Madras H.C : Whether, in the facts and circumstances of the case, the Tribunal had enough material to hold, and was right in holding that the assessee was justified in receiving deposits exceeding Rs. 20,000 in cash when the depositors did not have bank accounts ?

High Court Of Madras

CIT vs. Kundrathur Finance & Chit Co.

Sections 269SS, 271D, 273B

Asst. Years 1996-97, 1997-98, 1998-99, 1999-2000

P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.

Tax Case (Appeal) Nos. 185 of 2004 & 1542 to 1544 of 2005

30th January, 2006

Counsel Appeared

J. Narayanaswamy, for the Appellant

JUDGMENT

P.D. Dinakaran, J. :

The appeals are directed against the order dt. 5th June, 2003 made in ITA Nos. 999, 1000, 1001 and 1002/Mad/2000 for the asst. yrs. 1996-97, 1997-98, 1998-99 and 1999-2000.

2. The brief facts of the case are stated as under : The assessee is a partnership firm engaged in the business of chit and finance. During the survey, it was found that the assessee had accepted the cash deposits of more than Rs.20,000 in contravention of s. 269SS of the Act. Hence, after giving an opportunity pursuant to the show-cause notice, the Jt. CIT imposed a penalty by exercising the power under s. 271D of the Act, equal to the amount of deposits in excess of Rs. 20,000 received in cash during the period relevant to the asst. yrs. 1996-97 to 1999-2000. Hence, the assessee preferred an appeal before the CIT (A), who allowed the appeal, which was subsequently confirmed by the Tribunal. Hence, the above appeal.

3. The learned counsel for the appellant raised the following substantial questions of law for our consideration :

“(a) Whether, in the facts and circumstances of the case, the Tribunal had enough material to hold, and was right in holding that the assessee was justified in receiving deposits exceeding Rs. 20,000 in cash when the depositors did not have bank accounts ?

(b) Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the penalty under s. 271D on the ground that the depositors did not have bank accounts, when s. 269SS provides for payment either by cheque or bank drafts ?”

Both the CIT(A) as well as the Tribunal concurrently found that within the jurisdiction of the assessee finance (sic) viz., Kundrathur, there is no banking facility for the depositors, who are, apart from the partners, pensioners, housewives and agriculturists. The explanation offered by the assessee was that in the absence of any banking facility in the locality concerned and in view of the business of the assessee, the deposits made by the depositors cannot be rejected on the only ground that they had not been paid by way of cheque as contemplated under s. 269SS of the Act. On the other hand, it was not the case of the Department that banking facilities are available within the jurisdiction of the assessee’s business place viz., Kundrathur and the depositors were operating bank accounts. Under such circumstances, both the CIT(A) and the Tribunal, exercising the discretion conferred under s. 273B of the Act came to the conclusion that the transactions were found to be genuine and bona fide, and that the depositors did not have bank account and therefore, the assessee was in no position to request them to make the deposits by cheque, assuming the same was in contravention of s. 269SS of the Act.

In this regard, it is apt to refer s. 273B of the Act, which reads as follows : “Penalty not to be imposed in certain cases.—Notwithstanding anything contained in the provisions of cl. (b) of sub-s. (1) of s. 271, s. 271A, s. 271AA, s. 271B, s. 271BA, s. 271BB, s. 271C, s. 271D, s. 271E, s. 271F, s. 271FA, s. 271FB, s. 271G, cl. (c) or cl. (d) of sub-s. (1) or sub-s. (2) of s. 272A, sub-s. (1) of s. 272AA or s. 272B or sub-s. (1) of s. 272BB or sub-s. (1) of s. 272BBB or cl. (b) of sub-s. (1) or cl. (b) or cl. (c) of sub-s. (2) of s. 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.” (Emphasis, italicised in print, supplied)

The apex Court, interpreting the powers conferred on the Revenue under s. 273B of the Act in Asstt. Director of Inspection (Inv.) vs. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC) held that if there was a genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. If that be so, since the authorities concerned having exercised the power conferred on them and satisfied that the transactions are bona fide on material facts, viz. (i) there is no banking facility within the business jurisdiction of the assessee, viz., Kundrathur; and (ii) it is not the case of the Revenue that there is any banking facility nearby and the depositors are operating the funds through banks, but the authorities have come to the conclusion that the transactions are genuine and bona fide. Therefore, it may not be proper for this Court to interfere with such discretion exercised by the authorities below, having satisfied with the reasonable cause for the failure to comply with s. 269SS of the Act.

8. We are, therefore, of the view that there is no error or illegality in the order of the Tribunal and therefore, no interference is warranted. Finding no merit to entertain the above appeals, the same are dismissed.

[Citation : 283 ITR 329]

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