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TMI Blog1998 (12) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... te PWD. During the course of assessment proceedings for the asst. yr. 1992-93, the ITO, Modasa holding jurisdiction over the case of the assessee found that It had accepted the loans/deposits of Rs. 9,60,500 in aggregate from M/s Ajay Bharatkumar Co. and Rs. 3,55,500 in aggregate from M/s Punamchand Devchand Shroff in cash on various dates which were considered by the AO as contravention of provisions of s. 269SS. Similarly, the AO also found that the assessee had made repayments of loans/deposits in cash to M/s Ajay Bharatkumar Co of an amount of Rs. 90,000 and to M/s Punamchand Devchand Shroff and amount of Rs. 85,000 and this was also considered as a violation Of provisions of s. 269T. The AO accordingly vide letter dt. 28th March, 1994, referred the case to the Dy. CIT for initiation and imposition of penalty under ss. 271D and 271E of the Act. Accordingly, the Dy. CIT issued show-cause notice dt. 16th Sept., 1994, to the assessee and after considering the submissions of the assessee levied penalty of Rs. 13,16,000 under s. 271D and Rs. 1,75,000 under s. 271E. Before the Dy. CIT the assessee submitted that no penalty under ss. 271D and 271E are leviable in the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter deducting from the cheque amount, the amount of commission/discounting to which it is entitled; (iii) Considering the objects of the provisions of ss. 269SS and 269T as explained by the Board in Circular No. 387, dt. 8th July, 1984, and Circular No 345, dt 28th June, 1982, and the transactions being otherwise genuine in nature, no penalty ought to have been levied in the case of the assessee; (iv) In view of the decision of the Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa penalty for a technical breach or venial violation of the provision of law should not have been levied by the Departmental authorities. It was submitted that assuming though not admitting that the assessee has in fact committed breach of the provisions of ss. 269SS and 269T, the assessee was prevented by a reasonable/sufficient cause from accepting money by cheques or repaying the same by cheques because the assessee required money urgently in cash for meeting its day-to-day working as a building contractor- It was submitted that the assessee was substantially doing the work of Government of Gujarat and in the relevant period the Government of Gujarat was in financial difficulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine, cannot save the assessee from default committed under the provisions of ss. 269SS and 269T because had the deposits been non-genuine then there could have been further addition to the assessed income under s. 68. It was further submitted that breach of the provisions of ss. 269SS and 269T by the assessee is quite obvious from the perusal of the copies of the accounts of the two parties i.e. M/s Bharatkumar Co. and M/s Poonachand Devchand Shroff and it cannot be regarded as a technical breach or venial violation as contended by the learned counsel for the assessee. It was submitted that ss. 271D and 271E r/w ss. 269SS and 269T are complete code in themselves and the levy of penalty is mandatory which is clear from the use of the word "shall" in ss. 271D and 271E. It was submitted that the assessee cannot plead ignorance about the provisions of law as it is an existing assessee and is being assisted by the competent chartered accountants. It was submitted that the ignorance of law cannot be accepted as a valid or reasonable cause for cancellation of penalties. 7. We have considered the rival submissions and have also perused the orders passed by the AO as well as the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras 2.1 and 2.2 of the said Circular are reproduced hereunder, which is published at p. 5735 of the said volume of Income-tax law by Chaturvedi Pithisaria. "2.1 The proliferation of black money poses a serious threat to the national economy and it was considered necessary to take effective steps to contain and counter this major economic evil. The Government have, in recent past, taken several legislative and administrative measures to unearth black money. The IT (Second Amendment) Act, 1981 (hereinafter referred as the Amending Act), represents another step in the same direction. 2.2 It came to Government's notice that a substantial amount of black money was deposited by tax evaders with banks, companies, co-operative societies and partnership firms either in their own names or in benami names, the IT (Second Amendment) Act, 1981, seeks to counter attempts to circulate black money in this manner." It is clear from the aforesaid circulars issued by the Board that these provisions were introduced with a view to countering the various devices adopted by the tax evaders for explaining their unaccounted cash found during the course of search or for introducing their unaccounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at violation of the provisions of ss. 269SS and 269T was an innocent mistake on its part on account of ignorance of the relevant provisions of law and it constituted a reasonable cause within the meaning of s. 273B, could not be just brushed aside. Ordinarily a plea as to the ignorance of law cannot support the breach of a statutory provision. But the fact of such an innocent mistake due to ignorance of the relevant provisions of law, computed with the fact that the transactions in question are genuine and bona fide transactions and were undertaken during the regular course of its business, will in our opinion constitute a reasonable cause. The Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of U.P.(1979) 118 ITR 326 (SC) at p 339 has observed as under: "Moreover, it must be remembered that there is no presumption that every person knowns the law. It is often said that everyone is presumed to know the law but that is not a correct statement. There is no such maxim known to the law." The penal provisions of ss. 271D and 271E r/w s. 273B confer a discretion on the authorities to levy or not to levy penalty. Such discretion needs to be exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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