TMI Blog2003 (7) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... th identifiable and known. Further, the deposits made by the appellant had to be so made to comply with the directions of the AAIFR authorities. The appellant submits that the provisions of the BIFR override the provisions of other enactment. In the circumstances, there was no justification for levy of any penalty and it is again prayed that the penalty levied be cancelled. Ground No. 3 : On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in holding that the issue is not debatable. The appellant respectfully submits that the issue is debatable and as such no penalty ought to have been levied on debatable issue. It is prayed that the penalty upheld by the learned Commissioner of Income-tax (Appeals) be cancelled. Ground No. 4 : On the facts and in the circumstances of the case, without prejudice to the earlier grounds, the appellant has reasonable cause for alleged violation of the provision of section 269SS of the Income-tax Act. It is, therefore, prayed that the levy of penalty being unjustified be cancelled. Ground No. 5 : On the facts and in the circumstances of the case the lower authorities failed to appreciate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various decisions of the courts. However, the arguments of the assessee did not find favour with the Assessing Officer. The Assessing Officer observed that the assessee had merely relied on the purpose of the loan, genuineness of transaction and the circumstances in which the loan was accepted in cash and the discretionary power of the court. The Assessing Officer reproduced section 269SS in his order and expressed the view that the section does not exempt any loan in the nature of accommodation loan and it does not even exempt the genuine transactions. The Assessing Officer pointed out that except for the exceptions provided under the section, section 269SS does not exempt cash loans in any circumstances. As regards the assessee s arguments that there existed compelling circumstances, the Assessing Officer observed that the compelling circumstances were in the case of M/ s. Tensile Steel Ltd. (the payer) and not the assessee. In view of these argu ments and relying on certain judgments of the courts, the Assessing Officer held that the assessee had contravened the provisions of section 269SS by accepting the loan of Rs. 41,50,000 otherwise than by account payee cheque or account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka Ginning and Pressing Factory v. Joint CIT[2001] 77 ITD 478 (Mumbai) ; (ii) Dr. Deepak Muchala v. ITO [1997] 58 TTJ 524 (Bom) ; (iii) Patiram Jain v. Union of India [1997] 225 ITR 409 (MP) ; (iv) Motilal J. Doshi v. Deputy CIT-ITAT Pune Bench, Pune in ITA No. 1030/PN/1995 dated December 16, 1999 ; (v) Navinchandra Ugttamram v. ITO-ITAT Ahmedabad Bench ITA Nos. 679 and 680 (Ahd.) of 1997 dated August 6, 1997 ; (vi) Shrepak Enterprises v. Deputy CIT [1998] 64 ITD 300 (Ahd.) ; (vii) Kumari A. B. Shanti v. Assistant Director of Inspection [1992] 197 ITR 303 (Mad) ; (viii) Harpal Singh Jaswant Singh v. ITO-reported Taxman Maga zine at page 81 under the head Case Digest ITAT ; (ix) CIT v. Prithipal Singh and Co. [2001] 249 ITR 670 (SC) ; and (x) ITO v. Paramount Builders,-decided by the ITAT Mumbai Bench F in ITA No. 1812/Mum of 1998 dated January 17, 2001. On the other hand, the learned Departmental Representative contended that the facts of the case show that there was no urgency and it was not shown why the money could not be deposited to the BIFR directly rather than routing through the assessee. The learned Departmental Representative contended that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re received by the assessee from M/s. Tensile Steel Ltd. on May 3, 1993, whereas the assessee had been relying on the correspondence from the AAIFR which are dated May 14, 1993, August 10, 1993 and September 14, 1993. It was stated that this shows that all these dates were subsequent to the date of accepting the cash loans on May 3, 1993. The learned Departmental Representative strongly relied on the Commissioner of Income-tax (Appeals) order. In the rejoinder, learned counsel for the assessee contended that in the order dated August 10, 1993, the AAIFR referred to the order dated April 15, 1993 which falls before the date of cash loans. We have given a careful consideration to the rival submissions and the facts and circumstances of the case. It is evident that the assessee had received cash amounts from the company, M/s. Tensile Steel Ltd. in violation of the provisions contained in section 269SS. But like any other penalty, the operation of section 271D with reference to the violation of the provisions contained in section 269SS also is not automatic. Section 273B has provided a statutory fetter to the automatic application of section 271D. It provides that no penalty shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX-B which reads requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax . The legislative intention in bringing section 269SS was to avoid certain circumstances of tax evasion, whereby huge transactions are made outside the books of account by way of cash. As far as the case on hand is concerned, there is no case against the assessee that these transactions had anything to do with evasion of tax or concealment of income. In the memorandum explaining the provisions of the Finance Bill, 1984 (see [1984] 146 ITR (St.) 157), it was explained as follows (page 162) : 22. Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers as rep resenting loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation. 23. With a view to circumven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade for the year under consideration. The compelling circumstances in which the assessee was constrained to violate the provisions of section 269SS, which could not be termed as intentional, had not in any way defeated or tended to defeat the objective of incorporation of section 269SS in the statute book, i.e., prevention of tax evasion, as there was no element of tax evasion in the instant case. Thus, in this case, it was only a technical violation of the provisions of section 269SS. The assessee had sufficiently explained the circumstances under whichshe was cons- trained to go in for cash loans. Those explanations constituted reasonable cause as construed in section 273B. Even if it is taken that the assessee has violated the provisions of section 269SS by accepting the loans of an amount of more than Rs. 20,000 by way of other than crossed cheque or draft, that violation was only a technical violation. We are of the opinion that there is no reason to impose penalty under section 271D for the technical default of the assessee. This view is duly fortified by the decision of the hon ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26.The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveals that the use of the expression shall be liable to pay in sections 271D and 271E and the provisions of section 273B providing that no penalty would be leviable if the person concerned proves that there was reasonable cause for the said failure, clearly indicate that these provisions give a discretion to the authorities to impose the penalty or not to impose the penalty. Such a discretion has to be exer-cised with wisdom and in a just and fair manner having regard to the entire relevant facts and materials existing on records. Even if the relevant provisions of law prescribe levy of a minimum penalty, it does not mean that penalty must necessarily be imposed in every case falling within sections 269SS and 269T. Even if the minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical breach or venial violation of the provisions of the Act or where the breach flows from a bona fide belief like in the present case. Such a view finds ample support from the judgment of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. In the instant case, it was undisputed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with a view to countering the various devices adopted by the tax evaders for explaining their unaccounted cash found during the course of search or for introducing their unaccounted income in the form of loans and deposits and it was introduced for countering major economic evil of proliferation of black money, etc. In the instant case, such facts do not appear as it is nobody s case that the assessee was a tax evader or she gave cooked up explanation for cash found during the course of search. We further find that almost on identical grounds, the Commissioner of Income-tax (Appeals) order cancelling penalty under section 271D has been recently upheld by the Bombay Bench C of Income-tax Appellate Tribunal vide their order dated October 16, 2001, in the case of ITO v. Bellona Infotech Ltd. in ITA No. 245 (Mum.) of 2001 for the assessment year 1998-99. The Accountant Member was a party to this order. We further point out that after the case was heard on July 19, 2001, it was noted by us that vide order sheet entry dated April 9, 2001, the assessee was required to file a copy of her account in the books of account of M/s. Tensile Steel Ltd. and explain the nature of entries t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. In the circumstances, we hold that it was not a fit case for imposition of penalty under section 271D for violation of the provisions of section 269SS. Accordingly, we set aside the order of the Commissioner of Income-tax (Appeals) in relation to penalty under section 271D and cancel the impugned penalty levied by the Additional Commissioner of Income-tax. In the result, the appeal of the assessee is allowed. I. P. Bansal (Judicial Member)-I have the benefit of going through the order proposed by learned Brother. After careful consideration I could not persuade myself to agree with the conclusion reached by him for the reasons mentioned below. The issue in short is whether the assessee has a reasonable cause in accepting the cash loan/deposit in excess of the limit prescribed under section 269SS of the Income-tax Act, 1961 (in short the Act ). In order to appreciate the issue, it is necessary to bear in mind the following facts. The copy of ledger account of the assessee as appearing in the books of M/s. Tensile Steel Ltd. (in short the company ) is as under : Copy of Ledger Account of Miss Rupali R. Desai in the books of M/s. Tensile Steel Limited for the period 1-4- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted are both having agricultural income and neither of them has any income chargeable to tax under this Act. Explanation.