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2005 (1) TMI 742
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....iated on 12th June, 2003, after a gap of about seven years from the end of relevant assessment year and that too when no assessment proceedings were pending before the learned AO. 2. That the learned authorities below have not properly appreciated the purpose, aims and objects of inserting Section 269SS as clarified by the CBDT in its Circular 387, dt. 6th July, 1984, according to which these provisions were brought to curb the tendency of tax evaders to prove the unaccounted money found in search, loans. 3. That the learned authorities have not properly appreciated that the transaction is neither a loan nor a deposit as the trustee is giver of amount and individual and he is also the receiver of amount as trustee of the trust for making payment of land to farmers and to meet urgent needs for material used in construction 4. That the default, if any, is of technical and venial nature as the genuineness and availability of cash given by the trustee to trust to meet urgent needs has not been doubted. 5. That the appellant craves leave to add, amend, alter or withdraw any ground of appeal. 3. The parties were heard first with respect to the reque....
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....In view of such delayed initiation of penalty proceedings, the penalty in question was claimed to be bad in law. In support of these submissions, the learned Counsel relied upon the decision of Tribunal, Cochin Bench in the case of Noble Pictures v. Jt. CIT (Coch)(AT). 5. The next argument advanced by the learned Counsel for the appellant was that the intention of legislature while enacting the provisions of Sections 269SS, 269T, 27ID and 27IE was, as have been explained, in Circular No. 387, dt. 6th July, 1984, to curb the transactions of black money for explaining the genuineness of cash found during the time of search or otherwise--meaning thereby, that, if the transaction in question does not involve the black money rather is found to be genuine then there is no violation of Section 269SS or 269T, as the case may be and consequently, there is no justification for making penalty under Section 271D or 271E of the Act, as the case may be. Reverting to the present case, the counsel for the assessee submitted that since the Revenue has accepted the transaction as genuine, there was no involvement of black money and consequently, this is not a fit case where penalty under Section ....
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.... concerned, there is no such limit in the provisions of Section 271D and, therefore, this plea of the assessee is not maintainable. With regard to the assessee's submission that the transaction being genuine, no penalty was leviable, the learned Departmental Representative submitted that there is no such prohibition under the law. Only requirement is that of receipt of amount exceeding Rs. 20,000 in cash and once this requirement is satisfied, penalty under Section 271D is leviable. The learned Departmental Representative further submitted that when the amount was received by the assessee, it was not known as to who has paid because it was only when Mr. Y.K. Gupta had disclosed the amount under VDIS Scheme that it came to be known that it was Mr. Y.K. Gupta, who had given the amount. Closing his averments, the learned Departmental Representative supported the order of the CIT(A). 10. We have considered the rival submissions, facts and circumstances of the case and various decisions relied upon by the counsel for the assessee. 11. The brief facts, as have been revealed from the records, are that - (i) The appellant is a public charitable trust, which has set up an....
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....osited in the cash book of the trust and debited to the account of the farmers. The payments were made in cash as farmers do not accept cheque payments when taking advances or land payments and this is a usual practice in all rural land deals. (vi) The amount paid by Shri Y.K. Gupta to the trust on this account being in cash was declared by him in voluntary disclosure scheme and income-tax due thereon was paid by him. No interest was charged on the amounts paid by Shri Y.K. Gupta and credited in the books of unsecured loans as the intention of the managing trustee was to assist the trust in its objective of setting up an engineering and management college in periphery of Agra. There was no tax evasion in the entire transaction. (vii) The Addl. CIT Range-I, Agra issued a show-cause notice under Section 271D of the Act on 12th June, 2003, proposing to impose penalty under Section 271D of the Act for assessee's default in accepting the loan during the period relevant to asst. yr. 1996-97. The assessee submitted that the amount in question having been received from the trustee, it was neither loan nor deposit. Another submission made was that since the assessee ha....
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....inte Swapnom' and was released on 28th Sept., 1989 and another feature film named 'Arangu' which was released on 22nd March, 1991. The AO was of the view that the assessee was required to file a statement in Form No. 52A, containing the particulars of all payments of over five thousand rupees in the aggregate made by it or due from it as the assessee was engaged in the production of films. The said statement was to be filed within 30 days of completion of the production. The first film was released on 28th Sept., 1989 and the second one released on 22nd March, 1991. Hence, the statement was due on or before 28th Oct., 1989 and 21st April, 1991, respectively. However, the assessee did not comply with the above requirement. The AO held that the failure on the part of the assessee to file the said statements within the prescribed time attracts penalty under Clause (c) of Sub-section (2) of Section 272A of the Act. Accordingly, notice under Section 274(1) read with Section 272A of the Act, on 14th July, 1999 for both the assessment years in question, calling the assessee to appear before the AO on 27th July, 1999, so as to explain why penalty could not be imposed. The asses....
