TMI Blog1993 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be imposed upon him. The Assessing Officer held that the said deposits were genuine, but the explanation that the said deposits were accepted because cash funds were urgently required for the petitioner's business, was not accepted by him and, therefore, by an order dated January 28, 1993, he levied penalty of Rs. 1,14,113. A contention was raised before the Assessing Officer that section 269SS has been held ultra vires article 14 of the Constitution by the Madras High Court and, therefore, no penalty could be levied under that provision. That contention was rejected on the ground that against the said judgment of the Madras High Court, an appeal is pending before the Supreme Court. The petitioner has preferred an appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to be based upon an intelligible differentia, the classification has no rational nexus with the object sought to be achieved by that section. He also submitted that while carrying on trade or business, a businessman is required to borrow money from time to time for various reasons and if, because of possibility or apprehension of delay in banking facilities, he accepted money in cash he has to pay a heavy penalty of 100 per cent. of the amount borrowed and, therefore, the provision contained in section 269SS should be regarded as an unreasonable restriction on the petitioner's right to carry on trade or business. Section 269SS appears in Chapter XX-B which came to be inserted by the Income-tax (Second Amendment) Act, 1981, with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs. 10,000 or more." As can be seen from the said explanatory memorandum, the necessity to make some provision in this behalf was felt because unaccounted cash often used to be found in the course of searches carried out by the Income-tax Department and the devices adopted by the taxpayers to explain away such unaccounted cash or unaccounted deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z., the borrower, is put under obligation by not taking the loan except by way of an account payee cheque or an account payee draft, if the loan was for Rs. 10,000 or more. No such obligation was cast on the lender who is an integral part of a loan transaction. This differentia looks all the more hostile, harsh and discriminatory when we take into account the normal circumstance that the borrower would be at the mercy of the lender. Ordinarily, he cannot dictate terms to the lender as to the manner in which he should advance the loan amount to him. While so, leaving the lender out of the purview of section 269SS and placing the borrower alone within the ambit of the same would amount to a classification which is not a rational one. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations or by creating false evidence, it is the borrower who was found to be evading payment of tax. In the case of a lender, we fail to appreciate how while lending money by not making payment by a cheque or a draft, he would evade payment of income-tax. Therefore, though the transaction of loan can be regarded as a single transaction, and the borrower and the lender can be said to be equal integral parts, when we view them from the angle of tax evasion, we find that they cannot be regarded as equals or similarly situated. Compared to the class consisting of lenders, the class consisting of borrowers can be said to be in a position to evade tax by adopting the devices, for curbing which provisions have been made in Chapter XX-B by inserti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st functionaries in the Income-tax Department. Now, there is no provision for prosecution but we have the provision for penalty only. But the same reasons would be available for holding that there is sufficient safeguard against any arbitrary action and, therefore, in that sense the provision is reasonable. Merely because this provision may cause hardships to some persons that can hardly be regarded as sufficient for the purpose of invalidating the section, particularly, when we find that it is preventive in nature, although penal in character, and that it has been enacted in the interest of public revenue. As we do not find any substance in the contentions raised by learned counsel for the petitioner, this petition is dismissed. Rule is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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