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2015 (8) TMI 1214 - KERALA HIGH COURT

2015 (8) TMI 1214 - KERALA HIGH COURT - [2015] 379 ITR 100 (Ker) - Penalty levied u/s 271D and 271E - cash loans taken by the assessee in contravention of 261SS - Tribunal was correct in holding that the orders imposing penalty under Section 271D and E were passed within the period of limitation prescribed under Section 275(1)(c) and whether the Tribunal was correct in confirming the findings? - Held that:- The only case of the assessee is that if the period of limitation prescribed in Section 2 .....

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re received from partners and other sister concerns of the assessee and were repaid, there is no material whatsoever to infer that these receipts were anything other than loans or deposits. There is no law that every receipt from a partner or a sister concern cannot, in all circumstances, be treated as a loan or deposit. On the other hand, the nature of the receipt would depend upon the agreement between the parties and the evidence that is produced. As we have already stated, there is no materi .....

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an and Sri R Anas Muhammed Shamnad For the Respondent : Sri PKR Menon, SC and Sri B Ramachandran, Addl. CGSC JUDGMENT Antony Dominic, J. These appeals are filed by the assessee impugning the orders passed by the Tribunal in ITA Nos.103/11 and 104/11 whereby the orders passed under Sections 271D and 271E of the Income Tax Act (hereinafter referred to as 'Act') confirmed by the Commissioner of Income Tax (Appeals) were upheld. 2. We heard the counsel for the appellant and the Standing Coun .....

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eferred to the Joint Commissioner of Income Tax and who issued notice dated 28.3.2008. To the notice, replies were given and finally order under Section 271D and 271E were passed on 29.7.2008. In the order passed under Section 271D, penalty of ₹ 10,83,000/- which is equal to the cash loans taken by the assessee in contravention of 261SS of the Income Tax Act was levied. Similarly, in the order passed under Section 271E, penalty of ₹ 2,97,000/- which is equal to the amount of cash loa .....

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d of limitation prescribed under Section 275(1)(c) and whether the Tribunal was correct in confirming the findings without examining the circumstances providing reasonable cause as contemplated under Section 273B of the Act. Another question of law which is framed is whether the authorities below erred in not considering the issue whether the cash receipts, being bonafide transactions between the assessee and its sister concerns/partners, can be considered as loans or deposits attracting the pro .....

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e than by an account payee cheque or account payee bank draft if the aggregate amount of such loan or deposit is ₹ 20,000/- or more. Section 269T of the Act, also occurring in Chapter XXB of the Act, provides for the mode of repayment of certain loans or deposits. As per this provision, no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit if the amo .....

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aid. Sub section (2) of both these provisions provide that any penalty imposable under sub section (1) shall be imposed by the Joint Commissioner. By virtue of these provisions, though contravention of Section 269SS and T automatically invites penalty under Section 271D and E, Section 273B provides that notwithstanding anything contained in the above provisions, 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 h .....

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concerned, the assessment order was passed on 6.11.2007 and the assessment order concluded by stating thus: "Since the assessee has violated the provisions of section 269SS and 269T of the IT Act by accepting and repaying loans exceeding ₹ 20,000/- aggregating and otherwise at any point of time, as given above, penalty provisions of Section 271D and 271E of the IT Act are attracted. Accordingly initiated penalty proceedings under Section 271D and 271E." It was relying on the last .....

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svi v. Commissioner of Income Tax, Gujarat II [1972] 86 ITR 557 and Commissioner of Income Tax v. Jitendra Singh Rathore [2013] 352 ITR 327 (Raj). 9. As we have already seen, although Section 271D and E of the Income Tax Act provides for levy of penalty for contravention of Sections 269SS and 269T. As per sub section (2) to both these sections any penalty imposable under sub section (1) of these provisions shall be imposed by the Joint Commissioner. It was, therefore, that the matter was referre .....

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itiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the p .....

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y the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in Section 275(1)(c). 12. Insofar as the judgment of the Apex Court in D.M.Manasvi v. Commissioner of Income Tax, Gujarat II [1972] 86 ITR 557 is concerned, that was a case where penalty was levied under Section 271(1)(c) and as is evident from the provision itself, the proceedings under that Section are to be initiated on the basis of .....

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do so. 13. The second contention raised by the assessee is regarding the existence of reasonable cause. As we have already stated, Section 273B provides that notwithstanding anything contained in the provisions of Section 271D and E, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred in the provisions, if he proves that there was reasonable cause for the failure. Insofar as this case is concerned, reading of the reply given by the assessee s .....

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he Assessing Officer has stated thus: "The said replies do not give 'reasonable cause' of failure to repay 'otherwise' than by the account payee cheque or, account payee bank draft. The assessee does not state any 'objective satisfaction' regarding cash repayment of ₹ 2,97,000/-. The assessee also does not say anything about availability of banking facility and maintenance of bank accounts by both parties (the person who has paid loan/deposit and the person who .....

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made beyond normal banking hours or beyond the availability of banking facilities. The said provision of section 269T is procedural regarding why the assessee must not repay any loan exceeding ₹ 20,000/- (aggregate) 'otherwise' than by an account payee cheque or an account payee bank draft. It not only prohibits cash loan repayment but also prohibits any amount received 'otherwise' than by account payee cheque or an account payee bank draft. The assessee must prove to take .....

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id other than by an account payee cheque or account payee bank draft. So, I am not inclined to give the benefit of provision of Section 273B of the Income Tax Act, 1961, since the assessee firm has not proved any 'reasonable cause' for the said failure." 14. It is this finding which has been confirmed by the Commissioner of Income Tax (Appeals) and by the Tribunal, having appreciated the reasoning of the lower authorities we do not find any perversity in the findings. Apart from tha .....

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