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....chur, processed the return under Section 143(1)(a) on 21st March, 1991, without pointing out any shortfalls. It was the case of the assessee that since the Dy. CIT processed the return without pointing out any discrepancy or irregularity, it was possible that Form No. 52A might have got misplaced/lost after completing the assessment proceedings. Similar is the case for the asst. yr. 1991-92. The first appellate authority already dismissed the assessee's appeal vide para 4 of his order observing as under: On a consideration of the facts of the case, it is noticed that the AO has imposed the penalty as Form No. 52A was not on record, either for the asst. yr. 1990-91 or for the asst. yr. 1991-92. During the course of the appellate proceedings, the Authorised Representative of the appellant was required to give evidence in regard to the claim that Form No. 52A was actually filed. However, he expressed his inability to give any direct evidence of having filed Form No. 52A with the IT authorities at Aluva or Trichur. Since the appellant has been insisting on having filed Form No. 52A with the IT authorities, no explanation was offered at the time of hearing in regard to non-....
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....expires late. In this regard the Hon'ble Delhi High Court in the case of CIT v. Rajinder Kumar Somani clearly held that (headnote) : 'By necessary implication, Section 275 of the IT Act, 1961 has also provided that action for imposition for penalty must be initiated in the course of the assessment proceedings. It is not enough that the ITO is satisfied in the course of the assessment proceedings that a case for penalty exists, it is further necessary that he should have initiated some action for the imposition of penalty in the course of such proceedings. It depends on the facts of each case whether any such action has been initiated before the date of completion of the assessment. If, even before the completion of the assessment, the ITO has issued a penalty notice, it is clear that he has taken necessary action for the imposition of penalty. This condition can also be said to be satisfied where, though a penalty notice has not been issued before that date, it is seen that the officer had given a direction to his office before completing the assessment that such a notice should be issued. Similarly, in cases governed by Section 274(2) (which has been dele....
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....Even otherwise, as we have already noted in terms of Section 275(1)(c) the penalty proceedings, since was not initiated during the assessment proceedings nor even completed within the contemplated time, the penalty proceedings initiated are bad in law. Section 275 which prescribes time-limit for imposing penalty is applicable to Chapter XXI given under the head "Penalties imposable". Section 272A falls within this Chapter. Section 275(1)(c) stipulates that no order imposing penalty under this Chapter (Chapter XXI) shall be passed in any other case after the expiry of the financial year in which the proceedings in the course of which action for the imposition of penalty has been initiated are completed or six months from the end of the month in which action for imposition of penalty is initiated. In the instant case of the assessee, it was neither completed before 31st March, 1993, nor even initiated before the six months contemplated by the second limb of the provision, i.e., 31st Aug., 1993. It was initiated in the year 1999. First of all there should be a reasonable time within which penalty proceedings is to be initiated or to be completed. Even if a time is no....
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....d that a sum of Rs. 64,62,489 was accepted as loan or deposits in violation of the provisions of Section 269SS relevant to the asst. yr. 1996-97. A remand report was submitted to the CIT(A) accordingly. After considering the submissions of the AO, the CIT(A) held that penalty under Section 271D was imposable on those amounts of loans or deposits which were accepted in the previous year relevant to the asst. yr. 1996-97, in violation of the provisions of Section 269SS. He, therefore, restricted the penalty under Section 271D to Rs. 64,62,489 for asst. yr. 1996-97. The findings of the CIT(A) were accepted by the Revenue and no second appeal was preferred before us. In view of the finding of the CIT(A), the AO issued show-cause notice to the assessee as to why the penalty under Section 271D may not be imposed on the amount of loans or deposits accepted by the assessee in other years. As per the AO, the amount of loans/deposits accepted by the assessee in violation of Section 269SS in different years was as under : Asst. yr. Amount 1992-93 1,43,050 1993-94 1,37,000 1994-95 11,51,000 1995-96 27,76,960 1997-98 71,71,360 1998-99 18,17,762 6. In his order, the AO has obse....
