TaxTMI 
TaxTMI 
2006 (7) TMI 264
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....persons- Rs. Shri Hemchand Vira 24,241 Smt. Dayalaxmi 23,233 Shri Abhay Kankane 22,350 Miss Ann Marya Thomas 20,000 Shri Ashish Dhirwani 20,000 Shri Jitendra Shrivastava 22,380 -------- 1,32,204 -------- 3. Th....
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....p; 13.5.1991 5,000 -do- 1.9.1991 5,000 Smt. Dayalaxmi Ben 9.6.1991 5,000 -do- 20.6.1991 5,000 5. Since the assessee has not considered the opening balance of the above creditors while submitting its reply as on 1st April, 1991 and interest earned during the year by the above creditors is as under- Opening Amount of Total Balance&n....
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....sp; -------- 6. These were also to be considered while eexamining the default under s. 269SS. The assessee further submitted that the loans were taken during the course of construction of the hospital. The assessee badly needed the funds to make payments to labourers and to various dealers who supplied the materials. The difficulty arose because the bank was not releasing the instalments of term loan. The assessee has to, therefore, under unavoidable circumstances accept the loans/deposits in cash. The assessee filed correspondence with the bank, and submitted that it was prevented from sufficient cause in accepting the loan in cash. It was, therefore, requested that no penalty be levied in view of relaxation provided in s. 273B of the IT Act. 7. The AO while considering but not accepting the plea of the assessee with regard to reasonable cause has concluded to hold that the assessee has failed to adopt n....
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....various parties who supplied building materials. The assessee was facing acute financial hardship at that time. The deposits were accepted in cash under unavoidable circumstances. Learned counsel for the assessee contended that the AO did not doubt the genuineness of the transactions. The only observation of the AO was that the assessee had taken loans in cash but he ignored the urgency and circumstances under which the assessee required funds. Learned counsel also relied on several judgements of Hon'ble High Courts and Supreme Court as mentioned in the written submission. He submitted that the AO was not fair, proper and justified in levying the penalty under s. 271D, especially when the matter is in litigation. Learned CIT(A) while considering the plea of the assessee has concluded to allow the appeal as per the conclusion drawn by him in later part of the para 3 of his order which is reproduced as under- "................ I have gone through the penalty order, oral and written arguments of the learned counsel and I find that the submissions of learned counsel are correct. Provision regarding levy of penalty under s. 271D is not mandatory. The appellant filed necessary evidenc....
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.... assessee the construction of the hospital was in full swing and the bankers had not released the instalments of term loan of Rs. 74 lacs sanctioned by the bank for a period of four months in 1991 when hospital started functioning in May, 1991. Therefore, the assessee has accepted these loans in cash, as there was acute urgency, so it constitutes reasonable cause as envisaged under s. 273B of the IT Act. As such, the penalty is not imposable and learned CIT(A) has rightly deleted the same. Reliance was placed on all the decisions which were relied upon before the learned CIT(A) and detailed as under- 1. Kumari A.B. Shanthi (Alias) Vennira Adai Nirmala vs. Asstt. Director of Inspection (Inv.) (1992) 197 ITR 330 (Mad); 2. CIT vs. Smt. Godavari Devi Saraf (1978) 113 ITR 589 (Bom); 3. Muthoot M. George Brothers vs. Asstt. CIT (1993) 47 TTJ (Coch) 434 : (1993) 46 ITD 10 (Coch); 4. Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC); 5. CIT vs. Vrajlal Manilal & Co. (1980) 19 CTR (MP) 182 : (1981) 127 ITR 512 (MP); 6. CIT vs. Vegetable Products Ltd. 1973 CTR (SC) 177 : (1973) 88 ITR 192 (SC); 7. Hari Shankar Agrawal, Prop. M/s Khajuraho Auto Centre, Kha....
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.... (b), is twenty thousand rupees or more" (since the case of the assessee does not fall within the purview of either of the provisos, hence these are not being reproduced). 14. So far as validity of the provision containing s. 269SS is concerned, same came up for consideration before Hon'ble Supreme Court in the case of Asstt. Director of Inspection (Inv.) vs. Kum. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC), against the order of Madras High Court's decision as reported in (1992) 197 ITR 330 (Mad) and Hon'ble Supreme Court while upholding the validity of the provision has held as under- "Sec. 269SS of the IT Act, 1961, prescribing the mode of taking or accepting certain loans or deposits, is not discriminatory and is not violative of Art. 14 of the Constitution of India; nor was it enacted by Parliament without legislative competence. It cannot be said that s. 269SS deals with a subject outside the scope of the IT Act or that it relates to a topic not within the competence of Parliament. Nor are the provisions of s. 269SS or s. 271D or s. 276DD unconstitutional on the ground that the provisions are draconian or expropriatory. The object of introducing s. ....
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....e in question, in substance and in reality, it covers a field which is outside its legislative competence." 15. In the context of such provision, in the case of CIT vs. Jagdish Prasad Choudhary (1995) 125 CTR (Pat) 277 : (1995) 211 ITR 472 (Pat) Hon'ble Patna High Court's Full Bench has held that for existence of reasonable cause the assessee is entitled to offer a factual explanation. It is incumbent upon the AO to be satisfied about the existence or the absence of the reasonable cause in the context of the explanation offered. The AO, in arriving at his satisfaction in such a situation, acts in a quasi-judicial capacity. The proceeding for imposition of penalty is a quasi-criminal proceeding. The satisfaction has to be reached by the AO objectively and on consideration of relevant materials only and to the total exclusion of extraneous and irrelevant considerations. 16. So from the aforesaid decisions of the Courts/Tribunal including that of highest Court of the land, the provision under s. 269SS has been held to be valid provision and while upholding such validity, at the same time, Hon'ble Supreme Court has held as under: "It is important to note that another provision....
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.... any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of loan or deposit or the aggregate amount of such loan or deposit is Rs. 20,000 or more. This monopoly of law was brought on the statute to counter the tax evasion. Therefore, it is not sufficient to say that simply the transaction was genuine, so s. 269SS of the Act is not applicable. One cannot accept such proposition of law. There is no ambiguity in the language of the provision. And penalty provisions are to be construed strictly in view of CIT vs. National Taj Traders (1980) 14 CTR (SC) 348 : (1980) 121 ITR 535 (SC) in which Hon'ble Supreme Court has held as under- "The principle that a fiscal statute should be construed strictly is applicable only to taxing provisions such as a charging provision or a provision imposing penalty and not to those parts of the statute which contain machinery provisions." 19. Therefore, subject to the existence of mitigating circumstances penalty cannot be deleted. The assessee must prove beyond the shadow of doubt that there existed a reasonable cause for not complying with the conditions contained in s. 269SS. Circumstances under whi....