Income Tax Appellate Tribunal - Lucknow
Assistant Commissioner Of Income-Tax vs Sahara India on 21 December, 2005
Equivalent citations: [2006]100ITD93(LUCK), (2006)101TTJ(LUCK)933
ORDER
P.M. Parashar, Judicial Member
1. The appeal filed by the revenue and the cross-objection filed by the assessee are directed against CIT(A)'s order dated 5-4-1999 relating to assessment year 1994-95.
2. In appeal No. 640/Alld./99 the assessee has taken only one effective ground which challenges the cancellation of penalty of Rs. 41,42,87,300 imposed by the Addl. CIT (Central), Lucknow under Section 271D of the Income-tax Act, 1961. In the cross-objection, two grounds have been taken by the assessee for supporting the order of learned CIT(A).
3. Shri K.K. Pandey, CIT DR appeared for the assessee whereas Shri A.A. Thakkar, Advocate along with Shri J.P. Mehrotra, CA appeared for the assessee.
ITA No. 640/Alld./99 (Revenue's appeal)
4. Facts, concerning the matter, in brief, are as under:
4.1 The assessee-firm was working as agent on behalf of various companies and was collecting deposits under various financing or mutual benefit schemes run by such companies.
4.2 During assessment proceedings in assessment year 1994-95 the Assessing Officer noticed that the assessee had received certain cash deposits above Rs. 20,000 from various depositors and has thus contravened the provisions of Section 269SS of the Income-tax Act. The Assessing Officer, therefore, sent a proposal for initiation of penalty proceedings under Section 271D.
4.3 During penalty proceedings, the Assessing Officer required the assessee to furnish details of cash deposits beyond Rs. 20,000. In this regard show cause notice dated 9-3-1998 was also sent besides other notices. The concerned officer also required the assessee to furnish the particulars of loans/deposits of Rs. 20,000 or more as required in para 10 of 3CD report. It was also mentioned that as per directions of the Assessing Officer issued under Section 142(2A) accounts of the assessee were to be audited and a report was to be submitted in which the loans and deposits of Rs. 20,000 or more were to be included in the points to furnish details.
4.4 The Assessing Officer has observed in the penalty order that the assessee did not furnish details required through show-cause notice nor the audit report. He, therefore, finally opted to quantify the amount involved for contravention of Section 269SS by making estimate. His observations on this aspect are as under:
In these circumstances I am left with no alternative for the quantification of amount involved for contravention of provisions of Section 269SS but make a reasonable estimate on the basis of material available on record and keeping in view the investigations made by the Assessing Officer & the comments made by him in the assessment order, for levy of penalty under Section 271D.
However, you are hereby given one more opportunity to produce evidence in support of your contention that there is no contravention of provisions of Section 269SS at my office at Lucknow on 17-3-1998 at 11.00 a.m. 4.4A After receiving the reply of the notice referred to above, the concerned officer further made observations in para 5 of the order to hold that the assessee was trying to avoid furnishing the information which are as under :
the auditor has not quantified although it was mandatory on him to verify the total quantum of cash deposits of Rs. 20 thousand or more in the audit report.
During the course of assessment proceedings the assessee has not disclosed total quantum of cash deposits of Rs. 20 thousand or more when it was asked by the Assessing Officer.
When special audit was ordered by the learned CIT, Kanpur, the assessee has not cooperated and he not got the audit done.
When in the penalty proceedings under Section 271D this information has been called for, it has not submitted.
