High Court Of Punjab & Haryana
CIT vs. Avet Chemicals (P) Ltd.
Sections 271E, 273B
Adarsh Kumar Goel & Ajay Kumar Mittal, JJ.
IT Appeal Nos. 17 & 102 of 1999
11th September, 2006
Counsel Appeared :
Dr. N.L. Sharda, for the Appellant
JUDGMENT
By the court :
This judgment will dispose of IT Appeal Nos. 102 and 17 of 1999. The facts have been taken from IT Appeal No. 102 of 1999.
This appeal has been preferred by the Revenue proposing the following substantial question of law : “Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in upholding the deletion of penalty under s. 271E by the CIT(A) on the ground that the assessee company was under a bona fide belief that the limit of Rs. 20,000 for accepting a deposit was in force in the year under consideration where the law specifically provided the cut off date as 1st April, 1989 ?”
The relevant facts are that during the course of assessment proceedings, the AO noticed that the assessee company had repaid deposit/loan of Rs. 10,000 other than by account payee cheques, or accounts payee bank drafts on 10th Nov., 1988, to Shri Angad Bir Singh during the year under reference, in contravention of the provisions of s. 269T of the IT Act, 1961 (for short “the Act”). Accordingly, penalty proceedings under s. 271E of the Act were initiated by the then Dy. CIT, Range I, Jalandhar, on 10th June, 1991, by issue of notice under s. 271E of the Act. Subsequently, penalty under s. 271E was imposed by the then Dy. CIT, Range I, Jalandhar, at Rs. 10,000 vide order passed by him on 21st Oct., 1991.
On appeal, the CIT(A), Jalandhar, deleted the said penalty vide his order passed in Appeal No. 700/91 92/CIT(A)/Jal., on 16th Nov., 1992, holding that its imposition was not justified. The said order was affirmed by the Tribunal.
The CIT(A) held that the assessee was under a bona fide belief that the limit for deposit and repayment of loan in cash was Rs. 20,000 for the year under consideration.
It has been held by the Hon’ble Supreme Court in Asstt. Director of Inspection (Inv.) vs. Kum. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC), that if cash payment was on account of reasonable belief, penalty will not be justified. It was observed at p. 266 :
“It is important to note that another provision, namely s. 273B was also incorporated which provides that notwithstanding anything contained in the provisions of s. 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of s. 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power.”
6. In view of the above, we answer the question against the Revenue and in favour of the assessee.
[Citation : 288 ITR 310]
