TaxTMI 
TaxTMI 
2012 (9) TMI 845
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.... comply with the provisions of Section 269SS and therefore, no penalty u/s 271D could be levied? c) Whether ITAT was correct in law in holding that the assessee had failed to comply with the provisions of Section 269SS to a very small extent of total deposits in the range of 1.1% to 6.14% and therefore, no penalty could be levied? d) Whether a reasonable cause within the meaning of Section 273B existed in the present case so as to delete the penalty imposed by the AO u/s 271D of the Act? e) Whether general averment on the part of assessee e.g. existence of inadequate banking facilities and reluctance of the customers to utilize banking facilities due to illiteracy and non-cooperation in the bank constituted a reasonable cause so as to delete the penalty imposed by the AO u/s 271D, by the ITAT? f) Whether violation of provisions of Section 269SS to a small extent ranging from 1.1% to 6.14% would exonerate the assessee from the penal provisions of Section 271D of the Act? g) Whether order passed by ITAT is perverse in law and on facts when ITAT deleted the penalty ignoring the object and purpose of the provision for which, it was brought into the statue book?" 2. Th....
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....accounts, getting them witnessed and generally motivating the depositors in the rural areas. (c) There is a tremendous reception in the rural areas for the schemes floated by the assessee since it dispenses with the cumbersome procedure the depositors in the rural areas are required to follow if they want to open accounts in banks. Very often, the banks are at a distance from their areas and there are logistic and other problems in freely accessing the banking facilities. The assessee stepped in to supply the needs of the rural/ remote areas. (d) The agents and field-workers who collect the deposits in cash did make attempts to open accounts in the banks in their names so that the carrying of the cash to distant places can be avoided; but they faced difficulties in opening the bank accounts, presumably because the banks thought that they were competing with their business. Some correspondence to this effect between the agents and the banks was led as evidence. (e) In some cases it is not as if the amount collected, even though it exceeds Rs.20,000/- is in cash; in many cases the amount represents conversion of the deposit from one scheme to another. Details of such convert....
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.... speared all over the country of the each area may be having branches of different public sector/ co-operative sector or Private Banks. The argument of the assessee therefore is not accepted." The Additional CIT also rejected the submission of the assessee that there were several cases of conversion of the deposits from one scheme to another which did not involve the receipt of cash. He however rejected the same and observed that the accounts were subjected to special audit under Section 142(2A) of the Act and, therefore, at that stage he was not willing to accept the claim. The other claim that there was double jeopardy in the sense that the deposits were treated as income under Section 68 to the extent of 35% and were also subjected to an equivalent amount of penalty was not accepted on the ground that the addition was the subject matter of appeal in different proceedings. 5. For the above reasons the Additional CIT held that the assessee, without reasonable cause, committed a violation of Section 269SS of the Act and has, therefore, rendered itself liable for penalty under Section 271D. He accordingly imposed a penalty of Rs.109,98,41,899/- by order dated 28.05.2004. The p....
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....ent years 1993-94, 1999-00, 2000-01 and 2001-02, it was 1.1%, 3.31%, 5.89% and 6.14% respectively. (e) The whole activity of the assessee consists of acceptance of deposits and if the assessee is to remain in business, it cannot dictate terms to its clients and it has to carry on the business only under prevalent circumstances. (f) No penalty has been levied for the intervening years, that is, assessment years 1994-95 to 1998-99 or for the years subsequent to the assessment year 2001-02. The Assessing Officer is thus not sure of levying penalty. In the light of the aforesaid reasons and findings, the CIT (Appeals) held that the levy of the penalty is not mandatory and the assessee has shown the existence of reasonable cause. He also relied on some authorities as the question of reasonable cause and ultimately cancelled the penalties. 8. The Revenue carried the matter for all the four years in appeals before the Tribunal. The Tribunal passed a common order on 17.09.2010. The following findings have been recorded by the Tribunal: - (a) The amount of deposit collected by the assessee in cash in violation of Section 269SS, for all the four years is very minimal, ranging ....
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....cheque facility, considering that the deposits schemes are basically small saving schemes. 9. The main contention of the revenue before us is that the basis of the order of the Tribunal is untenable in as much as it has held that since the nature of the assessee's business itself is to receive deposits, the provisions of Section 269SS cannot be applied. It is also contended that even if the assessee is a Residuary Non-Banking Finance Company (RNBFC), it was obliged to maintain requisite ledgers and registers which it did not and in these circumstances there were no means of verifying the genuineness of the deposits or the genuineness, the identity and creditworthiness of the depositors, an aspect which was overlooked by the Tribunal. According to the Revenue, perversity is writ large in the order of the Tribunal. 10. The counsel for the assessee however submits that the assessee made several attempts to get exemption from the applicability of Section 269SS under clause (e) of the first proviso to the Section, but the attempts were unsuccessful. He pointed out that the CIT (Appeals) had called for a remand report from the Assessing Officer to which a detailed parawise comme....