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....ct-matter of appeal before us. 10. On receipt of the penalty orders, the assessee challenged the same before the Hon'ble Allahabad High Court. In their order dt. 5th June, 2000, their Lordships observed that in the writ petition, the orders imposing penalties under Section 271D/271E of the Act have been challenged. The Hon'ble Court observed that as the petitioner had alternate remedy of filing the appeal under the IT Act, the petitioner may file appeal within 3 weeks from the date of their orders. Their Lordships also observed that the appeals shall be decided by the appellate authority preferably within two months from the date of filing the appeal in accordance with law. The assessee, therefore, preferred appeal before the CIT(A) in respect of the amount and the assessment years mentioned earlier." (iii)(b). It was in view of the above facts and circumstances that the Hon'ble Tribunal deleted the penalty after observing as under : 38. We have considered the rival submissions. The assessee is a non-banking financial company whose business was accepting loans and deposits and investing the same. As certain loans/deposits were accepted and rep....
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....s on the statute was clarified by the CBDT vide its Circular No. 387 , dt. 6th Sept., 1984 [sic-Memorandum Explaining the Provision of the Finance Bill, 1984] [reported in (1984) 146 ITR 162 (St)]. The relevant part of the circular is as under : '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 taxpayers are also able to get confirmatory letters from such persons in support of their explanation. With a view to circumventing this device, which enables taxpayers to explain away unaccounted cash or unaccounted deposits, the Bill seeks to make a new provision in the IT Act debarring persons from taking or accepting, after 30th June, 1984, from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of such loan or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where on the date of taking or accepting....
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....he Chapter XX-B and Section 269SS begins with the heading--Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax. The term 'certain' used therein, when read along with the legislative intent of curbing tax evasion, clearly means that all loans are not attracted. This section attracts only 'certain' loans that are brought in by the taxpayer to explain away his unexplained cash or unaccounted deposit. This section is definitely not intended to penalize genuine transactions, where no tax evasion is involved. It is well-settled that the headings prefixed to sections or set of sections in some modern statutes are regarded as 'preambles' to those sections. This view was approved by Farewel L.J. Fletcher v. Birkenhead Corporation (1907) 1 KB 205.' 42. A statute is an edict of the legislature and the conventional way of interpreting or construing a statute is to seek the intentions of its maker. A statute is to be construed according to the intent of them who make it. Our observations find support from the decision of the Hon'ble Supreme Court in Vishnu Pratap Sugar Works (P) Ltd. v. Chief Inspector....
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....ar views were expressed in the cases of Sodhi Transport Co. v. State of U.P., Manmohan Das Shah v. Bishun Das, State of Madhya Pradesh v. Azad Bharat Finance Co. and Ajay Hasia v. Khalid Mujib Sehravadi. 46. Keeping in view the intent of the legislature behind enacting the above sections, we hold that the loans/deposits brought in by the assessee was not to explain its unaccounted cash and, therefore, the question of violating the provisions of Section 269SS/269T did not arise. We may mention here that even there is no suggestion from the Revenue that by way of accepting loans and deposits in cash, the assessee has introduced its unaccounted cash in the garb of loans. 48. Regarding learned Counsel's arguments that the time-limit for imposition of penalty was governed by the provisions of Section 275(1)(c), we find force in it. This issue was adjudicated by Hyderabad Bench of the Tribunal in the case of Dillu Cine Enterprises (P) Ltd. (supra). At p. 495 of the report, the Bench held as under : 'To our mind, the intent of the legislature is to give more time to such cases falling in Category 1 only, i.e., where penalty is related to quantum of addit....
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....eals in both the years before the first appellate authority who confirmed penalty in both the years rejecting the plea of the appellant and hence these appeals. Since both the appeals involve similar issue, they are disposed of through this common order and common discussion. During the course of hearing, oral arguments as well as written submissions were made on behalf of both the parties which are considered while disposing of these appeals. (iv)b. It was in view of the above facts that the Hon'ble Tribunal cancelled the penalty after observing as under : We have carefully gone through the facts of the case, arguments advanced and written submissions and case laws relied upon. At the outset, we may mention that it has been argued by both the parties that true character/nature of transactions should be determined without being influenced by manner of entries passed in the books of account or, the method of accounting or disclosure made in balance sheet. We agree with this contention put forth by both the parties, and, therefore, we would like to first determine the nature of transactions in the present case in respect of which the penalties under Section 271D....