4.5 Thereafter the Assessing Officer made reference to para 4.29 of the assessment order for assessment year 1994-95 to note down the deposits in various branches made in violation of Section 269SS. The total of such deposits as worked out by him was at Rs. 1,45,45,600 + Rs. 45,03,600 + Rs. 21,10,450 + Rs. 48, 57,781 = Rs. 2,60,17,431. The Assessing Officer, therefore, held that the Department has been able to quantify the deposits in contravention of Section 269SS at Rs. 2,60,17,432 out of the few branches from which the information could be obtained by issuing commissions etc. 4.6 The concerned officer also observed that the assessee has not furnished any details of cash deposits of Rs. 20,000 or more out of total deposits of Rs. 4,42,81,70,243 made during the year. For estimating the deposits, taken by way of contravention he took assistance from the details of one branch namely Basti Branch for assessment year 1995-96 and found that deposit during the year in that branch were Rs. 3,38,41,342 out of which cash deposit of Rs. 20,000 or more was at Rs. 29,84,200. Thus, the ratio of deposits of Rs. 20,000 or more was 8.82 per cent to the balance deposit of Rs. 4,40,21,52,811 (Rs. 4,42,81,70,243 - 2,60,17,432). The figures of deposits in contravention of Section 269SS was worked out by him by applying the ratio of 8.82 per cent to the balance deposit of Rs. 4,40,21,52,811 at Rs. 38,82,69,877. Thus, he added this figure to the quantified amount of Rs. 2,60,17,432 and took the figure of Rs. 41,42,87,305 as the total figure of deposits beyond Rs. 20,000 or more as taken by contravening the provisions of Section 269SS.
4.7 The Assessing Officer then considered the legal aspect. The contention of the assessee was that it was only an agent and was taking loans and deposits on behalf of its principals and not in its own account and as such the entire deposits collected by the assessee were in fiduciary capacity and hence the same did not belong to the assessee-firm as the assessee-firm was not carrying on any business of para banking in its own account but was carrying the business of an agent on behalf of other companies. The Assessing Officer rejected this contention by assigning following reasons:
Section 269SS does not exclude the agents from its purview;
It is the assessee who has actually received deposits in cash, therefore, Section 269SS applies in its case.
The assessee's contention that it is not a para banking and, therefore, not in the purview of Section 269SS is not correct. All persons who are receiving cash deposit of Rs. 20 thousand or more are in the purview of Section 269SS. The contention of the assessee is that since the assessee has not received cash deposit on its own account it is not liable for penalty under Section 271D, but Section 269SS nowhere says that for attracting the penalty the assessee must have received the cash deposits in its own account. Moreover, the fact is that the assessee is issuing receipts for the deposits also and deposits them in its own bank account and books of account also.
4.8 He thus concluded that penalty under Section 271D is attracted at the point the cash amount is collected and since the assessee-firm collected the cash amount, it is liable for penalty under Section 27ID.
4.9 After considering the factual aspect relating to quantification of the amount, as pointed out above and after considering the legal aspect, the Assessing Officer imposed penalty of Rs. 41,42,87,309 under Section 271D.
4.10 The assessee challenged the imposition of penalty before the learned CIT(A). It was pointed out on behalf of the assessee that the provisions of Section 269SS are not applicable to the assessee who was doing the business of agency and was engaged in collecting the deposit on behalf of the principals. Regarding the responsibility of the agent, reference was made to Sections 2 and 282 of the Indian Contract Act.
4.11 It was argued on behalf of the assessee that no addition on account of deposits was made in the hands of the assessee-firm which denotes that the assessee-firm did not accept any deposit under any scheme. It was also submitted that the auditors did not give details of deposits of Rs. 20,000 or more in para 10 of Form 3rd because they were not required to do so while auditing the accounts of the assessee-firm which was not accepting the deposits on its own behalf. It was further argued that provisions of Section 269SS are attracted in case of acceptance of deposits and not on their collection or receipts.
4.12 The learned CIT(A) considered the facts and circumstances of the case and cancelled the penalty after accepting the pleas raised on behalf of the assessee. In doing so he assigned, inter alia, following reasons :
(a) The break up of the identified deposits of Rs. 20,000 or more of various branches was not given to the assessee. After collecting details from the Department, he found that large number of deposits did not violate the provisions of Section 269SS.
(b) During the penalty proceedings the Assessing Officer issued various show-cause notices for making roving inquiries in respect of deposits which might have violated the provisions of Section 269SS.
(c) The Assessing Officer was not justified in estimating the amount relating to contravention of provisions of Section 269SS and that too by picking up the accounts of one branch for subsequent assessment year. If the audit report was defective, then the penalty could have been imposed under Section 271B.
(d) Penalty can be imposed under Section 271D only when a specific charge is levied against the assessee for the violation of Section 269SS.
