TaxTMI 
TaxTMI 
2004 (10) TMI 304
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....r accepting the deposits in cash. During the course of assessment proceedings, the AO noticed from the tax audit report filed under s. 44AB of the IT Act that the assessee has violated the provisions of s. 269SS of the Act. In the tax audit report, it was mentioned that the assessee has accepted the deposits of Rs. 20,000 or more in cash and complete list was provided with the audit report in Annex. J to Form No. 3CD. The assessee could not adduce the reasons or the reasons adduced were not acceptable and in view of this, he levied the penalty on the following transactions: "15-4-1991 20,000 cash 14-5-1991 45,000 cash 27-8-1991 75,000 cash 11-9-1991 44,917 Compulsory deposit 19-10-1991 75,000 cash 18-12-1991 1,00,000 ....
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....tion of income of the assessee-firm for asst. yr. 1992-93, assessment order of the firm and computation of income of Smt. Mohsina Begum for asst. yrs. 1990-91 to 1994-95. The learned counsel for the assessee first of all stated that the firm consists of the sons of the depositor Smt. Mohsina Begum as partners. He further argued that no interest has been charged on this loan amount and this is practically neither a loan nor deposit. He further argued that the depositor Smt. Mohsina Begum (is) having rental income from Bangalore properties and refund of Compulsory Deposits and out of that she has deposited the money for the safe custody with the firm. He further argued that where the loans or deposits are genuine, the provisions of s. 269SS of the Act will not apply. Further, he argued that Smt. Mohsina Begum was partner in the firm till 31st May, 1985 and she continued the practice of keeping funds with the firm. The learned counsel for the assessee relied on the decision of the Gauhati High Court in the case of CIT vs. Bhagwati Prasad Bajoria (HUF) (2003) 183 CTR (Gau) 484: (2003) 263 ITR 487 (Gau) and the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Ind....
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.... prove otherwise. The assessee could not prove that this transaction is a trading receipt, gift, family arrangement or any other transaction. The CIT(A) further found that Smt. Mohsina Begum was a partner in the firm till 1985 but in the asst. yr. 1992-93 when she deposited the money with the assessee-firm, this cannot be stated as capital contribution or cannot be given any other nature to these transactions. The CIT(A) more importantly found that the money was lying with the bank account at Bangalore and other places and the depositor was receiving interest on the deposits from the bank and there was no occasion to keep the money as deposits with the assessee-firm. Even this firm did not pay any interest on the deposits. The CIT(A) has given the complete details of the cash receipts drawn from the bank which is again being reproduced as it is: "Particulars of cash receipts of Mrs. A Mohsina Begum: ------------------------------------------------- Cash received Drawn from bank in account ....
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.... 11-2-1992 1,25,000 Canara 10-2-1992 1,25,000" Bank 6551 ------------------------------------------------- The CIT(A) has simply given a finding that it is not at all difficult for the assessee or the depositor to obtain the money through account payee cheque or account payee draft as the firm was in no need of any money and the deposit was not losing any interest in these transactions. 8. The next point raised by both the sides is that as to whether there exists a reasonable cause or not? And as to whether the onus is on the Department or on the assessee to prove that there exists a reasonable cause. Even though, the assessee was not in need of money, all these loan transactions were made for deposit of money with the assessee and it has accepted the money in cash from the depositor in excess of Rs. 20,000. For this, the simple reason stated by the assessee is that the depositor was a partner earlier and she wanted to dep....
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.... accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act Explanation :-For the purposes of this section,- (i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in s. 51 of that Act; (ii) "co-operative bank" shall have the meaning assigned to it in Part IV of the Banking Regulation Act, 1949 (10 of 1949); (iii) "loan or deposit" means loan or deposit of money." 10. Further, we will go through the memorandum explaining the provisions in Finance Bill, 1984, while introducing this section by the Finance Act, 1984, w.e.f. 1st April, 1984. The relevant memorandum explaining the provisions in the Finance Bill, 1984, is being reproduced as it is which is reported in (1984) 39 CTR (St) 41, 79 : (1984) 146ITR (St) 162: "22. 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 taxpaye....
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....t the taxpayers are also able to get confirmatory letters from such cash creditors/persons in support of their explanation. The only saving clause for reasonable cause is provided in s. 273B of the Act for violation of s. 269SS of the Act and in view of that section, no penalty under s. 271D of the Act will be imposed if there is any reasonable cause. 11.1 As regards to the onus/burden it is clear that first the Department has to prove that the particular transaction was entered into and in this case, the assessee has accepted the loan in cash in excess of Rs. 20,000 or more. This fact has not been disputed by the assessee and after this, the burden shifts on the assessee to prove that this loan was taken in cash with a reasonable cause and the entire burden to prove that there exists a reasonable cause is on the assessee. The assessee has to prove the existence of reasonable cause by preponderance of probabilities as in a civil case and not necessarily by proof beyond reasonable doubt. In this case, the assessee has not proved any reasonable cause and hence, the Dy. CIT has levied the penalty. 11.2 It is pertinent to note that as to whether there exists a reasonable cause or....
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....e petitioners were accepted, the same could not be reopened for prosecution of the petitioners after a lapse of two years that the show-cause notices were given to them for the same offences under ss. 276DD and 276E of the IT Act. Detailed explanations were tendered by the two firms and an opportunity of personal hearing was sought, but the respondents did not hear, the petitioners at all. In view of the fact that ss. 276DD and 276E of the IT Act were deleted from the Act without any saving clause, prosecution of the petitioners thereafter when already explanations were accepted, was unwarranted and unauthorised by law. The facts of this case are fully covered by the law laid down in the case of Rayala Corporation AIR 1970 SC 494, referred above." 11.5 We also find that in the case of CIT vs. Parma Nand (2004) 266 ITR 255 (Del), the Hon'ble Delhi High Court has held as follows: "Where the Tribunal held that the assessee was benefited by receiving money in cash in excess of the limit specified in s. 269SS of the IT Act, 1961, since there, was a discount of 2 per cent, for payment in time, and the loans were taken only to clear the cheques issued by the assessee and the amou....
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.... of banking operations. In addition, these incriminating documents attached in the inventory on 22nd Aug., 1995, could not be termed as "books of account" and, therefore, there was no case for initiating proceedings for the violation of s. 269SS and consequently levying penalty under s. 271D of the IT Act. The assessee contended that all the registers maintained show only outgoings and there was no transaction of receipts. At one point of time it was the case of the assessee that he was handling a specialised area of land acquisition cages and he used to appear before the land acquisition cases and he used to appear before the Land Acquisition Officer for receiving the award amounts pursuant to the award under s. 11 of the Acquisition Act, before the reference Court for enhancement of compensation and also in the appeals before this Court and during all these proceedings the claimants were required to be supported by financial assistance. He was, therefore, advancing them finance and adjusting the said amounts from the final payments and, therefore, he contended that it cannot be termed as an operation of granting loan in the strict sense. While, interpreting the term "books of acc....
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....ly be visited with a penalty of fine equal to the amount of loan or deposit to be taken or accepted. The objections raised by the assessee against the penalty imposed under s. 271D have been considered by the authorities below in keeping with the provisions of s. 269SS and it has been rightly held that the said objections raised by the assessee against invoking the provisions of s. 269SS and thus levying penalty under s. 271D of the IT Act were without any material force and it was only a defence for name sake." 11.8 In the case of Asstt. Director of Inspection (Inv.) vs. Kumari A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC), the Hon'ble Supreme Court has held that: "The contention of the appellant's counsel has no force. The object of introducing s. 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is e....