1997 (9) TMI 34 - HC - Income Tax

Reference on whether two Rs.20,000 cash receipts qualify as 'Amanat' and fall outside s.269SS, affecting s.271D penalty

Jagir Singh Balraj Kumar And Co. Versus Commissioner Of Income-Tax

The HC directed the Tribunal to refer to the Court under s.256(2) the discrete legal question whether two cash receipts of Rs.20,000 each were 'Amanat' ... Question Of Law, Loans Or Deposits ISSUES PRESENTED AND CONSIDERED 1. Whether, on the facts and in the circumstances of the case, amounts of Rs. 20,000 received on specified dates were 'Amanat' and not a 'loan' or 'deposit' within the meaning of section 269SS of the Income-tax Act, 1961, and consequently whether no penalty under section 271D was leviable on those amounts. 2. Whether other pleaded grounds (reasonable cause/bona fide belief inapplicability of section 269SS; and consistency in imposing penalty where a similar amount was excluded) were to be referred or decided by the Court in the present petition. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Characterisation of amounts as 'Amanat' vs. 'loan' or 'deposit' under section 269SS and liability to penalty under section 271D Legal framework: Section 269SS requires that any loan or deposit of Rs. 20,000 or more taken or accepted after the specified date must be by account payee cheque or account payee bank draft; contravention attracts penalty under section 271D. Section 273B provides a defence if reasonable cause for non-compliance is shown. The characterisation of receipts determines whether section 269SS applies at all. Precedent treatment: The Tribunal, on facts, treated most cash receipts as deposits subject to section 269SS but held that a number of receipts (aggregating Rs. 1,42,200) were not liable and cancelled penalty in respect thereof; it treated two particular receipts of Rs. 20,000 each as deposits from non-agriculturists and confirmed penalty of Rs. 40,000. The Revenue has already caused one question of law to be referred under section 256(1) in respect of cancellation of penalty on the larger sum; the assessee seeks reference in respect of the remaining Rs. 40,000. Interpretation and reasoning: The Court examined the nature of the controversy and the Tribunal's treatment. The central legal question for determination is whether the specified receipts, on the material before the Tribunal, were properly characterised as 'Amanat' (which, if true, would fall outside 'loan' or 'deposit' under section 269SS) or whether they were in truth loans/deposits caught by section 269SS such that penalty under section 271D could be imposed. The Court considered the posture that the Tribunal had already framed and transmitted a statement of case on a related legal point and that, for full resolution of the controversy, the residual question concerning the two Rs. 20,000 receipts should also be considered by this Court. Ratio vs. Obiter: The decision to refer the legal question to the High Court is procedural and dispositive only as to referral - not a substantive determination of whether the receipts are 'Amanat' or deposits. The direction to refer is part of the operative order and is binding for the purposes of enabling adjudication by the Court; any view expressed about facts or merits in the order is obiter with respect to the ultimate characterisation absent a substantive adjudication. Conclusions: The Tribunal was directed to send a statement of the case and to refer the specific question - whether the two receipts of Rs. 20,000 each were 'Amanat' and thus not loans/deposits within the meaning of section 269SS so that no penalty under section 271D was leviable - to the Court under section 256(2). The Court did not decide the substantive question but ordered its referral for adjudication. Issue 2 - Whether other grounds (reasonable cause/bona fide belief; consistency regarding exclusion of similar amounts) were to be referred or considered Legal framework: Section 273B allows waiver of penalty where reasonable cause is shown; bona fide belief about the applicability of a statute can bear on whether reasonable cause exists. Principles of consistency and comparability in penalty assessment may bear on discretionary waiver or mitigation. Precedent treatment: In the assessment and appellate proceedings the assessee argued reasonable cause and that many receipts were 'Amanat'. The Deputy Commissioner rejected reasonable-cause pleas and levied penalty on the total; the Commissioner confirmed; the Tribunal accepted part of the assessee's plea and reduced penalty to two contested receipts. Interpretation and reasoning: The Court observed that the Tribunal had already referred to the Court a separate question of law at the Revenue's instance concerning cancellation of penalty on a substantial portion of the receipts. Given that the Tribunal had confined its decision on referral to a specific question advanced by the Revenue and had otherwise adjudicated certain receipts as deposits, the Court found it appropriate, for comprehensive resolution, to have the remaining question (characterisation of the two Rs. 20,000 receipts) referred. The Court did not purport to resolve the reasonable-cause/bona-fide belief contention on the merits in the present order; rather it limited the referral to the discrete legal question necessary to determine applicability of section 269SS and consequent penalty under 271D. The Court thereby implicitly treated the reasonable-cause issue as subordinate to the primary question of statutory applicability in respect of those two receipts. Ratio vs. Obiter: The Court's remarks declining to adjudicate the reasonable-cause/bona-fide and consistency arguments at this stage are procedural and obiter with respect to the merits; the operative ratio is the decision to refer the specific statutory-characterisation question to the Court for determination under section 256(2). Conclusions: The Court declined to expand the referral to encompass all pleaded grounds; it directed the Tribunal to refer only the modified question whether the two specified Rs. 20,000 receipts were 'Amanat' and thus outside section 269SS so that no penalty under section 271D was leviable. Other grounds (reasonable cause/bona fide belief; consistency) were not decided and remain to be considered as appropriate in proceedings following the reference or in the substantive hearing.