(e) The agent cannot be held responsible for the acts done on behalf of the principal. This position has been explained by the Tribunal in its order in the case of Sahara India Savings & Investment Corporation Ltd. v. Asstt. CIT [IT Appeal Nos. 372, 373 & 374 (Alld.) of 1996, dated 30-6-1998].
4.13 On the basis of the above reasons the learned CIT(A) concluded as under:
33. In view of the above findings of the Tribunal also it is clear that as agent does everything on behalf of the principal and nothing in his own right, even if there was any violation of provisions of Section 269SS in accepting the deposits from the depositors of the schemes floated by the principals, such violations has to be presumed to have been done by the principal only. As according to the provisions of Section 226 of the Indian Contract Act, the legal consequences have to be faced by the principals, penalty can be imposed upon the principals and not upon the agents.
5. The learned CIT DR Shri Pandey, while challenging the cancellation of penalty, took us through the provisions of Sections 269SS and 271D. According to him, these provisions are broadly worded and the term "any loan or deposit" appearing in Section 269D covers the cases of every person who takes the loan or receives the deposit.
5.1 The learned DR submitted that there is no dispute of the fact that the assessee had collected deposits and, therefore, the provisions of sections 269SS and 271D are fully applicable to it.
5.2 The learned DR also pointed out the difficulty faced by the Assessing Officer and the officer imposing penalty in quantifying the figure of amount deposited in contravention of Section 269SS and for this purpose he took us to the penalty order. It was pointed out by him that the Assessing Officer as well as the officer imposing the penalty made repeated efforts and required the assessee to give details but the assessee avoided the same. It was further pointed out that even the auditor did not cooperate and, therefore, the concerned officer was left with no option but to estimate the figure to ascertain the contravention of Section 269SS. For justifying the approach of the concerned officer in estimating the figure he took support from the ratio of decisions in the cases of CST v. H.M. Esufali H.M. Abdulali ; and CIT v. Rayala Corporation (P.) Ltd. . According to him, the Assessing Officer was fair enough in estimating the amount. He thus supported the order of Assessing Officer on factual as well as legal aspects. According to him, principles of Contract Law did not apply in the case of the assessee because the assessee was itself collecting the deposits and in any case the term "no person" appearing in Section 269SS puts prohibition on every person collecting or taking the loan or amount or enters into any monetary transaction.
6. The learned Counsel for the assessee, on the other hand, fully supported the order of learned CIT(A) and in support of the same raised further following arguments :
(i) Penalty notices were issued in the case of the assessee as well as in the case of its principal companies but penalty was imposed in the case of the assessee only i.e. the agent and no action was taken in the cases of the principals. In this regard he made reference to the notice dated 15-9-1997 issued to M/s. Sahara India Savings & Investments Corporation Ltd. and notice issued to M/s. Sahara India Mutual Benefit Co. Ltd. dated 15-9-1997 under Section 271D. Copies of the notices have also been filed on behalf of the assessee.
(ii) The language of Section 271D clearly shows that the person responsible for action under Section 271D is a qualified person i.e., a person who accepts the deposits. In the present case, the assessee was not accepting any deposit on its own behalf but was doing every act on behalf of the principal. Therefore, the assessee was not the person accepting deposits and thus the provisions of Section 271D cannot apply to the assessee.
(iii) In view of the contract entered into between the principal companies and the assessee agent, the liabilities for the action of the assessee was determined and settled. In this regard he made reference to the memorandum of understanding a copy of which has been filed on record.
(iv) Except for the year under consideration, no penalty under Section 271D was imposed upon the firm.
(v) The Assessing Officer, while estimating the figure of the amount relating to contravention of Section 269SS took assessment year 1995-96 as the basis but in that year no penalty was initiated against the firm.
(vi) The break up of the identified figures was never given to the assessee in the show-cause notice. In this regard he also made reference to the observations of CIT(A) in para 23 of the order and submitted that the factual findings of learned CIT(A) have not been challenged by the Department.
(vii) In the balance-sheet of the assessee no deposit was reflected which shows the treatment given by the assessee to the deposits.
