CIT v. Saini Medical Store ()

INCOME TAX

--Penalty under section 271D----CONTRAVENTION OF SECTION 269SSReasonable cause--Held: No substantial question of law arose from the order of the appellate authorities cancelling penalty under section 271D on the ground that provision of section 269SS was violated under a bona fide belief of the assessee and same was not with any intention to avoid or evade tax.

Income Tax Act, 1961 s.271D

Income Tax Act, 1961 s.273B

Income Tax Act, 1961 s.269SS

CIT v. Saini Medical Store

In the Punjab and Haryana High Court N.K. Sud & Ajay Kumar Mittal, JJ.

ITA No. 376 of 2004 1 March, 2005

Counsel : Rajesh Bindal, for the appellant

JUDGMENT

Ajay Kumar Mittal, J.

The judgment of the court was delivered by

1. The revenue has filed the present appeal under section 260A of the Income Tax Act, 1961 (hereinafter refer to 'the Act'), against the order of the Income Tax Appellate Tribunal, Delhi Bench 'B', New Delhi (hereinafter refer to 'the Tribunal'), passed in ITA No. 1872/Delhi of 1999, dated 30-1-2004, for the assessment year 1993-94 claiming that the following substantial question of law arises in this appeal :

'Whether, on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was right in dismissing the appeal of the revenue and confirmed the action of the CIT(A) in cancelling the penalty of Rs. 50,000 under section 271D imposed by the Deputy Commissioner of Income Tax ?'

2. Briefly the facts are that the Income Tax Officer, Ward-2, Jind, vide his letter No. 844 dated 6-8-1997, referred the matter for initiation of penalty proceedings under section 271D of the Act as the respondent assessee had contravened the provisions of section 269SS of the Act during the financial year 1992-93 relevant to the assessment year 1993-94 by accepting loan/deposits in cash from the persons as per detail given below :

3. A show-cause notice under section 274 read with section 271D of the Act was issued to the assessee. The assessee in response thereto filed written submissions and the then Deputy Commissioner of Income Tax, Hisar Range, Hisar (now Joint Commissioner of Income Tax), imposed a penalty of Rs. 50,000 which was equal to the amount of loan accepted in cash by the assessee-firm vide order dated 20-8-1998. The assessee feeling aggrieved against the said order filed an appeal which was allowed by the CIT(A) [hereinafter refer to 'the CIT(A)'], vide order dated 18-1-1999, whereby the order of penalty was cancelled. The revenue challenged the order of the CIT(A), Rohtak, before the Tribunal which was dismissed on 30-1-2004.

4. Shri Rajesh Bindal, learned counsel for the revenue, submitted that the penalty had been rightly imposed by the Deputy Commissioner of Income Tax, Hisar Range, Hisar, and he supported the order imposing penalty. He argued that the orders of the CIT(A) and the Tribunal cancelling the penalty are perverse and, therefore, a substantial question of law as claimed by the revenue arises in this appeal.

5. We have heard learned counsel for the revenue and with his assistance have perused the record.

6. The relevant provisions of sections 269SS, 271D and 273B of the Act for decision of the present appeal are reproduced as under :

'Section 269SS. No person shall, after the 30-6-1984, take or accept from any other person (hereafter in this section referred to as the 'depositor'), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,

(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or

(b) on the date of taking or accepting such loan or deposit, 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 twenty thousand rupees or more :

Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,

(a) Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); and

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette :

Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.

ExplanationFor the purposes of this section,

(i) banking company means a company to which the Banking 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 assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);

(iii) loan or deposit means loan or deposit of money.

271D.(1) If a person takes or accepts any loan or deposit 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 deposit so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Deputy Commissioner.

273B.Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or sub-section (1) of section 272BB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.'

7. Section 269SS of the Act provides for the mode of taking or accepting certain loans and deposits. It stipulates that no person after 30-6-1984, shall take or accept from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit is Rs. 20,000 or more.

8. Section 271D has been included in Chapter XXI of the Act which deals with penalties imposable for failure to comply with the provisions of section 269SS of the Act and it provides that in the case of any contravention of the provisions of section 269SS of the Act, the person who takes or accepts any loan or deposit shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted.

9. Section 273B of the Act provides that no penalty is imposable for any failure referred to in the said provisions, if the assessee proves that there was 'reasonable cause' for the said failure.

10. Therefore, a combined reading of the provisions of sections 271D and 273B of the Act makes it clear that if the assessee shows 'reasonable cause' for the failure to comply with any provision referred therein, to penalty for its violation shall not be imposable on the assessee.

11. In the present case, the CIT(A) in his order dated 18-1-1999, whereby the penalty under section 271D of the Act was deleted, had accepted the version given by the assessee that violation of the provisions of the Act was under a bona fide belief of the assessee and the same was not with any intention to avoid or evade the tax.

12. The findings of the CIT(A) have been confirmed in appeal by the Tribunal.

13. Therefore, the findings recorded by the CIT(A) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269SS is a finding of fact based on appreciation of material on record. It does not give rise to any question of law, much less substantial question of law.

14. There is no merit in the appeal and accordingly, the same is dismissed.

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