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TMI Blog2012 (12) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... nical defence has given relief to the assessee for the violations of law u/s. 269SS for accepting loans above Rs. 20,000 in cash to the extent of Rs. 10,50,000. 3. Brief facts of the issue are that the assessee is an individual carrying on the business of running vehicles on hire. For the A.Y. 2005-06, the assessee filed return of income on 29.10.2005 disclosing a taxable income of Rs. 1,10,750. The case was selected for scrutiny in order to verify the sources for Earnest Money Deposit (EMD) placed with the Prohibition Department. During the course of scrutiny assessment, it was observed by the Assessing Officer that the assessee had shown unsecured loans to the tune of Rs. 10.50 lakhs and an amount of Rs. 10 lakhs on the assets side as deposit with the Prohibition Department. The assessment was completed u/s. 143(3) of the Act, accepting the returned income. Since the assessee has received cash loans/deposits more than Rs. 20,000 in cash otherwise than by crossed account payee cheques/DDs, by following the provisions of section 269SS of the Act, the Assessing Officer invoked the provisions of section 271D of the Act by issuing a notice u/s. 274 of the Act. Accordingly penalty was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cheques issued to the four persons were not just Rs. Four lakhs and is over and above it and is with an understanding between the assessee and the four persons that the excess amount should be returned to the persons who do not hold the bank account. After considering the entire facts and circumstances of the case, the CIT(A) observed that the imposition of penalty cannot be sustained. Against this, the Revenue is in appeal before us. 6. The learned DR submitted that the assessee has not shown any reason for accepting loans by cash and the CIT(A) deleted the penalty on irrelevant considerations and submitted that penalty levied by the Assessing Officer has to be confirmed. 7. On the other hand, the learned AR submitted that the order of the CIT(A) dated 16.10.2010, clearly upholding the appeal in favour of the assessee and admitting that the imposition of the penalty cannot be sustained is based on extensive study and considering all the facts of the case. The CIT(A) in Para 8.0 of her order clearly discussed that the total assessment record in the case for the relevant assessment year was called for and the same was perused. The CIT(A), therefore, thoroughly discussed the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of these transactions committed by the assessee, it has not resulted in loss of revenue, therefore, the action of the assessee is purely unintentional, technical lapse not knowing the law of the land. The assessee was not professionally managed and acted at the behest of the village elders and also not gained any business benefit out of these transactions, it could be concluded that the breach flowered from a bona fide belief that i.e., venial breach. 9. The AR submitted that these facts have been clearly discussed by the Assessing Officer and the CIT(A) while passing their respective orders. Hence, the grounds of appeal of the department that the CIT(A) on technical defence has given the relief to the assessee is false and erroneous and not based on the fact. Hence, it should not be allowed. The AR submitted that the Assessing Officer in this case is satisfied not arbitrarily but judicially, it means the genuineness of the transaction and bona fide belief of the assessee were accepted by the Assessing Officer and hence while passing 143(1) order he did not invoke the provisions of Section 271D. The veracity of the creditors was not doubted by the Assessing Officer at any po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons 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 purpose 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 section 51 of that Act;] (ii) 'co-operative bank' shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) (iii) 'Loan or deposit' means loan or deposit of money.]" 11. So far as the validity of the provisions of 269SS is concerned, the same came up for consideration before the Hon'ble Supreme Court in the case of Asstt. Director of Inspection (Investigation) v. Kumari A.B. Shanti [2002] 255 ITR 258, against the judgement Madras High Court 197 ITR 330 and the Hon'ble Supreme Court held the validity of the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to legislate, or the legislation is camouflaged in such a way as to appear to be within its competence when it knows that it is not, that it can be said that the legislation so enacted is a colourable legislation and that there is no legislative competence. If any legislation which is intended to achieve the collection of income-tax and to make it easier and systematic is enacted, such legislation would certainly be within the competence of Parliament. When a provision in a statute is challenged on the ground of colourable legislation, what has to be proved to the satisfaction of the court is that though the statute ostensibly is within the legislative competence of the Legislature in question, in substance and in reality, it covers a field which is outside its legislative competence." 12. In consequence of such provisions it has to be seen that for deleting a penalty u/s. 271D, the existence of reasonable cause is necessary and it should be based on factual explanation furnished by the assessee. It is incumbent upon the assessee to satisfy the Assessing Officer about the existence of reasonable cause. The Assessing Officer, in arriving at satisfaction in such a situation, acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing penalty and not to those parts of the statute which consist machinery provisions." 14. Therefore, subject to the existence of mitigating circumstances penalty cannot be deleted. The assessee must prove beyond the shadow of the doubt there existed a reasonable cause for not complying with the conditions contained in section 269SS of the Act. Circumstances under which the cash was accepted must be explained. Unfortunately no cogent material was produced in that direction. The exigency was stated to be village customs and traditions and the assessee accepted words of the elders of the village from which he hailed and the depositors do not have PANs and the assessee only acted as a custodian of the amount and did not gain anything and the depositors were agriculturists. However, there is no material whatsoever placed on record regarding which elder advice the assessee has taken and details of the agricultural activities carried on by the depositors. Even otherwise, there is nothing brought on record to show that when some of the depositors are holding bank account what prevented the assessee to receive the loan by crossed account payee cheques or by DDs. 15. In our opinion, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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