(viii)The deposits made by the assessee were not taken to be its receipts. In this regard reference was made by him to the order of the Tribunal dated 30-6-1998 rendered in ITA Nos. 372, 373 & 375/Alld./96.
(ix) In view of the provisions of Sections 182 and 229 of the Contract Act the agent is authorized to do certain acts on behalf of its principal but the liability of the agent is limited. In this regard he made reference to the ratio of decisions in the cases of CIT v. D. Shankariah ; and CIT v. Sita Ram Srikishan Das . The learned Counsel also made reference to the ratio of decision in the case of Rajesh Kumar Mahesh Kumar v. ITO [1986] 25 TTJ (Indore) 193; and Innosearch Ltd. v. Asstt. CIT [1998] 60 TTJ (Ahd.) 203; and Pennwalt India Ltd. v. Registrar of Companies [1987] 62 Comp. Cas. 112 (Bom.).
(x) Penalty cannot be levied under Section 271D on estimate basis and exact amount has to be determined before initiating penalty. In the case of the assessee there is no concrete fixation of the amount and, therefore, the levy of penalty cannot succeed. In support of this argument the learned Counsel placed reliance on the ratio of decisions in CIT v. Vedlapatla Veeravenkataramiah [1943] 11 ITR 308 (Mad.); CIT v. Golaprai Hoonlal & Co. ; and Pennwalt India Ltd. v. Registrar of Companies [1987] 62 Comp. Cas. 112 (Bom.).
7. The learned CIT DR in rejoinder vehemently opposed the arguments raised on behalf of the assessee and submitted that the learned CIT(A) was not justified in cancelling the penalty.
8. We have carefully considered the facts and circumstances relating to this matter, the rival contentions including the case laws to which reference was made at the time of hearing before us.
8.1 Provisions of Section 269SS are as under :
No person shall, after the 30th day of June, 1984, take or accept from any other person (hereinafter in this section referred to as the depositor), any loan or deposit otherwise than by an account-payee cheque or account-payee bank draft, if-
the amount of such loan or deposit or the aggregate amount of such loan and deposit; or on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or the amount or the aggregate amount referred to in Clause (a) together with the amount or the aggregate amount referred to in Clause (b), is twenty thousand rupees or more.
8.2 A close examination of the provisions shows that the prohibition postulated in this provision applies to a person who accepts from another person any loan or deposit otherwise than by an account-payee cheque or account-payee bank draft. The provisions are not absolute. Whereas the first proviso, attached to the section, excludes government, banking companies, post office savings bank; corporations established by a Central or State Governments; the second proviso exempts persons having agricultural income, whose income is not chargeable to Income-tax Act. The category of exemptions is also not exhaustive. By implication there may be certain cases in which the provision may not apply. For example, if a servant or agent accepts the deposits or receives the loan on behalf of his master or principal then such agent or servant cannot be treated to be a person receiving the deposit because such agent or servant is working only in fiduciary capacity or intermediary. The amount is actually deposited on behalf of the master or the principal as the case may be and thus the violation of Section 269SS is to be considered in the case of the master or the principal for whom and on whose behalf of the deposit was received. There may be other similar circumstances.
8.3 Thus, applying the above analogy we can say that the liability on account of the violation of Section 269SS cannot be fastened on the servant or the agent. This view can further be verified by examining the proviso of Section 271D which provides that if a person takes or accepts any loan or deposit in contravention of Section 269SS then he shall be liable to pay, by way of penalty, a sum equal to the amount of loan or deposit so taken or accepted. If a servant or agent takes or deposits any amount in contravention of Section 269SS then he cannot be treated to be a person taking or accepting a loan because he has not taken or accepted the loan or deposit for himself but on behalf of somebody else and, therefore, penal provision of Section 271D cannot be attracted in his case. On this view, the learned CIT(A) has correctly appreciated the provisions of Sections 269SS and 271D and therefore we do not find any scope to interfere in his findings.
