TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 737
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....as an alternative to the bank and, therefore, the activities of these Societies are covered by the proviso to Section 269SS of the I.T. Act is not perverse as this proviso specifically covered banking companies, Post Office Saving Bank or Co-op. Banks, and all these entities are specifically defined in Explanation to Section 269SS of the Act and assessee-society is not covered by these definitions? 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld.CIT(A)-I Surat may be set-aside and that of the Assessing Officer's order may be restored." 3. Brief facts of the case are that the assessee a Co-operative Society, filed its Return of Income on 15.10.2010 by declaring income at Rs.Nil for the year under consideration. The assessment u/s.143(3) was finalized on 01.03.2013 determining total income at Rs. 5,13,290/-. Since assessee had accepted and repaid deposits of Rs. 20,000/- or more otherwise than by account payee cheque or bank drafts. Therefore, penalty proceedings were initiated u/s.271D and 271E of the Income Tax Act and penalty was i....
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....ctivities. It opens different types of accounts including accounts similar to savings bank account for its members, where amounts can be withdrawn immediately on demand. It is observed that the intention of the legislature in enacting the provisions of Section 269SS and 269T of the Act; were envisaged to apply to the loan/deposit accepted by a person for his own purposes and not keeping in mind case like that of appellant's where control and ownership remains with the person to whose credit money stand as a member of the Society. Also the member can keep the deposit for a period which is according to their convenience. The amount has sometimes to be repaid by the assessee to its member immediately on demand. These features distinguish the case of the assessee from other ordinary assessees. Therefore, the provisions of Section 271D/271E are to be viewed in the background of these aspects. The authority vested with power to impose penalty has a discretionary power not to levy the penalty. It is also noted that no addition on account of these impugned deposits in the return of income, it means that deposits are considered genuine. The veracity of the creditors is not doubted by th....
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.... reasonable cause for the said failure clearly indicates that these provisions given a discretion to the authority to impose the penalty or not to impose the penalty. Such discretion has to be exercised in a just and fair manner having regard to the entire facts and materials existing on record. Ordinarily, a plea as to ignorance of law cannot support the breach of a statutory provisions of law or on account of bona fide belief, coupled with the fact that transactions in question are genuine and bonafide, transactions were undertaken during the regular course of its business will not result in levy of penalty u/s 271D and 271E. 4. The decision of the Ld. CIT(A) in deleting the penalty is not acceptable for the following reasons :- (i) First of all, the Ld. CIT (A) has deleted the penalty u/s 271D & 271E by accepting the submission of the assessee that it had accepted and repaid deposit or loan above Rs. 20,000/- or more otherwise than by an account payee cheque or account payee bank draft on bona fide belief that the provisions of Section 269SS and 269T are not applicable in its case. This action of the Ld. CIT (A) is not acceptable as the provisions of Section_269SS are very m....
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....e case of the assessee society cannot be compared with any illiterate individual when deciding whether there was a reasonable cause in not complying with the provisions of Section 269SS. (iv) The argument that it had an bonafide belief that it can accept and repay loan or deposit in cash as is done by the Co-Op. Banks and provisions of Section 269SS are not applicable in its case is not acceptable because it is not believable that a Society managed by professionals and in existence for last 40 years does not understand the differences in laws, rules and regulations governing a Cooperative Society and a Cooperative Bank. The Co-Op. Banks, besides being governed by the State Cooperative Laws are also regulated by the Reserve bank of India as per the Banking Regulation Act, 1949. The Cooperative banks are required to obtain a license from the Reserve Bank of India, under the provisions of Section 22 of the Banking Regulation Act, 1949, and maintenance of Cash Reserve Ratio and Statutory Liquidity Ratios norms of Minimum Capital Requirements as per the guidelines of RBI and other functions are supervised by the RBI. The assessee Society is not functioning under Banking Regulations Ac....
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.... member of the Society, The assesses like present is hot Obliged to question the source of deposit made toy it's members. Also, the member can keep the deposit for a period which' is according to their convenience. The amount has sometimes to be repaid by the assessee to its member immediately on demand. These features distinguish the case of the assessee from other ordinary assessees. Therefore, the provisions of s, 271D/271E ore to be viewed in the background of these aspects. Further, the assessee is subject to periodical inspects and audits by various statutory authorities. the deposits received by the assessee, which was carrying on the activities of proving credits, were not in the nature-of taking of any loans or deposits for the purpose of funding its project as a source of investment; rather, it was in the business of accepting deposits; that in view of the nature of such business, the scrutiny of the deposits could not be the same as in the case of assessee making entries of deposits on account of loan etc to be used for its own investment The authority vested with the power to Impose penalty has a discretionary power not to levy the penalty. It is also noted th....
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....ted the deposits and repaid the same to the members; according to the bye-laws of the assessee society. In view of the transactions which took place between the assess(c)(c) and its members, the strict provisions of the s. 2695S/269T may not be applicable, and is a very plausible opinion of the provision. In view of the above the appellant was in all probability functioning under bona fide belief. In this regard, reliance is placed on the fallowing judgments: 1) Dillu Cine Enterprises (P) Limited V/s Additional Of (2002) SO ITD 2) Citizen Co-operative Society Limited V/s Additional OT (2010). 41 DTR 0305. 8.3 One has to keep in view the intent of the legislature behind enacting s. 269SS/269T, where it is clear that the loan or deposit brought in by the assessee was not to explain its unaccounted cash and a plausible opinion that members of the assessee society are not covered by the expression 'any other person' occurring in s. 2A9SS. The transaction can also be attributed to various exigencies of business carried on by the assessee and: thus constitutes a 'reasonable cause as contemplated by s. 2738., Reliance Is placed on: following; case low: 1) CIT V/s Maa....