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M/s. Sudha Agro Oil and Chemical Industries Ltd. Versus Addl. CIT, Kakinada and Vica-Versa

2016 (5) TMI 335 - ITAT VISAKHAPATNAM

Penalty proceedings u/s 271D - deposits in contravention of section 269SS - Held that:- In the present case on hand, it was proved beyond doubt that the assessee has accepted cash deposits of ₹ 20,000/- and more, in contravention of section 269SS. The assessee has failed to furnish any explanation for the violations referred to in section 269SS of the Act. Therefore, we are of the opinion that the A.O. has rightly levied penalty u/s 271D of the Act, in respect of cash deposits from relativ .....

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V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant by : Shri G.V.N. Hari, AR For The Respondent : Shri M.N. Murthy Naik, DR ORDER PER G. MANJUNATHA, Accountant Member: These cross appeals filed by the assessee, as well as revenue are directed against the order of CIT(A), Visakhapatnam dated 24.1.2013 and it pertains to the assessment year 2006-07. ITA.No. 191/V/2013 2. The brief facts of the case are that, from the assessment records, it was noticed that th .....

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Before the CIT(A), the assessee has reiterated the submissions made before the A.O.. The assessee further submitted that, A.O. was not correct in levying the penalty u/s 271D of the Act, as the deposits accepted by the company are from the close relatives of the Directors and few deposits were renewal of the existing deposits held by the company. Accordingly, the assessee has classified deposits in to 3 parts -(1) deposit accepted from friends and relatives of Directors (2) Renewal of existing d .....

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penalty u/s 271D of the Act. Similarly, in respect of renewal of deposits, the assessee submitted that the A.O. was erred in holding that even for renewal of existing deposits the penalty is leviable u/s 271D of the Act. It was further submitted that it has renewed the existing deposit by passing necessary journal entries in the books of accounts and the journal entries cannot be considered as acceptance of fresh deposits. The assessee further submitted that in respect of fresh deposits accepted .....

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ows that the assessee has accepted cash deposits of ₹ 20,000/- and above. The assessee could not give any reasons for not having accepted the deposits by way of cheque. Similarly, in respect of fresh deposits accepted during the year, the CIT(A) held that the deposits were accepted in cash and the assessee has not furnished any reasons for not accepting the deposits by way of cheque. The contention of the assessee that the depositors were insisted for cash deposits is not acceptable. The a .....

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s assessee are in appeal before us. 5. The ld. A.R. of the assessee submitted that the CIT(A) was erred in confirming the penalty levied in respect of deposit accepted from the family members of Managing Director. The A.R. further submitted that the assessee has proved the genuineness of the transactions and furnished the identity of the depositors. The depositors have directly deposited the cash into the bank account of the assessee, therefore, it cannot be held that there was a violation of se .....

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he deposits in cash. Since, the depositors have insisted for cash payment, it cannot be held that there was a violation of the provisions of section 269SS of the Act. The A.R. further submitted that in case penalty is leviable, the upper limit provided u/s 269SS of the Act should be excluded for levying the penalty u/s 271D of the Act. In support of his arguments relied upon the judgement of Hon ble High Court of Bombay, in the case of CIT Vs. Madhukar B. Pawar 319 ITR 255 and also ITAT Kolkata .....

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that the assessee, during the course of proceedings before the A.O., not furnished any evidence to justify his claim that there was no cash deposits. The D.R. further submitted that the Act is clearly specifies for levy of penalty, where the assessee has accepted cash deposits of ₹ 20,000/- and more. The case law relied upon by the assessee are under different set of facts, which cannot be applied to the facts of the assessee case. Therefore, requested to uphold the penalty order passed by .....

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has not proved the reasonable cause for accepting the cash deposits. It was the contention of the assessee that it has accepted deposits from close relatives and the parties are identifiable and the transaction was genuine. The A.O. cannot levy penalty, merely because it was accepted in cash, unless prove the transaction is not genuine. The assessee further submitted that penalty cannot be levied for technical mistakes. We do not find force in the arguments of the assessee, for the reason that t .....

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y levied penalty u/s 271D of the Act, in respect of cash deposits from relatives and fresh deposits. 8. Coming to the alternative arguments of the assessee. The assessee submitted that penalty u/s 271D of the Act, can be levied on the amount which is in excess of ₹ 20,000/-. In other words, no penalty can be levied for the amount up to ₹ 20,000/-. In case, each loan amount exceeds ₹ 20,000/-, the permissible amount of ₹ 20,000/- has to be adjusted while levying penalty u/ .....

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t portion is reproduced hereunder: It is now well settled that circulars issued by CBDT are statutory in character and are binding on the Departmental authorities. The authorities including AO and other consequently would be bound by that circular. In that instant case, CBDT for the purpose of attracting s. 271D has set out that the loan or deposit should be in excess of ₹ 20000. It is true that what CBDT has stated may be contrary to the express language of s. 269SS which uses the express .....

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CTR (SC) 71: (1971) 82 ITR 913 (SC). In UCO Bank vs. CIT (1999) 154 CTR (SC) 88: (1999) 237 ITR 889 (SC), the law was restated and it was held that circulars of CBDT are legally binding on the Revenue and this binding character attaches to the circulars even if they be found not in accordance with the correct interpretation of the section and they depart or deviate from such construction, when they are issued in exercise of the statutory powers under s. 119. It was however clarified that the Bo .....

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the Court further observed that the taxing authority cannot be heard to advance an argument that it is contrary to that interpretation. 9. The ITAT Kolkata Bench, in the case of Shri Pintoo Karmakar Vs. JCIT (supra) has considered similar issue. The coordinate bench, by following the judgement of Bombay High Court, decided the issue in favour of the assessee as under: 4. We have heard rival submissions and gone through facts and circumstances of the case. Before us Ld. Counsel for the assessee .....

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sessee relied on CBDT Circular No572 dated 0308.1990 reported in (1999) 87 CTR (St.) 1, and stated that this circular has clearly brought out the provision of section 269SS explaining that for taking or accepting any loan or deposit in excess of ₹ 20,000/-" Ld. Counsel for the assessee stated that the word in excess of amounts exceeding ₹ 20,000/-. He also relid on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Madhukar B. Pawar (2008) 218 CTR 59, wherein H .....

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ed language of s. 269S5 which uses the expression 'twenty thousand rupees or more". The law and the CBDT circulars can be spelled out from the following judgments of the Supreme Court In Navnit LaL C. Javeri Vs. KK Sen. AAC (1965) 561TR 198 (SC), a Constitution Bench of the Supreme Court observed "It is clear that a circular of the &1S which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under s. 5(8) of the Act" N .....

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tutory powers under a. 119. It was however clarified that the Board cannot pre-empt a judicial interpretation of the scope and ambig of the provision and further her could not impose a burden on the taxpayer higher than what the Act itself on a true interpretation, envisages. It was observed that the Board has the statutory power under s. 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 Vs. .....

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ection 269S8 of the Act and Hon ble Bombay High Court has interpreted circular no. 572 dated 3 August 1990 (supra) wherein vide pars, 3 relevant portion of clause 43 is as under: "43. Secs. 271C, 271D and 271E, which were inserted in the IT Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provided for the levy of penalties for certain defaults. Penalty under s. 271C was levied for failure to deduct tax at source. Penalty under s. 271D may be levied for failure to co .....

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