl. Commissioner was prepared to accept only 'to some extent' the argument that persons from agricultural background and small shopkeepers cannot be expected to have exposure to banking facilities or banking habit, even though he also said that the said argument was correct. He, however, held that the provisions of the Act were applicable uniformly to deposits from all persons without any exemption for persons of agricultural background and petty shopkeepers. As regards the objection that the deposits were genuine and the depositors were identifiable, he held that the provisions of section 269SS were applicable to genuine deposits only. He also considered as irrelevant the fact that the amounts were added under section 68 in the assessment against which an appeal was pending. In this view of the matter, he held that the assessee was liable to penalty under section 271D. A similar view was taken by him in respect of the applicability of section 269T and the penalty imposed under section 271E for having repaid the deposits in cash. All the penalties were deleted by the Commissioner (Appeals). Tribunal confirmed the orders of the Commissioner (Appeals) cancelling the penalties. Held: The explanation of the assessee as to the facts and circumstances in which it was placed which constituted reasonable cause has been accepted by the Tribunal and the finding of the Tribunal that there was reasonable cause for the default within the meaning of section 273B is a question of fact which cannot be disturbed by the High Court as there was no material or evidence brought before the Court to show that the finding was perverse or was of such nature that no reasonable person, duly instructed on the facts and the legal position, would have reached. In the present case, the revenue has not been able to bring on record any material to show that the finding of the Tribunal as to the existence of reasonable cause is perverse. Whether or not there was reasonable cause for the default is a question of fact which does not give rise to a substantial question of law, unless the finding is perverse or irrational. In the light of the judgments of this court in CIT v. Parma Nand (2004) 266 ITR 255 (Del): 2004 TaxPub(DT) 320 (Del-HC) and CIT v. Itocha Corporation (2004) 268 ITR 172 (Del) : 2004 TaxPub(DT) 1656 (Del-HC), and having regard to the finding of fact entered by the Tribunal that there was reasonable cause for the defaults, there is no substantial question of law arising for consideration by this court.