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TMI Blog2002 (2) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... whom are not well-versed with the Income-tax proceedings. The firm's return of income for the assessment year 1993-94 was filed showing total income of Rs. 41090. The net profit as per profit and loss account was Rs. 2,839. The sales during the year of trading business were of Rs. 4,24,958 and commission receipts were Rs. 1,31,346. The total income of the assessee was assessed by the Assessing Officer by order dated 26-2-1996 at Rs. 9,410 after making an addition of Rs. 5,000. 3. During the course of scrutiny, the Assessing Officer found that the assessee had received advances from the following parties: (1) Shri Bhagwan Namdeo Rs. 1,30,000 (2) Shri Maruti Kishan Rao Rs. 61,000 (3) Shri Chiman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed having given a hand loan (interest free) to the assessee. In the course of the proceedings, the Assessing Officer had made further enquiries and these enquiries revealed that the persons giving the amounts were indeed agriculturists and had capacity to advance the loans. All the parties had bank account at Nanded Dist. Central Co-op. Bank Ltd., Nanded at Limbgaon branch (not at Nanded where the assessee carries on the business). The amounts given were interest free and all these amounts had been repaid during the same financial year. 5. The assessee's contention that the amounts kept by the agriculturists as hand loans for safe-custody did not constitute loan or deposit was not accepted by the DCIT, who held that there was no mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This kind of service was necessary because the constituents who were agriculturists resided in remote villages and visited the place where the assessee was carrying on the business for purchase of seeds, pesticides, fertilizers etc. and considering the risk involving carrying cash physically, they sometimes kept certain sums with the assessee firm. (2) The amounts in question were never accepted by way of loans or deposits, but were kept with the assessee on behalf of the constituents and in the interest of the assessee's own business. The DCIT in his penalty orders had not given a clear finding whether the amounts were loans or deposits but had used both the terms, loans and deposits inter-changeably. Thus, he was not sure whether the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance was placed on the decision of the Calcutta High Court in the case of Girdharilal Goenka v. CIT [1989] 179 ITR 122 which was rendered in the context of section 40A(3). (6) Reliance was also placed on the decision of the Amritsar Bench in the case of Harpal Singh Jaswant Singh v. ITO [1995] 82 Taxman 81 (Mag.), wherein it has been held that bona fide belief coupled with genuineness of transactions would constitute reasonable cause for not invoking the provisions of sections 271D and 271E. In the said case, reference has been made to the Board's Circular No. 556 dated 23-2-1990 wherein the CBDT had clarified that where a Kacha Arhatiya sells goods belonging to an agriculturist, the sale proceeds thereof which remain with him cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the assessee might have misinterpreted the said Circular, but his belief that Kacha Arhatia could keep and repay money of the constituents without attracting the provisions of sections 269SS and 269T was a bona fide belief and this bona fide belief constituted a reasonable cause. 7. The ld. CIT(A) considered the above submissions. He agreed on going through the facts on record that the assessee appeared to work under a genuine belief that being a commission agent the transactions in question were not hit by the provisions of sections 269SS and 269T and that was covered by Circular No. 556 dated 23-2-1990 of the CBDT. This, according to the ld. CIT(A), justifiably constituted a reasonable cause. He also held that one co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituents would not be hit by the provisions of section 269SS or 269T. Though technically speaking one could say that the said Circular did not apply, the fact that a person from a small place earning a very small income could reasonably be considered to hold a bona fide belief that the concerned provisions did not apply. He therefore submitted that the CIT(A) is justified in deleting the impugned penalties. In support of his contentions, he relied upon the following authorities (i) Harpal Singh Jaswant Singh's case (ii) Dr. Deepak Muchala's case; (iii) Hindustan Steel Ltd.'s case; (iv) CIT v. Eetachi Agencies [2001] 248 ITR 525 (Bom.) (v) Dy. CIT v. Dhanji R. Zalte [2001] 78 ITD 397 (Pune). 10. I have considered the rival s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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