-For 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. It is the case of the assessee that there was an exigency to accept the two loans/deposits on May 3, 1993, in contravention of section 269SS of the Act. The exigency according to the assessee is supported by the order of the Appellate Authority for Industrial and Financial Reconstruction (for short the AAIFR ). According to the orders of the AAIFR the company was directed to submit fixed deposit in Bank of India in a no-lien account vide its order dated April 16, 1993. The said amount was required to be deposited within a period of one month from the date of the order, i.e., on or before May 16, 1993. Thus, the company was under an obligation to deposit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. Learned counsel for the assessee relied on the decision of the honourable Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 in support of his contention that penalty should not be levied for technical offence. The decision of the honourable Supreme Court is rendered under the Sales Tax Act and has no relevance to section 269SS of the Act which is introduced in the statute with a view to check the tax evasion and proliferation of black money by accepting the loan/deposit otherwise than by account payee cheque/draft. Thus it could be seen that section 269SS is a provision introduced in the Act to penalise an assessee for a technical offence, i.e., even in a case where parties are identifiable so long as the cash loan/deposit does not satisfy the exception provided in the section. Penalty is imposable for technical offence of accepting the deposit in cash. If the decision of the honourable Supreme Court in the case of Hindustan Steel Ltd. [1972] 83 ITR 26 is extended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e levied for mere technical offence. The following observations of the honourable Supreme Court in the case of Govind Saran Ganga Saran v. CST [1985] 155 ITR 144, at page 150 highlights that in a case where the language of the statute is clear, there is no need to lay more emphasis on the Statement of Objects. It is well-settled that when the language of the statute is clear and admits of no ambiguity, recourse to the Statement of objects and Reasons for the purpose of construing a statutory provision is not permissible. While interpreting an analogous provision, i.e., section 40A(3), the honourable Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667 has stressed on the strict language of the section rather than the objective behind the legislation as could be seen from the observations of their Lordships extracted in para. 5 (page 125) above. Thus, considering the facts and circumstances of the case I am fully convinced that the assessee has accepted cash loan/deposit without proving any exigency for such acceptance, which is further reinforced by the fact that even on a later date the assessee accepted cheque/draft payment from the same party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company registered under the Companies Act, 1956. The registered office of the company is located at Hirabaug, Vishwamitri Road, Baroda. The assessee is the daughter of Mr. Ramesh R. Desai, who is the chief promoter and managing director of this company. The assessee is also one of the promoters and directors of the company. TSL was registered under the Sick Industrial Companies (Special Provisions) Act, 1985, with the Board for Industrial and Financial Re-construction ion (hereinafter called BIFR) under registration No. 25/87 in the year 1987. BIFR passed a winding up order on March 19, 1993 against TSL. This order was appealed before the hon ble Gujarat High Court. The hon ble Gujarat High Court approved the winding up. The operation of winding up was stayed up to April 6, 1993. Against the said order, TSL filed an appeal before the Appellate Authority for Industrial and Financial Reconstruction, New Delhi (hereinafter called AAIFR) on March 31, 1993. The said appeal was heard on April 2, 1993. The matter was adjourned to April 16, 1993. On April 16, 1993, AAIFR passed an order to deposit Rs. 1 crore in a nolien account in Bank of India. It was stipulated that the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid factual details it was contended that there existed a reasonable cause in accepting the cash deposit in excess of the limit prescribed under section 269SS of the Act. Section 269SS of the Act put an interdict against taking or accepting certain loans and deposits in cash. Testing the provisions on the touch-stone of Heydon s rule, it transpires that prior to the insertion of section 269SS of the Act, it was open to the assessee to explain the cash found in the course of searches representing loans taken from the deposits made by various persons. The mischief or the defect for which the law did not provide remedy was that unaccounted income so brought into the books in the form of loans and deposits was easy to explain. Because there was no restriction on the cash deposits, it was not difficult to get confirmatory letters from such persons in support of their explanation. To curb this mischief, section 269SS of the Act was enacted, by which prohibition was laid against taking or accepting certain loans and deposits in cash. It debars persons from taking or accepting, after June 30, 1984, from any other person any loan or deposit otherwise than by an account payee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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