Income Tax Appellate Tribunal - Amritsar
Income Tax Officer vs Tarlochan Singh on 16 December, 2002
Equivalent citations: (2003)81TTJ(ASR)1021
ORDER
H.L. Karwa, J.M.
1. These two appeals by the assesses and the Department are directed against the order of the CIT(A), Jalandhar dt. 1st March, 1996, relating to the asst. yr. : 1993-94.
2. In ITA No.415(Asr)/1996, the assesses has taken the following grounds:
"1. That the order of the authorities below is against law and facts of the case.
2. That the C1T(A) has erred in concurring with the Dy. CIT in mentioning that the appellant accepted deposit of Rs. 70,000 i.e. Rs. 50,000 on 27th Jan., 1993, and Rs. 20,000 on 20th Feb., 1993 and thereby has violated provision of Section 269SS.
3. That the CIT(A) has erred in concurring with the Dy. CIT in not appreciating the contention of the appellant that the ITO was not justified to record statements of the appellant and his wife under Section 131 and thereby any adverse inference drawn by him was not justified.
4. That the CIT(A) has erred in concurring with the Dy, CIT in drawing adverse inference from the statements of the appellant and his wife under Section 131.
5. That the CIT(A) has erred in concurring with the Dy. CIT in not accepting the contention of the appellant that the Bank A/c No. 2121 with Bank of Baroda in fact belonged to the appellant and the CIT(A) further erred in concurring with the Dy. CIT in not appreciating that the appellant had disclosed the same in his assets and the question of loan from the said a/c did not arise.
6. That the CIT(A) has erred in concurring with the Dy. CIT in not accepting the contention of the assesses that the amount of Rs. 70,000 alleged to have been taken by the assessee from his wife as loan was incorrect. It was not accepted as loan by the appellant and thereby the penalty under Section 271D was not imposable,
7. That the CIT(A) has erred in concurring with the Dy. CIT in not accepting the contention of the appellant that the case is covered under Section 273B and there was reasonable cause for the alleged failure, if any.
8. That the CIT(A) has erred in reducing the penalty by 60 per cent and thereby sustaining 50 per cent of the penalty. He ought to have reduced the penalty to nil.
9. Such other grounds as may be urged at the time of hearing."
3. In ITA No. 473(Asr)/1996, the Department has raised the following grounds;
"1, That on the facts and in the circumstances of the case, the learned CIT(A) has erred in reducing the penalty imposed under s, 271D of the IT Act, 1961 from Rs, 70,000 to Rs. 35,000, la. While reducing the above penalty the learned CIT(A) has failed to appreciate the provisions of s, 271D which is that if a person takes or accepts any loan or deposit in contravention of the provisions of Section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted."
4. Briefly stated, the facts of the case are that the assessee is a Government contractor. During the course of assessment proceedings, statement of assets and liabilities as on 31st March, 1993, was called for in which the assessee admitted having taken loans of Rs. 50,000 and Rs, 20,000 on 27th Jan., 1993 and 20th Feb., 1993, respectively, from his wife, Smt. Paramjit Kaur in cash.
According to the AO, the assessee had accepted/taken aforesaid loans of Rs. 70,000 in violation of the provisions of Section 269SS, reference was made to the Dy. CIT, Range-I, Jalandhar for the levy of penalty under Section 271D of the Act. He further noted that the assessee had made some investments in the acquisition of the immovable properties, while calling upon to explain the source thereof, the assessee had submitted that he had taken cash loans of Rs. 50,000 on 27th Jan., 1993 and Rs. 20,000 on 20th Feb., 1993, from his wife, The learned Dy. CIT, Range-I, Jalandhar issued a show-cause notice to the assessee as to why the penalty should not be imposed for the default omitted by him under s, 271D of the Act. In response to the said show-cause notice, the assessee submitted that the amount belonged to him, which was disclosed in the total wealth statement, since the wife is only a trustee. However, the learned Dy. CIT observed that in the statement of assets and liabilities furnished in the course of assessment proceedings, the assessee had disclosed the liability of Rs. 70,000 by stating that he took a loan of Rs. 50,000 from his wife Smt. Paramjit Kaur on 27th Jan., 1993 and Rs. 20,000 on 20th Feb., 1993. Smt, Paramjit Kaur vide her letter dt. 11th Aug., 1994, addressed to the AO confirmed that she had advanced a loan in cash to her husband. She further stated that the amount was withdrawn from her saving bank account No. 2121 with Bank of Baroda. The Dy. CIT has stated that whatever has been put before him was only an afterthought to avoid the consequences of the contravention of the provisions of Section 269SS of the Act. According to him, the default was not merely a technical one as asserted before him, but was to evade the source of investment, because the assessee wanted to get himself cleared from the assessment by declaring the amount of Rs. 70,000 as a liability of loan, but when it came to the contravention of Section 269SS, he shifted his stand taken in the course of assessment. Consequently, the learned Dy. CIT imposed a penalty of Rs. 70,000 under Section 271D of the Act.
