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TMI Blog2014 (11) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... ble cause as provided under section 273B of the Act as the assessee has received the amount as custodian in view of family arrangements. It can be safely held that the bona fide belief constitute all reasonable cause, as provided under section 273B. In these circumstances and also keeping in view of the decision of the Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of U.P. [ 1978 (12) TMI 45 - SUPREME COURT] (1979) (118 ITR 326), it was held that there was a reasonable cause within the meaning of section 273B and, therefore, no penalty is leviable under section 271E of the Act. The facts and circumstances of the present case clearly indicate that there was a reasonable cause and, therefore, no penalty is leviable. In the present case, it is noticed that the amount was kept in the form of bank deposit and not used for business purposes and later repayments were made to Shri K.A. Thomas and it is obvious that the assessee entertained a bona fide belief that no contravention of any provisions of Income-tax Act was being made while making the transaction and it cannot be considered as violation of contravention of sec. 269T of the Act. Accordingly, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee firm i.e., not to disclose this amount as freight charges but something else as repayment of loan. 5. In view of the above judgment of the Jurisdictional High Court, we are inclined to decide the issue against the assessee and in favour of the Department. Accordingly, this ground in I.T.A. Nos. 192 193/Coch/2014 is dismissed. I.T.A. No. 191/Coch/2014 6. In this appeal, the grievance of the assessee is with regard to levy of penalty u/s. 271E of the I.T. Act. 7. The brief facts of the case are that the assessee-firm is a partnership firm. The firm was dealing in raw rubber sheets and scrap rubber and small and medium farmers who supply rubber are the clients of the firm. These farmers were having regular accounts with the firm. During the assessment proceedings it was found that here was violation of provision of section 269T of the Act in respect of deposit of ₹ 1,69,20,000/- in three different bank accounts of the assessee firm and repayment of the same in cash, which attracted penalty u/s. 271E of the Act. The Assessing officer found that the Managing Partner of the firm Shri Mohamed Faizal has been very close to one Shri K.A. Thomas whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily settlement was unproved. In view of these circumstances, the Assessing officer found that the violation of provisions of sec. 269T was clearly established which attracts penalty u/s. 271E of the Act. 10. On appeal, the CIT(A) confirmed the penalty levied by the Assessing officer. Against this, the assessee is in appeal before us. 11. The Ld. AR submitted that Shri K.A. Thomas had arranged ₹ 1,69,20,000/- from his US based son for settlement of family disputes. However, for the sake of convenience, Shri Thomas entrusted the above amount with Shri Mohammed Faizal, the managing partner of the assessee firm by account payee cheque. When the family settlement was over, the amount was taken by Shri K.A. Thomas which was made through cheques in the name of K.A. Thomas. The Ld. AR submitted that the amount was neither a loan nor a deposit. According to the Ld. AR, it was only an entry for the sake of convenience kept under safe custody for a short period and the said amount was not used for the purpose of business. Further, it was submitted that Shri K.A. Thomas had not made any claim on the firm regarding non receipt of the amount entrusted with it nor claimed any interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount received ₹ 7920000 Transferred to IOB Short Term Deposit on 04-05-2007 2. 04-05-2007 Amount received ₹ 3600000 Transferred to Meenachil E. Urban Co. Bank 4 Fixed Deposits of ₹ 9 lakhs each. 3. 04-05-2007 Amount received ₹ 5400000 South Indian Bank - Quick Term Deposit Account. Details of Return of money by closure of deposits 1. On 03-05-2007 IOB Short Term Deposit of ₹ 79,20,000/- Closed on 26-07-2007 and paid to K.A. Thomas on 27-7-2007 2. On 04-05-2007 MEU Co. Bank ₹ 36,00,000/- ₹ 90000 closed on 21-07-2007 paid to K.A. Thomas on 27-07-2007. ₹ 90000 closed on 26-07-2007 paid to K.A. Thomas on 27-07-2007. ₹ 90000 closed on 21-12-2007 and transferred to Current Account and paid to K.A. Thomas between 21-12-2007 and 22-03-2008. ₹ 90000 closed on 26-12-2007 and transferred to Current Account and paid to K.A. Thomas between 26-12-2007 and 22-03-2008. 3. On 04-05-2007 South Indian Bank ₹ 54,00,000/-. ₹ 18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich make sec. 269T applicable stands fulfilled and hence, the same is applicable. 16. The Ld. DR submitted that the argument that the assessee did not receive loan or deposit, the assessee had no unaccounted income and there was no evasion of tax etc. have got no relevance . Hence, according to the Ld. DR, the Assessing officer was right in holding that there was violation of sec 269T and hence penalty u/s. 271E of the Act was leviable. 17. We have heard both the parties and perused the record. In this case, it is not disputed that the money was received by the assessee were not utilized in its business. No doubt, there was some time gap between the date on which money was received by the assessee from Shri K.A. Thomas and repayment to him. But this is attributable to the various exigencies of business. The Ld. Counsel took the plea before us that it was kept only for safe custody and he made fixed deposit of the money received from Shri K.A. Thomas and on encashment of the fixed deposit, it was repaid back to Shri K.A. Thomas. 17.1 Before us, the Ld. Counsel explained that Shri K.A. Thomas was the teacher of the assessee s partner Shri Faizal Mohammed, who had some proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently withdrawn and handed over to Shri K.A. Thomas and thus, no part of the funds was brought to the main stream of the assessee s business. 17.4 It is to be noted that a businessman usually takes loan or accept deposit for meeting working capital requirements, repayment of debts or increase in fixed assets and no person will take a loan or accept deposit without any purpose. Thus, the entire money entrusted for safe custody was deposited into a Bank, and returned to Shri Thomas, through cheques and no part of the money was used by the assessee for any business or other purposes which itself shows that the amount was not a loan or deposit. 17.5 In our opinion, the above explanation offered by the assessee is bona fide and reasonable, the penalty is not exigible u/s. 271E in the case of amount received by the assessee not as a loan or as a deposit. 18. It is to be noted that the provisions of sec. 269T was introduced with the purpose to debar a person from repayment of loan/deposit otherwise than by account payee cheque or account payee draft provided the amount exceeded ₹ 20,000/-. While interpreting the provisions of sec. 269T, we have to bear in mind the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he chart furnished by the assessee, the assessee has earned meagre income from 2004-05 to 2008-09 ranging from ₹ 1.45 lakhs to ₹ 11.88 lakhs and it cannot be said that knowingly the assessee would expose itself to such huge penalty. If at all there is fault on the part of the assessee, the same is only of technical nature. No penalty is leviable for such technical default. The assessee has dealt with these transactions in good faith and out of casualness, in these circumstances, it cannot be considered for levy of penalty under section 271E of the Act. Further, the provisions of section 271E confer discretion on the competent authority to levy or not to levy penalty. In our view, such discretion needs to be exercised with wisdom and in a fair and just manner. The Supreme Court in the case of Kum. A.B. Shanthi (122 Taxman 574) held as under: It is important to note that another provision, namely section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be impossible on the person or the assessee, as the case may be, for any failure referred to in the said provision, if he proves that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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