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....he company. It was in this background that when he found company being unable to make the resources available for the project work, he decided to involve and utilize his own money for construction work. There were neither compelling reasons nor a compelling force by the so-called artificial person-company to bring in the money, it appears that it was merely a suo motu decision of Mr. Goyal to expose himself to such a huge risk of utilizing his personal money for company's purposes, with the hope that he would take it back when the loans are disbursed to the company. In other words, it is a case where agent utilized his own money in order to fulfil his obligations towards the principal upon which he became entitled to get back the money. This is thus a unilateral transaction on the part of Mr. Goyal to involve and utilize his own money by withdrawing it from his own sources. An unilateral act cannot result in a contract for which existence of two parties is a sine qua non. Whether loan or deposit they both are contracts only, originated from bilateral act. We are impressed by the reference of Section 69 of the Indian Contract Act, 1872, which, helps on understanding the....
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....ncorporating them in the books of account. Thus, going by the nature of transactions, we are satisfied that the impugned transactions were neither loan nor deposits and there is enough material on record to suggest that the amounts were brought by Mr. Goyal for directly incurring on the construction expenditure which was not in terms of any agreement with the company, but was suo motu. The nomenclature used by the parties is immaterial and would not alter the nature of captioned monies. Having decided that impugned amounts were neither loans nor deposits, all other allegations and arguments become irrelevant to the context since the provisions of Section 269SS are not attracted in the facts of the present case. (v) Mohan Karkare v. Dy. CIT (supra) : (v)(a). The facts in this case were that on 10th Jan., 1989, the assessee had obtained a sum of Rs. 40,000 and on 11th Jan., 1989, another sum of Rs. 30,000 both amounts in cash; from his father to purchase a matador from Bajaj Auto Ltd. Poona. In the assessment proceedings, the transaction was accepted as genuine, but penalty proceedings under Section 271D of the Act were initiated. (v)(b). In the pe....
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..... They are one and the same. It was submitted that a firm is a compendious name of all the partners taken together. Therefore, the payment, in this case, is not from one person to another. It is a payment to self. It may be treated as loan or deposit for the purposes of accounting only and not for the purposes of general law. He relied upon the following decisions : CIT v. R.M. Chidambaram Pillai, Sunil Siddharthbhai v. CIT, Malabar Fisheries Co. v. CIT, ITO v. Arunagiri Chettiar (sic), CIT v. Madhukant M. Mehta (1981) 132 ITR 159 : (1981) 5 Taxman 11 (Guj), Vir Sales Corporation v. Asstt. CIT (1994) 50 TTJ (Adh) 130 and Mohamad Ali v. Karji Koudho Rayaguru AIR 1945 Pat 286. The Departmental Representative invited our attention to the provisions of Sections 188 and 189, of the IT Act to submit that a specific mention has been made in the Act where the firm and the partners are treated as separate entities. As far as Section 269SS is concerned, the firm and partners are separate entities for the purposes of income-tax and for the purposes of application of the provisions of the IT Act. He invited our attention to the decisions CIT v. A. W. Figgies & Co. and Ors., C....
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....he case of Narayandas Kedarnath (supra), held, that there is no presumption that all the payments by the firm and the partners are separate payments. But in that case the Hon'ble High Court was not required to decide as to whether the firm and the partners are the same. It was a very narrow compass, which was to be decided. The reliance of the Department on the case of A.W. Figgies & Co. (supra) is also of no help to it. At p. 409, the Hon'ble Supreme Court have held that the partners of the firm are distinct assessable entities, while the firm as such is a separate and distinct unit for purpose of assessment. It has been held that the provisions of the IT Act go to show that the technical view of the nature of a partnership, under English Law or Indian Law, cannot be taken in applying the law of income-tax. Therefore only for the purpose of making an assessment that the IT Act has made distinction between the firm and the partners. In general law, they continue to be one and the same. Therefore, the decision of the Hon'ble Supreme Court also does not help the Department. Reliance of the Department on the decision of the Madras High Court in the case of R. Rangaswamy Na....
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.... payment itself to self and does not partake the character of loan or deposit in general law. Therefore, the provisions of Section 269SS are not applicable to the facts of the case and no penalty imposable under Section 271D. We also feel that the assessee could be under genuine impression that advancing of loan by a partner to firm is not a transfer from one person to the another and hence, there is no violation of provisions of Section 269SS. In view of the above, we cancel the penalty imposed and allow the assessee's appeal. (vii) Decision of Tribunal Hyderabad Bench in the case of Dillu Cine Enterprises (P) Ltd. v. Addl. CIT (supra) (vii)(a). The brief facts in this case and as have been revealed from the records, were as under : The facts as gathered from the record are as follows. The assessee is a domestic company in which public are not substantially interested. The assessee derives income from two cinema theatres and a shopping complex. The assessee-company has been managed by three directors, one of whom has since expired. All the three directors had personal accounts in the form of current account in the books of the assessee-company. Mr. P....
