2011 (5) TMI 1156

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rch on Shri B.H. shah on 29-7-2003, several blank cheques with amounts and dates mentioned on them belonging to the assessee and its group concerns were found aggregating to Rs. 1,01,00,000/-. These cheques were claimed to be handed over to Shri B.H. Shah for the amounts borrowed by various persons including by such assesses and were due for repayment or renewal on the dates mentioned therein. 4. It was found violation of provisions of sec. 269 SS. Accordingly penalty was levied u/s. 271D. According to A.O., the assessee has not been able to relate these blank cheques with the loans taken by them from shri B.H. Shah or his associated concerns as per the regular books of accounts. The cheques of Rs. 95.5 lakhs mention different date were found from Shri. B.M.Shah The stand of the assessee was that these cheques were given as security for the accounted loan transactions which was rejected by the Assessing Officer. The cheques amounting to Rs. 95,50,000/- could only be representing the unaccounted cash loans taken from Shri B.H. shah, by the assessee firm, in violation of section 269SS of the Act. Shri B.H. shah admitted that the seized blank cheques were actually se....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....umption without any concrete evidence with the Assessing Officer that the assessee in fact has borrowed this amount in cash from Shri B.H. Shah. It was submitted that that the Assessing Officer has relied upon the statement of Shri B.H. Shah. According to the Assessing Officer, Shri Shah has stated that the cheques found with him were in lieu of the amounts given in cash to the various persons. It was submitted that the Assessing Officer is not justified on placing reliance on the said statement without confronting the said general statement to the assessee. Assessee should have been given due opportunity including to cross examination of said Shri B.H. Shah whose general statement has been made basis of penalty in question. It is settled law that the department has power to collect any evidence from any source but it is equally the duty of the Assessing Officer to put it to the assessee before making it the basis of his assessment. It is violation of principles of natural justice. CIT (A) is justified to delete the same which should be upheld. 7. After going through rival submissions and material on record we find that certain cheques were claimed to have been issued as securit....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....able cause as held by Bombay High Court in the case of CIT Vs. Schell International (2005) 278 ITR 630 (Bom). The assessee submitted that in this background, the penalty is not justified same be deleted. On the other hand Ld. DR heavily relied on the decision of CIT (A) on the issue of enhancement of penalty under the provisions of section 271D of the Act for violation of provisions of section 269SS of the Act. 9. We find that the Assessing Officer has imposed penalty of Rs. 3,50,000/- on account of transactions carried out by the assessee through bearer cheques in violation of provisions of section 269SS of the Act. which was enhanced to Rs. 23,50,000/- u/s 271D of the Act. This enhanced figure is not in dispute. Dispute is on merit alone as far as penalty u/s 271D of the Act is concerned. As stated above initially the penalty was imposed at Rs. 3,50,000/- for violation of provisions of section 269SS of the Act. However, it was pointed out during the course of appellate proceedings that the violation of provisions of section 269SS of the Act was for amount of Rs. 23,50,000/-. It was admitted by the assessee that there was a mistake in computing figure at Rs.....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ossible to know all the common law; But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam (1937) AC 473 (HL)'.... The fact is that there is no and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application'" 13. We also find that in the case of ACIT Vs. Chandrakant Kashinath Kele (HUF) the Pune Bench of the Tribunal has decided similar issue by observing as under: "On hearing the submissions of both the sides in the light of the factual matrix of the case and the precedents cited, we are of the considered view that there was a reasonable cause, due to which, the assessee was compelled to accept the loan through bearer cheque. Some of the findings on facts such as availability of a meager amount of a few hundred rupees as outstanding balance in the bank account of the assessee, definitely establish the financial constrains of the assessee. Another uncontroverted factual finding that the assessee had already issued cheques favouring afore mentioned three parties had to be honoured and to fulfill....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... found that the assessee had committed violation of section 269T under a genuine belief that sec. 269T had no application to deposits and that it only applied to loans. The department preferred appeal against said order of the Tribunal before the Hon'ble High Court wherein, the Hon'ble Bombay High Court has been pleased to hold that the penalty was rightly deleted by the Tribunal. Again in the case of CIT Vs. Jayabhawani Gramin Bigar Sheti Sahakari Pat Sanstha Ltd. (supra) the Hon'ble Bombay High Court has been pleased to uphold the decision of the Tribunal accepting reasonable cause u/s 273B in case of violation of the provisions of sec. 269SS of the Act. The department had preferred SLP before the Hon'ble Supreme Court against the judgment of the Hon'ble Bombay High Court which has been dismissed by the Hon'ble Supreme Court reported in (2010) 322 ITR 12 (Statute). Respectfully following decisions of the Hon'ble Courts, we are of the view that there was reasonable cause with the assessee in nurturing a bonafide belief that the provisions of sec. 269T were not applicable in its case. We, therefore, uphold the order of the CIT (A) in deleting the penalty of Rs. 2,01,031/- levi....