8.4 We have examined the relevant agreements and other documents connected with the agreements in relation to the liability of the assessee. The assessee was appointed as agent by the companies to collect the deposits etc. The memorandum of understanding executed between M/s. Sahara India Savings & Investment Corporation Ltd. and the assessee dated 1-4-1993 clearly provides that the assessee-firm shall act as an agent of the company. The relevant covenants of this agreement are as under:
1. The Firm shall work as Agents to the company to conduct, promote, introduce, induce and secure business on behalf of the company under all its schemes - which may be changed, varied, suspended and modified from time to time as per the instructions of the Company.
2. The Firm shall collect the requisite amount from the members of its saving schemes and shall send it to the company the so collected amount through its Branches along with statement of accounts. Further, the receipts shall be issued to the members in the name of the Company.
3. The Firm shall submit to the Company statement of accounts or such other information as the company may require from time to time for its financial data or on other matters.
8.5 As per clause 10 of the agreement, the agreement commenced on 1-4-1993 and was valid for two years. Therefore, the agreement is enforceable for the assessment year under consideration.
8.6 A similar agreement has been entered into by another company, namely, M/s. Sahara India Mutual Benefit Company Ltd. with the assessee-firm on 1-1 -1991. This company also appointed the assessee-firm as its agent. This agreement also consists identical covenants, as reproduced in the case of M/s. Sahara India Savings & Investment Corporation Ltd. As per clause 10, the agreement was valid for four years and, therefore, was applicable to the assessment year 1994-95.
8.7 In view of the above agreement, the assessee had made its position very clear and against show-cause notice issued by the revenue for imposing penalty under Section 271(1)(c), following written submission was made vide letter dated 12-1-1998:
The Additional Commissioner Date 12-1 -1998 of Income-tax, Central Circle, Lucknow. Reg: Sahara India, Lucknow
Sub: Reply to Notice under Section 271D of the Income-tax Act, 1961 for the assessment year 1994-95.
Sir, With reference to your notice under Section 271D of the Income-ax Act, 1961 for the assessment year 1994-95 it is respectfully submitted as under:
The assessee-firm is carrying on the business in agency. In the aforesaid business, the assessee is acting as an agent for various companies as evident in the records before your honour. In the fiduciary capacity as an agent the assessee is collecting deposits for and on behalf of the companies and servicing those deposits such as by way of giving loans, meeting their maturities etc. The provisions of Section 269SS are not applicable in the case of the assessee inasmuch as the assessee has not accepted any loan or deposit in contravention of the provisions of Section 269SS in its own account. From a perusal of the Balance Sheet of the assessee your honour will appreciate that during the relevant previous year no scheme was being operated by the assessee in its own account, all the schemes which were being operated by the assessee earlier have since matured and no new scheme was operated by the assessee, and as such no deposits have been accepted in contravention of the provision of Section 269SS by the assessee in its own account for which the assessee can be treated to have committed any default within the meaning of Section 271D of the Income-tax Act.
8.8 Another written reply dated 17-3-1998, available at pages 13 & 14 of the paper book, also contained a similar explanation of the assessee. This reply is as under:
As already mentioned in our early reply, the assessee-firm is carrying on the business of the agency which fact is verifiable with reference to the assessment records of the assessee as well. The assessee is collecting deposits and servicing those deposits by way of giving loans, meeting their maturities etc. in the capacity of agent for and on behalf of the principals and not in its own account. As such, the entire deposits collected by the assessee are in a fiduciary capacity which do not belong to the assessee-firm as the assessee-firm is not carrying business of para banking in its own account but is only carrying the business of an agent.
