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TMI Blog2015 (1) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax for initiation of proceedings under Section 271D of the Income Tax Act. On a show cause notice issued by the Deputy Commissioner of Income Tax, the assessee explained that the said deposits were taken in cash for business expediency. The Assessing Officer, accepted the deposits as genuine and bonafide, however, the Deputy Commissioner of Income Tax not did not accept the explanation given by the assessee and imposed penalty of Rs. 2,60,000/- under Section 271D of the Act. 2.1. Against the said order, the assessee filed an appeal before the CIT(A). The CIT(A) confirmed the order of penalty and dismissed the appeal filed by the assessee. Being aggrieved by the order of the CIT(A), the assessee filed an appeal before the Tribunal. The Tribunal allowed the said appeal and cancelled the penalty imposed on the assessee. Pursuant to the order of the Tribunal, the revenue filed reference application under Section 256(1), which has led to reference of the present application. 3. Learned Senior advocate Mr. Bhatt, appearing for the appellant-revenue has pointed out that the tribunal has committed an error in reversing the order of the CIT(A) and in cancelling the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. 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 the 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 3.2. He also drew our attention to Section 271D, which reads as under:- Penalty for failure to comply with the provisions of section 269SS 271D (1) if a person takes of 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 subsection (1) shall be imposed by the joint Commissioner." 3.3. By making such submissions, learned senior advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe and ambit of the provision and further could not impose a burden on the taxpayer higher than what the Act itself, on a true interpretation, envisages. It was obserged that the Board has the statutory power under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute. In CST v. Indra Industries MANU/SC/0577/2000 : (2001) 168 CTR (SC) 50 : MANU/SC/0577/2000 : (2001) 248 ITR 338, the Court further observed that the taxing authority cannot be heard to advance an argument that it is contrary to that interpretation." 5. We have heard learned advocates appearing for both the parties and perused the material on record. While deciding the appeal of the assesee, the Tribunal in Nos. 6.2 to 6.6, has observed as under:- "Before we examined the question regarding the existence or absence of reasonable cause for the purprose of S. 271D, it would be appropriate to see the legislative intention or the object for which the provisions of S.269SS were inserted by the Finance Act, 1984. The Board in its Circular No.387, dt. 6th July, 1984 elab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said failure, that these provisions give discretion to the authorities to impose the penalty or not to impose the penalty and such discretion has to be exercise in a just and fair manner having regard to the facts and material existing on records. 6.3. It would be evident from the facts given that the assessee received the said loans/deposits from the various parties in cash in contravention of provisions of section 269SS. We also note that these loans/ deposits have been accepted by the Revenue as genuine. The assessee during the course of penalty proceedings in written submissions filed claimed that the assessee carries on business of construction of building and in the course of such business large amount of labour charges and payments for raw material purchased from unorganized trading sectors and bricks etc. are required to be made after banking hours particularly on the festival days. If their demand for cash payment is not met they would cancel the contract work and refused to complete the work and would also prevent the other contractors from undertaking the work till their dues are settled. Raw material would also not be made available for constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y account payee cheque or bank draft. Further an advertisement dt. 26th March, 1992, appearing in the newspaper given by the Department was to the effect that loans/deposits exceeding Rs. 20,000/- should be by account payee cheques or account-payee bank drafts; otherwise the amount in excess of Rs. 20,000 loans/deposits would be considered as default in contravention of s.269SS and defaulter shall be liable to pay by way of penalty a sum equal to amount of loan/deposit as per s.271D. According to the learned counsel for the assessee the aforesaid Board circular as well as the advertisement given by Department for information of the taxpayer at large gave the impression that the default is committed and penalty is leviable only if the loan/deposit amount in cash involved is in excess of Rs. 20,000 and not Rs. 20,000. The facts in this behalf have neither been disputed nor denied by the Revenue. A plain reading of the circular as well as advertisement would no doubt makes one believe that only loan/deposit in excess of Rs. 20,000 is required to be taken by account payee cheque or draft and such loan/deposit of Rs. 20,000 or below that amount could otherwise be taken by cash. & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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