2000 (4) TMI 823 - AT - Income Tax

Cash advances for paying excise duty-whether 'loan/deposit' under s 269SS; s 271D penalty cancelled, refund ordered

Penalty under s 271D for alleged contravention of s 269SS was examined where cash was received as temporary advances for making advance excise duty ... Imposition of penalty u/s 271D - contravention of section 269SS - monies received from VE were utilised for making advance payments of excise duty - existence of reasonable cause within the meaning of section 273B - HELD THAT:- Apparently the Assessing Officer was satisfied with the assessee’s explanation regarding the nature and source of the amount. Thus, the transactions between the assessee and VE did not fall within the mischief sought to be remedied by the section. As already pointed out by us, the assessee was also prevented by reasonable cause from taking the monies through account payee cheque or draft. The CIT(A), who has enhanced the penalty has also not said a word against the genuineness of the transactions between the assessee and VE. He has harped upon the fact that the excise duty payments could have been effected by cheques after taking the monies from VE through cheques or drafts since there was no urgency about the matter. But we have already pointed out that it is not a condition for the existence of reasonable cause that there should be some sort of urgency about the matter. We have in this connection already referred to the fact that it is not always possible to predict the exact time in which the assessee may be called upon to meet the statutory payments. Therefore, we are unable to share the view of the CIT(A) that unless there is an urgency or emergent need to effect payments in cash, the assessee would not be justified in taking the monies in cash from VE. The expression ‘reasonable cause’ has to be considered pragmatically and keeping in view the vicissitudes and the exigencies of the business, where it is not always possible to get things done or to anticipate the course of events with infallible precision. We are therefore satisfied that there was reasonable cause for the assessee to act in contravention of the provisions of section 269SS by taking monies from VE in cash. The amounts taken by the assessee in the present case from VE are temporary advances and there is no evidence that there was any stipulation as to the period or any stipulation for interest. It is therefore matter of grave doubt as to whether the amounts received from VE can be characterised as loans or deposits. In our view, they can be more appropriately referred to as temporary advances. Such temporary advances are outside the purview of section 269SS. Merely because the assessee had not utilised these amounts for making the excise duty payments, it cannot be stated that the assessee is liable for penalty in respect of this amount. This amount had also been taken for the purpose of effecting advance excise duty payments. It is not the case of the income-tax authorities that these amounts were not taken for such purpose. The mere fact that in the ultimate analysis it transpired that the assessee had taken more monies than were actually required for making the excise duty payments does not, in our view, authorise a different treatment to be accorded to the excess amount than what has been accorded to the amounts which were actually utilised for making excise duty payments. For the aforesaid reasons, we cancel the penalty and allow the appeal. The penalty, if any, already collected is directed to be refunded. Issues Involved:1. Penalty u/s 271D for contravention of section 269SS.2. Definition and applicability of 'loan' or 'deposit' u/s 269SS.3. Existence of reasonable cause u/s 273B.Summary:1. Penalty u/s 271D for contravention of section 269SS:The assessee, a partnership firm, was penalized Rs. 38,10,000 u/s 271D for receiving cash amounts totaling Rs. 38,10,000 from M/s. Vikas Exim (VE), allegedly in contravention of section 269SS. The Assessing Officer (AO) initiated penalty proceedings, asserting that the cash transactions violated section 269SS, which mandates that loans or deposits exceeding Rs. 20,000 must be accepted through an account payee cheque or draft.2. Definition and applicability of 'loan' or 'deposit' u/s 269SS:The assessee contended that the amounts received were temporary advances for business exigencies, not loans or deposits within the meaning of section 269SS. The CIT(A) disagreed, enhancing the penalty to Rs. 38,10,000, arguing that the entire amount received in cash violated section 269SS. The Tribunal noted that the terms 'loan' and 'deposit' are not mutually exclusive and that the amounts received from VE were temporary advances without any stipulation for interest or fixed tenure, thus falling outside the purview of section 269SS.3. Existence of reasonable cause u/s 273B:The assessee argued that the cash was received due to business exigencies, specifically for advance excise duty payments, and thus constituted a reasonable cause u/s 273B. The Tribunal agreed, noting that the transactions were genuine, the amounts were used for statutory business obligations, and there was no evidence of unaccounted money. The Tribunal emphasized that the existence of reasonable cause should be considered pragmatically, taking into account business exigencies and unpredictability.Conclusion:The Tribunal found that the assessee had reasonable cause for receiving the amounts in cash and that the transactions did not represent unaccounted money. It also concluded that the amounts received were temporary advances, not loans or deposits, and thus outside the scope of section 269SS. Consequently, the penalty was canceled, and any collected penalty was directed to be refunded.