8.9 It may be pointed out that the issue relating to role of the assessee in the context of these agreements was examined by the ITAT in the case of Sahara India Savings & Investment Corporation Ltd. (supra). The ITAT Allahabad Bench vide its order dated 30-1-1998, on examination of the terms of the agreement, has clearly held that the assessee was carrying out its responsibility assigned by the company, as an agent. The relevant observations of the ITAT are being reproduced as under:
27. It does not perhaps need any special stress to say that wherein there is relationship of a principal and agent, the agent being extended hand of the principal, does everything on behalf of the principal and nothing in his own right. This fundamental principle about the law of agency is unexceptional. There is no gainsaying that the firm, M/s. Sahara India, was appointed and acting as an agent of the appellant before us for the collection and carrying out other duties/responsibilities assigned by the company to them. There can be no or little doubt, therefore, that the firm was acting only as an agent of the company which is even otherwise not in dispute before us. In this connection a reference to the MOU at pages 15 to 19 could firstly be made even at the cost of repetition. Clauses 2 and 5 that have been reproduced by us above, more than once, for the sake of convenience and looking to their importance, if read in a layman's language would suggest that the firm was studded with the responsibility of collecting the deposits from various schemes ran by the company with liability to send to the company the so collected amount along with statement of accounts. Receipts, we would say importantly, were to be issued to the members (depositors) in the name of the company. Clause 5 clearly says that a MOU had been entered whereby the firm had to render services to the company as an 'Agent'.
8.10 The law relating to the relationship of the agent and principal and the inter se responsibilities may be examined in the context of Sections 182 to 229 of the Indian Contract Act. 'Agency' is a comprehensive word which is used to describe the relationship that arises. Here one man is appointed to act as the representative of another. The English Common Law reads relating to agency stems out of two Latin maxims, quiper alium facit, per seipsum facere videtur "He who does an act through another is deemed in law to do it himself", and "qui fcit per alium., facit per se". He who acts by another acts by himself. The justification for the whole law of agency is the idea of a unilateral manifestation of willingness to be bound. The base of agency is the consent of one party, the principal that the other party the agent shall act on his behalf and the agent consents so to act. The relationship of principal and agent can only be established by the consent of the principal and agent.
8.11 Section 188 of the Indian Contract Act defines the authority of the agent to do lawful things on behalf of its principal. This provision is as under:
An agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such act. An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose or usually done in the course of conducting such business.
8.12 The object of this provision has been described in the commentary of T.S. Venkatasa Iyer on the Law of Contracts or Tenders at page 687 as under:
The necessity for this section arises because, the agent is always bound to carry out the instructions of the principal and the agent has no authority to depart from such instructions, even though bona fide and for the benefit of the principal. Such being the agent's responsibility, the law naturally clothes him with an implied authority to do all that may be reasonably necessary for doing the thing authorized by the principal.
8.13 Section 195 of the Indian Contract Act envisages the amount of car to be taken by the agent while discharging its function. This provision is as under:
In selecting such agent for his principal, an agent is bound to exercise the same amount of discretion as a man of ordinary prudence would exercise in his own case; and if he does this, he is not responsible to the principal for the acts or negligence the agent so selected.
8.14. As per Section 226 of the Indian Contract Act, obligations arising from the acts of the agent are discharged by the principal. This provision is as under:
Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person.
8.15 In view of the above and other provisions of the Indian Contract Act, it is clear that the act of the agent is to be considered as act of the principal. In the case of Innosearch Ltd. v. Asstt. CIT [1998] 60 TTJ (Ahd.) 203, the ITAT Ahmedabad Bench "B", while considering the liability of the agent, held that the expenses incurred by the assessee as agent were the expenses of the principal and not of the assessee and, therefore, no disallowance was called for at the hands of the assessee-company.
8.16 In view of the above decision also, the liability of the agent has to be a limited liability and it cannot be held liable for any act done on behalf of the principal.
9. It is to be noted that notice dated 15-9-1997 issued to the assessee does not even mention that the assessee has contravened the provisions of Section 269SS by exceeding its authority as an agent. Identical notices were given to the principal company also. Thus, it is not the case of the department that while acting as an agent the assessee violated the provisions of Section 269SS by exceeding the limits prescribed. In fact even the company never imposed any restriction of any amount for collecting the deposits. The deposits were being regularly transferred to the principals and they too never made any objection of the amount taken in cash beyond Rs. 20,000.
9.1 In view of the above and on the facts and in the circumstances pertaining to the case of the present assessee, in our opinion, no case for imposition of penalty under Section 271D is made out against the assessee who was simply collecting the deposits of being authorized by the companies, who were its principals and violation, if any, of the provision of Section 269SS might have been considered in the hands of the principals, who were operating the schemes for collecting the deposits.
