TMI Blog1994 (1) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... s of s. 269SS of the Act as follows: 1. Smt. Sukhdev Kaur 66,480 2. Shri Vijay Kumar 25,000 3. Shri Gurmit Singh 28,000 4. Smt. Prakash Kaur 40,000 5. Shri Kaur Singh 1,00,000 6. Shri Harbans Singh 40,000 7. Shri Teja Singh 35,000 8. Shri Jaswinder Singh 1,18,570 9. Shri Jaswant Singh 41,700 The assessee responded to the show cause notice by submitting in writing as under: "that the assessee-firm is a registered firm doing business of kacha arhtia. Kacha arhtia acts only as an agent of his constituent and never acts as a principal. The remuneration of kacha arhtia consists solely of commission and he is not interested in the profit and losses made by his constituents and he has no personal interest of his own when he enters into a transaction and his interest is limited to the commission agent's charges and certain out of pocket expenses. In the instant case the persons mentioned in the notices are all agriculturists (except Shri Vijay Kumar, accountant) and are principals of the firm M/s Harpal Singh Jasw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroverted. 5. Before the CIT(A), the assessee reiterated the contentions raised before the Assessing Officer and the officer imposing penalty but he rejected the appeal and it is considered expedient to reproduce paras 5, 5.1 and 5.2 of his order: "5. I have given careful consideration to the entire matter and I am not inclined to agree with the plea of the learned counsel. The argument that assessee was under a bona fide belief that payments from agriculturists were not covered by s. 269SS is not borne out from the records. The plea taken before me that w.e.f. 1st April, 1989 2nd Proviso to s. 269SS was inserted which exempted transaction between agriculturist having no taxable income, was the basis for the bona fide belief on the part of the assessee-firm, is not tenable since the assessee is having taxable income for the last several years and there is no reason or basis for appellant to believe that loans taken from the agriculturists were not covered by the provisions of s. 269SS. The appellant firm is being assessed to tax for the last several years and provisions of s. 269SS were introduced w.e.f. 30th June, 1984. The appellant firm is having the benefit of competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have been invoked at all. The submission was that the purpose of bringing s. 269SS of the Act on the statute book was entirely different than the attitude adopted by the IT authorities in the present case. He submitted that the scope and effect of s. 269SS of the Act, as also of s. 276DD have been elaborated in the following portion of the Departmental Circular No. 387, dt. 6th July, 1984, as under: "(xxiv) Prohibition against taking or accepting certain loans and deposits in cash: 32.1 Unaccounted cash found in the course of searches carried out by the IT Department is often explained by taxpayers as representing 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. 32.5 Fears have been expressed in certain quarters that the provisions will adversely affect the rural sector and farmers who bring produce to mandies for sale. The prohibition contained in s. 269SS is confined to loans and deposits only and does not extend to purchase/sale transaction." 7. Relyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee particularly the type of one before me from the penal consequences of the provisions of s. 269SS r/w s. 271D of the Act: "11. Without prejudice to his contention that no penalty is leviable in this case. Shri Srinivasan contended that the provisions of ss. 271D and 271E are not mandatory but are only directory and, therefore, it is not in every case that penalty can be levied. On the other hand, Shri C. Abraham contended that the language of the impugned section do not permit of such interpretation. We have carefully considered the submissions. In both the sections, the expression "shall be liable to pay" is found. On similar expressions that are found in ss. 276DD and 276E, as they stood then prior to their omission w.e.f. 1st April, 1989, the Andhra Pradesh High Court in the case of ITO vs. Lakshmi Enterprises (1990) 185 ITR 595 (AP) held that the word 'liable' used in the section gives discretion to the Court with regard to the imposition of fine. The Court may either choose to impose fine or may dispense with the imposition of fine. It cannot be said that the Court has no discretion with the imposition of fine. It cannot be said that the Court has no discretion with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us that Sri George, the managing partner of the assessee-firm, is also the managing director of the limited company nor it is in dispute before us that the transactions of alleged deposits or alleged loans or the repayments thereof are among the sister concerns inter se. It is also on record that the accounts of these concerns are managed from Kozhencherry where the senior partners are residing. Nor it is in dispute that the assessee and the sister concerns with which it had dealings are all assessed to income-tax. In the circumstances can it be said that the taking of money from one firm by another firm or repayments thereof constituted deposits or loans so as to attract the provisions of ss. 269SS and 269T? To make a deposit or loan, there must be at least two partners the giver and the receiver both in physical existence the legal existence the meaning of 'deposit' and 'loan' has been succintly explained at page 5735 of Chaturvedi and Pithisaria's income-tax law Fourth Edn., Vol. 5, which is as follows: 'Deposit and loan—these two are not identical in meaning—it is true that both in the case of loan and in the case of a deposit there is a relationship of a debtor and a cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a common managing partner with centralised accounts under the same roof, transfer of funds has taken place in a whimsical manner. Therefore, it is rather difficult to say that the transactions are in the nature of deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished before us all that can be gathered is that funds have been transferred from and to the sister concerns as and when required and since the managing partner is common to all the sister concerns, the decision to transfer the funds from one concern to another concern or to repay the funds could be said to have been largely influenced by the same individual. In other words, the decision to give and the decision to take rested with either the same group of people or with the same individual. In such circumstances of the case, we hold that the transactions inter se between the sister concerns and the assessee cannot partake of the nature of either "deposit" or "loan", though interest might have been paid on the same. Excepting for the transfer of funds being witnessed in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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