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TMI Blog2004 (10) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cash 8-2-1992 35,000 cash -- 1,25,000 cash" Before the Dy. CIT, Special Range-III, Madras, the reasons stated were as under: "1. The receipts are mostly from rental income and refund of compulsory deposit. A Mohsina Begum possesses properties at Bangalore and Ranipet and she has appointed an agent to collect the rent and has instructed to give the rents collected to the firm to be credited to her account. 2. Smt. Mohsina Begum was a partner in the firm till 31st May, 1985 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Indore Plastics (P) Ltd. (2003) 262 ITR 163 (MP) as well as the case laws cited before the CIT(A). 6. On the other hand, the learned Departmental Representative argued that the money was deposited in cash in spite of that, the assessee was not in need of money and therefore, there is no reasonable cause. He further argued that the depositor, Smt. Mohsina Begum, is having bank accounts and after withdrawing the money from the bank at Bangalore, she has deposited the money in cash with the assessee-firm. In view of this, the Dy. CIT has rightly levied the penalty as there was no reasonable cause to accept the deposits in cash. He further argued that the deposits are in cash and that also on various dates after withdr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(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 Date Amount Account Date Amount No. ------------------------------------------------- 15-4-1991 20,000 (SB) 15-4-1991 20,000 CAP 49014 ------------------------------------------------- 14-5-1991 45,000 Canara 9-5-1991 35,000 Bank 6551 ------------------------------------------------- 27-8-1991 75,000 Canara 27-8-1991 75,000 Bank ------------------------------------------------- 19-10-1991 75,000 (SBI) 19-9-1991 75,000 CAP 49014 ------------------------------------------------- 18-12-1991 1,00,000 Canara 16-12-1991 1,00,000 Bank ------------------------------------------------- 8-2-1992 35,000 (SB)CAP 8-2-1992 35,000 49014 ------------------------------------------------- 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit taken or accepted by,- (a) Government; (b) Any banking company, post office savings bank or co-operative bank; (c) Any corporation established by a Central, State or Provincial Act; (d) Any Government company as defined in s. 617 of the Companies Act, 1956 (1 of 1956); (e) Such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty (is) not to be imposed on the person or the assessee for any failure referred to in that provision (that section covers the provisions of s. 271D) if he proves that there was reasonable cause for the said failure. Even the memorandum explaining in Finance Bill, 1984, during the introduction of this particular provision, it was explained that unaccounted cash found during 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. It was further explained that unaccounted income is brought into the books of account in the form of such loans and deposits and it was particularly mentioned that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification or reasonable cause to remand the matter for adjudication afresh by the CIT for consideration of reasonableness within the meaning of s. 273B of the Act. In the facts and circumstances of the case, we hold that the Tribunal was justified and correct in law in upholding the judgment of the CIT in deleting the penalty of Rs. 45,000 imposed on the assessee under s. 271D of the IT Act, though for different reasons." 11.4 Further, we find that in the case of Patiram Jain & Ors. vs. Union of India (1997) 141 CTR (MP) 312 : (1997) 225 ITR 409 (MP), the Hon'ble Madhya Pradesh High Court has held as under: "Once the proceedings were dropped and the explanations offered by the 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, prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. CIT who imposed the penalty have no knowledge whatsoever about the genuineness of the loans and the identity of those lenders and their creditworthiness. Therefore, it is clear that the assessee-firm had no intention to conceal any particulars of those transactions." 11.7 It is also seen that in the case of Dhanji R. Zalte vs. Asstt. CIT (2004) 186 CTR (Bom) 772 : (2004) 265 ITR 204 (Bom), the Hon'ble Bombay High Court has held as under: "A plea has been taken before us, like it was taken before the appellate forums below, that most of the parties to whom the assessee had advanced money or taken loans from, were agriculturists and they did not have the benefit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a party-person takes or accepts any loan or deposit in contravention of the provisions of s. 269SS, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine to the extent of equal amount of such loan or deposit. Subsequently s. 271D, which is a penal clause in the Act, which provides for imposition of penalty for failure to comply with the provisions of s. 269SS was introduced w.e.f. 1st April, 1989, omitting s. 276DD from the said date. Thus, the original s. 276DD was replaced by s. 271D and the punishment of imprisonment was taken away. The failure to comply with the provisions of s. 269SS could only 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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