10. So far as the quantification of the amount is concerned, the objections raised on behalf of the assessee as enumerated above and the observations of the learned CIT(A) are found to be correct. The Assessing Officer has adopted unique method for estimating the amount. Firstly he has shown the break up of identified amount but no show-cause notice was given to the assessee against such working. Since the assessee did not have any opportunity to controvert the working, an ex parte working done by the AO cannot be used against the assessee without confronting it. In para 23 of the above order the learned CIT(A) has also observed that a perusal of these items shows that small deposits to the extent of Rs. 500; 2500 etc., were also alleged to have violated the provisions of Section 269SS. In view of this factual finding of learned CIT(A), the entire working of identified figures collapses. The Department has not been able to controvert the observations of learned CIT(A) made in para 23 of his order and, therefore, the findings remained unrebutted.
10.1 So far as the method of estimating the figures of balance amount is concerned, the concerned officer has not examined the figures of any branch for assessment year 1994-95. Rather, he took resort to the account of one branch, namely, Basti Branch for another assessment year i.e. assessment year 1995-96, which is subsequent assessment year. In view of these anomalies, the figures taken by him for working out the ratio of deposits taken for contravention of Section 269SS cannot be upheld. The learned CIT(A) has rightly rejected such working by observing as under:
Clearly the amounts of deposits has to be quantified earlier before the issue of show-cause notice. A perusal of provisions of Section 269SS also shows that the amount of loan or deposits has to be found first which might have violated the provisions of Section 269SS. Such deposits from the individual depositors have got to be quantified and all of them cannot be clubbed together without examining the accounts of various depositors. The reason being that if a person has accepted a deposit from a depositor in past which was less than Rs. 20,000 but adding the fresh deposits accepted during the year, total amounts Rs. 20,000, the penalty has to be worked out in a different manner.
10.2. The contention of the learned Counsel for the assessee that for levying the charge against the assessee for imposing penalty under Section 271D, the violation of Section 269SS has to be specifically brought out, deserves to be accepted. In view of the language adopted in sections 269SS and 271D, it is clear that first of all the amount of deposit or loan taken or accepted in violation of Section 269SS is to be determined specifically. Such amount cannot be estimated. Thus, the approach of the learned Assessing Officer in estimating the amount cannot be justified.
11. The approach of the Department is also not consistent. As pointed out by the learned Counsel for the assessee, neither in earlier years nor in subsequent years penal action under Section 271D was taken against the assessee, although the assessee was doing the same business on behalf of the principals in earlier and subsequent assessment years. In the assessment year under consideration, although notices were sent to the principals also for initiating penalty under Section 271D, but nothing was done against them. The reasons are not known. It is also not clear as to on what basis no further action under Section 271D was carried against them. On this basis also, the action of the Assessing Officer in initiating penalty against the assessee, who undisputedly worked as agent, cannot be justified.
12. In the case of Dillu Cine Enterprises (P.) Ltd. v. Addl. CIT [2002] 80 ITD 484 (Hyd.), the Hyderabad Bench of the ITAT has observed as under:
Penalty provisions have been held by the Supreme Court as penal in character and quasi-judicial in nature. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty cannot be ordinarily imposed unless the party has either acted deliberately in defiance of law or is guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and an considerations of all relevant circumstances. Thus, the default, if any, could be said to be "technical" and "venial" one.
12.1 We may also observe that in this case the conduct of the assessee cannot be treated to be contumacious or mala fide. It has also not been shown on record that assessee deliberately acted in defiance of law or dishonestly carried out its duties.
13. In view of the above and after considering the pleas of learned Counsel for the assessee, raised before us, we are of the considered opinion that penalty under Section 271D was not imposable on the assessee and the learned CIT(A) was fully justified in cancelling the same. We, therefore, uphold his order and reject the ground of revenue taken in this appeal.
14. In the result, the appeal of the revenue is dismissed.
CO. No. 30/Alld./99 (Assessors cross-objection):
15. The cross-objection has been filed by the assessee only to support the order of learned CIT(A). As we have dismissed the revenue's appeal, by upholding the order of learned CIT(A), the cross-objection filed by the assessee has been rendered infructuous and stands disposed of accordingly.