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....n or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not) and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The proposed prohibition would also apply to cases where the amount of such loan or deposit together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken, is Rs. 10,000 or more. (vii)(c). The Hon'ble Tribunal further referred to some other decisions as under: (vii)(c)(i). This Bench of the Tribunal in Industrial Enterprises v. Dy. CIT (2000) 68 TTJ (Hyd) 373 : (2000) 73 ITD 252 (Hyd), held in para 17 of its order, as follows : 'Provisions of S. 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX-B of the IT Act, 1961 which reads "requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax". Legislative intention in bringing Section 269SS in the IT Act was to avoid certain circumstances of tax evasion, whereby huge transactions are made outside the books of account by way of ....
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....nsidered view that the same is correct when read with legislative intent as reproduced in the previous paragraphs i.e., Board Circular No. 387 , dt. 6th July, 1984, (supra). We are convinced with the learned assessee's counsel's arguments that the Finance Act, 1984, states the legislative intent and describes a situation where explanation of taxpayer of loans obtained from "various persons". It also speaks of confirmatory letters from "such other person" during the course of search. This scheme of the section, the context in which the section is introduced and the legislative intend definitely do not mean "husband and wife", "director" and "company" or "partner and firm". The legislature was not referring to confirmatory letters produced to explain unaccounted money found during search operations from "spouse" in case of "individual" or "director" in case of "company" or "partner" in case of "firm": The term "any other person" in the context of introduction of this section as appears to us means persons who are not very intimately or very closely connected to the assessee as in the present case, as in a search and seizure operation under Section 132, all these persons are i....
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.... was the assessment order, which should have spoken about the ingenuity of the transactions. Thus, for all these reasons, the provisions of Section 269SS are not attracted to the facts of the case. The penalties levied are, therefore, cancelled. Even if they were to apply, in the facts and circumstances explained above the bona fide belief that provisions of Section 269SS would not be attracted in the nature of transactions will constitute reasonable cause in this case--Muthoot M. George Bankers v. Asstt. CIT (1993) 47 TTJ (Coch) 434 : (1993) 46 ITD 10 (Coch) and ITO v. Rajendra Trading Co. (1994) 48 ITD 210 (Chd) relied on. (vii)(c)(iii). The Hon'ble Madhya Pradesh High Court has in the case of Patiram Jain (supra) held that : It has also been accepted by the respondents that the transactions made between the two sister-concerns were under exceptional circumstances to accommodate the emergency needs of the sister-concern for a very short and temporary period. As such, it did not amount to a loan or deposit as defined under Section 269SS of the IT Act. Therefore, the proceedings initiated under Sections 276DD and 276E of the IT Act were against the provisions ....
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.... Expln. (iii) below Section 269SS except saying that "loan" or" deposit" means loan or deposit of money. The terms "loan" and "deposit" are not mutually exclusive there are a number of common features between the two. It was held by the Madras High Court in Abdul Hamid Sahib v. Rahmat Bi AIR 1965 Mad 427, that a loan is repayable the moment it is incurred while it is not so with the deposit. In a deposit, unlike a loan, there is no immediate obligation to repay. Normally a deposit is for a fixed tenure. 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, a matter of grave doubt as to whether the amount 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. Thus, in our considered opinion and in view of the various judicial pronouncements on this matter, we hold that the transaction of this case on hand cannot be considered as "loan" so as to attract Section 269SS and Sect....
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....aken various amounts in cash--each exceeding Rs. 20,000 from seven persons--totalling to Rs. 10,00,000. The AO imposed penalty under Section 271D of the Act. Before the Tribunal, the assessee submitted that keeping in view the object of introduction of Section 269SS, the case was not searched and seizure case where unaccounted money had been found. The other argument was that amount was deposited in cash by the directors or members of the assessee-company and the same were declared under the VDIS scheme in the personal capacity as they did not have any bank account. In view of these facts, the Hon'ble Tribunal cancelled the penalty after relying on the various decisions listed in the order itself. 13. After having considered the rival submissions, facts and circumstances of the case, provisions of Section 275(1)(c) of the Act and aforesaid various decisions and the Circular No. 387 relied upon by the counsel for the assessee and the fact that the learned Departmental Representative has not brought any decision contrary to various decisions relied upon by the counsel for the assessee, to our notice at the time of hearing, we are of the opinion that the assessee is to succeed ....