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TMI Blog2002 (1) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... AO referred the matter to the Jt. CIT, Bhatinda Range, Bhatinda, who initiated the penalty proceedings under s. 271E of the Act. The officer issued a notice under s. 274 r/w s. 271E of the Act and asked the assessee to show cause as to why penalty should not be imposed for the default committed by it. In response to the above, the assessee, inter alia, stated that at Faridkot branch it had paid some fixed deposits in cash exceeding Rs. 20,000 during the financial year 1997-98. It was also stated that at that time the payments passing officer was new and have no knowledge of provisions of s. 269T of the Act. There was no evasion of income-tax, stated in the reply. The payments were made to agriculturists and other non-income-tax assessees. But due to ignorance of law, the staff made the payments directly in cash. Subsequently, it was also brought to the notice of the Jt. CIT, Bhatinda that out of 52 entries in three cases, FDRs were renewed but the branch has shown wrongly cash payment in the statement given to the AO. It was also stated that in some cases repayments were made to the Government Department and also on the request of the depositors. After considering the assessee's co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 TTJ (Hyd) 373 : (2000) 73 ITD 252 (Hyd). (6) That the employee of the assessee-bank were acting under a bona fide belief, while repaying the fixed deposits in cash instead of transferring the same to the saving fund/current account, that the bank could repay the fixed deposits in cash and they were not making any contravention of the law in doing so as they were not aware of the provisions of s. 269SS of the IT Act. (7) That in number of cases, the different Benches of the Tribunal had held that the bona fide belief coupled with the genuineness of the transactions will constitute a reasonable cause for not invoking the provisions of s. 271E of the IT Act, 1961. Alternatively, it was submitted that the alleged violation of the provisions of s. 269T of the Act was only a technical and venial breach of law. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC). Alternatively, it was also submitted before the CIT(A) that in the following cases, the penalty proceedings of s. 271E for violation of the section 269T were not applicable: L/Folio No. Name and address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 -do- 2-3-98 29,604 28,347 -do- 2,17,246 (-) 65,624=1,51,622 It is also a factual position that the provisions of s. 269T are having no ambiguity as no branch of banking company or co-operative bank shall repay any deposit made with it otherwise than account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit. It is also crystal clear that repayment in cash was made by the appellant on fixed deposits as defined in Explanation to s. 269T of the IT Act, 1961. It is immaterial that the deposits were made by Government Department, agriculturists or repayment was made on the request of the depositors. These reasons and for the reasons given by the AO in his penalty order I hold that the appellant has violated the provisions of s. 269T of the IT Act, 1961, and the penalty levied under s. 271E amounting to Rs. 24,80,037 (26,31,659 - 1,51,622) is in order and the same stands confirmed. It is more so because the appellant unknowingly tried to shield the depositors for not disclosing their income as the appellant has neither deducted the TDS nor furnished (with C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the society by mobilising deposits from the same section. It is stated that the bank pays 1/2 per cent higher rate of interest as compared to the other nationalised banks to encourage savings in the weaker sections of the society. The officers and staff of the bank primarily deal with illiterate agriculturists, farm labourers and other weaker section of the society. It was also brought to our notice that in 1995-96, at the time of banking reforms, 148 regional rural banks out of 196 in India were loss making and on the verge of closure. Keeping in view this fact, the Government of India instructed these banks and trade unions to generate more deposits and to make different type of advances to survive, It is stated that after 1989, the pay scales of the nationalised banks have been revised twice but no revision of the pay scales has been made in the case of regional rural banks. The assessee-bank was the last regional rural bank established in 1986, under the Regional Rural Bank Act and no new regional rural bank has been established due to the fact that the regional rural banks were loss making units. That in context to the above stated facts/conditions, the staff and officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veryone is presumed to know the law but that is not a correct statement. There is no such maxim known to law." In the instant case, it was the contention of the assessee that the staff of the assessee-bank were acting in a bona fide belief that no offence is being made while making the payments of various deposits in cash. During the course of penalty proceedings, the assessee filed the affidavits and produced evidence regarding identity of the depositors. It is noticed that the Department has not impeached the transaction as non-genuine. At the same time, it is also not the case of the Department that the depositors were Benami. In that view of the matter, it can be safely held that the bona fide belief coupled with the genuineness of the transactions constitute a reasonable cause, as provided under s. 273B of the Act. 5.1. In the case of Industrial Enterprises vs. Dy. CIT (2000) 68 TTJ (Hyd) 373 : (2000) 73 ITD 252 (Hyd), the Hyderabad Bench of the Tribunal has said as under: "Provisions of s. 269SS were brought in the statute book to counter the evasion of tax in certain cases, as clearly stated in the heading of Chapter XX-B which reads 'requirement as to mode of acceptan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant is a banking company and the banking company goes by issue of circular from head office. TDS procedure and law is that "a harmonious construction of the relevant provisions of ss. 271D, 271E and 273B clearly generally misunderstood at times and it is the duty of the Department to draw education programme for DDOs and should be given proper publicity. We do not find that the bank was consciously trying to avoid compliance of the law. This misunderstanding was prevailing with the officials working in the branch that all the information is to be filed at the time of the annual return to be filed in Form 27A of the IT Act. In fact suo motu, the appellant did file all these declarations. Even after filing the declarations, none of the declaration was processed and found to be incorrect. We are of the opinion that this was a bona fide belief that the branch officials who have complied with all the provisions of TDS system have deducted tax at source and as such there is no default regarding non-deduction of tax at source We are of the opinion that this procedural aspect was not known at that given time because in Form 27A, the similar information is required to be field be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of guilty mind on the part of the assessee at the time when these transactions were made, the penalties levied deserves to be cancelled. We do so." It is true that while making the above observations, the Tribunal relied on the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa wherein it has been held that "Even if the minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical breach or venial violation of the provisions of the Act or where the breach flows from a bona fide belief like in the present case." 5.5. The net result of the above discussion is that we have held that the repayments were genuine transactions and there was no mens rea on the part of the assessee at the time when the repayments were made. It is also observed hereinabove that the officer who had made the repayments to the depositors was not well conversant with the provisions of IT Act. There is no finding from the Jt. CIT or the CIT(A) that the transactions were not genuine or the transactions were Benami. 5.6. In view of the above, we cancel the penalty levi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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