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TMI Blog2020 (4) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... osits were taken/repaid only in cheques, then it may loose all relevance. Even the Chartered Accountant who audited the books of accounts was not showing these as being in contravention of the Act in the relevant columns of Audit Report. Under bonafide belief assessee could accept and repaid loan or deposits in cash as is done by the Co-operative Banks, the assessee had accepted and repaid loans or deposits in cash. Provision of section 269SS are not applicable in the present case. - Decided against revenue. - I.T.A No.612/AHD/2016 - - - Dated:- 12-2-2020 - Shri Sandeep Gosain, Hon'ble Judicial Member And Shri O.P. Meena, Hon'ble Accountant Member For the Assessee : Shri Shaunak Zaveri CA And Shri Yogesh Gamit - Advocate For the Revenue : Shri Sreenivas T.Bidari CIT-DR ORDER PER SANDEEP GOSAIN, JM: 1. This appeal by the Revenue is directed against the order of Ld.Commissioner of Income Tax(Appeals)-4, Surat dated 08.12.2015 for the assessment year 2010-11. 2. Grounds raised by the Revenue read as under: 1. Whether on the facts and circumstances of the case and in law the action of Ld. CIT(A) in deleting the penalty of ₹ 28,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Society and the return of income for the A.Y. 2011-12 was filed by it on 15.10.2010 declaring Nil income. The assessment u/s. 143(3) of the Act was finalized on 01.03.2013 determining total income at ₹ 5,13,290/-. During the course of assessment proceedings, it was observed by the AO that the assessee had accepted and repaid deposits of ₹ 20,000/- or more otherwise than by account payee cheque or bank draft in contravention of provisions of Section 269SS and 269T of the I.T.Act amounting to ₹ 28,66,93,898/- and ₹ 27,12,01,825/- respectively. The details of the same were available in Cash Book submitted by the assessee during the course of assessment proceedings. 2. During the course of penalty proceedings, a show cause notice u/s 274 r.w.s. 271D and 271E of the Act was issued and duly served upon the assessee. After considering the reply of the assessee, the Jt. CIT, Range- 6, Surat imposed the Penalty u/s. 271D and u/s. 271E of the Act to the tune of ₹ 28,66,93,898/- and ₹ 27,12,01,825/- respectively by passing order dated 31.07.2014. 3. Being aggrieved with the penalty orders, the assessee preferred an appeal before the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the I.T. Department in so many years has not objected to it. Not only this, but even Chartered Accountant who audited the books of accounts of the society was not showing these as being in contravention of the Act, in the relevant columns of the Audit Report for years. (iii) In the present case, there exists reasonable cause in accepting the deposits in cash and paying by cash, assessee may therefore be exonerated from the levy of penalty. Further, the words ' any other person' in section 269SS and Section 269T do not denote the directors of the assessee or members of the assessee society when read with the legislative intent as reproduced in Board Circular No. 387, dated 6th September, 1984. The term 'any other person' in the context of introduction of Section 269SS appears to mean persons who are not very intimately or very closely connected with the assessee. In the present case, the assessee accepted the deposits and repaid the same to the members, according to the bye - laws of the society. In view of the transactions which took place between the assessee and its members, the strict provisions of the Section 269SS/269T may not be applicable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the observation of the Ld. CIT(A) that no addition was made on account of these impugned deposits in the return of income and the veracity of the creditors is not doubted by the revenue, it is to state that if veracity is doubted, the addition would be made u/s. 68 of the Act and no penalty is required to be levied. Penalty has been levied as the assessee had submitted that these are loan amount and could not prove the 'reasonable cause' for accepting and repaying the deposit or loan from/to its members ₹ 20,000/- or more otherwise than by an account payee cheque or account payee bank draft. (iii) The Ld. CIT(A) also held that, in fact these credits societies function in villages/talukas, etc. for farmers or illiterate people, etc. as an alternative to banks and if deposits are taken/repaid only in cheques, they may lose all relevance. In this regard it is pertinent to mention that Madhi - Surali is not a village but a town and it is a big market for trading of food grains and has adequate banking facilities where banks like Bank of Baroda and Surat Dist. Co-Op. Bank have branches at Madhi and Dena Bank has branch at Surali. The assessee itself maintains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AR) of the assessee relied upon the order of the ld.CIT(A). 7. Before we decide the merits of the grounds raised by the Revenue, it is necessary to evaluate the order passed by the ld.CIT(A). The operative portion of the order of ld.CIT(A) is contained in para no.8 of its order, same is reproduced as below: 8. I have carefully gone through the impugned penalty orders, the submissions of the appellant, the case law on the issues covered and the facts of the case. It is observed that the appellant is a Registered Society and has been functioning as co-operative credit society for its members and in the process, the appellant society has been carrying on the activities which are in many ways similar to the bank activities. It opens different types of accounts including accounts similar to savings bank account for its members, where amounts can be withdrawn immediately on demand. The appellant is subject to rules laid down by Cooperative Societies Act and the assesses has been carrying out operations with its members In nature of taking money as deposits arid providing money on credit to those members who need ft. Its nature of activity is such and there is no doubt that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is exempt under s. 80P of the Act and the circumstances show that, there was in all probability a bonafide belief of the assessee (that such cash deposits accepted in the savings accounts from the respective account holders do not contravene the provisions of sec. 269SS of the Act) which could easily be reinforced by the fact that the I T department in so many years has not objected to it. Not only this, but even the Chartered Accountant who audited the books of account of the society was not showing these as being in contravention of the Act, in the relevant columns of the Audit reports for years. 8.2 The imposition of penalty for failure to perform statutory obligation is only a discretionary power of the authority exercising judicial functions on consideration of all the relevant circumstances. If the assessee acted on genuine belief that penal provisions have no application to deposits and it applied only to other kind of assessees, then penalty could not be levied. As such, in present case, there exists reasonable cause in accepting the deposits in cash and paying by cash, assessee may therefore be exonerated from the levy of penalty. The other contention of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Omec Engineers V/s CIT (2007) 294 ITR 599, Jharkhand 3) Farrukhbad Investment (I) ltd. V/s JCIT (2003) 80 TTJ 82.ITAT Delhi 4) DIT (Exemption) V/s All India Deaf and Dumb Society 2005 198 CTR Del 376. 5) CIT V/s Maheshwari Nirman Udhyog 2007 211 CTR (Raj) 8.5 To sum up, a harmonious construction of the relevant provisions of s:s, 271D; 27IE and 273B clearly reveals the use of expression shall be liable to pay and the provisions of s. 273.6 providing that no penalty would be leviable if the person concerned proves that there is reasonable cause for the said failure clearly indicates that these provisions give 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 provision but the fact of such a technical break due to ignorance of the relevant provisions of law or on account of bona fide belief, coupled with the fact that transactions in question are genuine and bona fide, transaction were undertaken during the regular c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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