5. Aggrieved by the order of the Dy. CIT, the assessee carried the matter in appeal to the CIT(A). It was submitted before the CIT(A), that unaccounted cash found in the course of searches carried out by the IT Department is often explained by the tax-payers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought in the books of accounts in the form of such loans or deposits and tax payers are also able to get confirmatory letters from such persons in support of their explanation. With a view to countering this device, which enables tax payers to explain away unaccounted cash or unaccounted deposits, the Finance Act, 1984, has inserted a new Section 269SS in the IT Act, debarring persons from taking or accepting, after 30th June, 1984, from any other person 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 is Rs. 10,000 (raised to Rs. 20,000 w.e.f. 1st April, 1989) or more. Accordingly, it was submitted that it was not the intention of the legislature to punish the persons, who were engaged in genuine transaction. Furthermore, it was stated that there was no default and even if it can be so called, it was merely technical and covered under sufficient cause under Section 273B of the Act.
6. The learned CIT(A) confirmed the penalty for the reasons stated in paras 5 to 7 of the impugned order. The learned CIT(A) held that the transaction were genuine. He further observed that the assessee had categorically stated that he has taken the loan from his wife. However, when it came to his notice that he has contravened the provisions of Section 269SS, the assessee shifted the stand and submitted that the money actually belonged to him. The learned CIT(A) has rejected the contentions of the assessee and reduced the penalty to Rs. 35,000. In this manner, the learned CIT(A) allowed a relief of Rs. 35,000 to the assessee.
7. Aggrieved by the order of the CIT(A), the Department as well as the assessee are in appeal before the Tribunal. The assessee is aggrieved by the order of the CIT(A) in sustaining the penalty of Rs. 35,000 while the Department is in appeal against the cancellation of penalty of Rs. 35,000.
8. Before me, Shri Ravish Sood, advocate, the learned counsel for the assessee, reiterated the submissions made before the authorities below. According to him, the assessee is a Government contractor. During the period, relevant to the assessment year under consideration, the assessee had made some investment in the acquisition of the immovable properties. He further submitted that the assessee has received a sum of Rs. 70,000 i.e, a sum of Rs. 50,000 on 27th Jan., 1993 and Rs. 20,000 on 20th Feb., 1993, from his wife, Smt. Paramjit Kaur. According to him, the amount received by the assessee from Smt. Paramjit Kaur was invested in the acquisition of the immovable properties. The properties were acquired for the prosperity of family and transaction did not involve any interest element and there was no promise to return the amount with or without interest. In other words, the assessee was not required to pay the interest upon the amount, which was taken from Smt. Paramjit Kaur. He, therefore, submitted that the provisions of s, 269SS would not apply. He further submitted that the assessee has entertained a bona fide belief that he had received contribution from his family member i.e. his wife, and therefore, there was no violation of the provisions of Section 269SS of the Act. In other words, the assessee was under the bona fide belief that as the amount was available in cash and Smt. Paramjit Kaur was not giving the amount as loan and it was not required to be received by the account payee cheques or account payee bank draft, As an alternative submission, it was submitted that for the sake of argument, if it is assumed that there was a default, the default can be considered as a venial breach of law. While relying upon the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), the learned counsel for the assessee submitted that when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute, no penalty should be imposed.
9. On the other hand, Shri S.K. Maingi, the learned Departmental Representative strongly relied oh the order of the AO. He further submitted that in view of the clear provisions of law, the learned CIT(A) was not justified in reducing the amount of penalty of Rs. 70,000 to Rs. 35,000. According to him, either the learned CIT(A) should have deleted the entire penalty or should have sustained the same. He further submitted that in the instant case, the assessee himself had clearly admitted that he had taken the loan of Rs. 70,000 from his wife, Smt. Paramjit Kaur. Thus, the assessee has contravened the provisions of Section 269SS of the Act. During the course of the assessment proceedings, the assessee himself has submitted that he has taken the loan from his wife and on the other hand, when it came to his notice that he had contravened the provisions of Section 269SS of the Act, he shifted his stand and submitted that the money actually belonged to him. He, therefore, submitted that the assessee has clearly contravened the provisions of Section 269SS of the Act and the learned Dy. CIT was justified in imposing the penalty of Rs. 70,000. He accordingly submitted that the penalty of Rs. 70,000 may be imposed.
10. I have carefully considered the rival submissions and have also erused the facts of the present case. It is an admitted fact that the assessee had made some investment in the acquisition of the immovable properties. It is also an admitted position that he has taken an amount of Rs. 70,000 i.e., Rs. 50,000 on 27th Jan., 1993 and Rs. 20,000 on 20th Feb., 1993, from his wife Srnt. Paramjit Kaur. It is true that the findings recorded in the assessment order constitute good evidence in the penalty proceedings but those findings cannot be regarded as conclusive for the purpose of the penalty proceedings. Whether a penalty can be imposed in a given case, the entirety of the circumstances must be taken into account. All will depend in the circumstances of a case. Thus, keeping in view the entire relevant facts of the present case, it would be clear that in the instant case the wife gave money to the husband for investment in the acquisition of the immovable properties, which was actually for the prosperity of the family only. There is no evidence on record to suggest that the amount in question was taken for commercial use. The Department has stated that the amount in question was a loan but at the same time, it is not clear whether there was promise to return the amount with or without interest. It is also true that the AO has recorded the statement of Smt. Paramjit Kaur under Section 131 of the Act. However, no question was put to her regarding the payment of interest. Whether the assessee had paid any interest on the amount of Rs. 70,000, there is no such indication in the orders of the authorities below. There is also no material on record to show that the assessee had returned the amount received from wife or he had paid the interest thereupon.
10.1. At this stage, I may refer to a decision of the Calcutta Bench of the Tribunal in the case of Dr. B.G. Panda v. Dy. CIT in I.T.A. No. 2742(Cal)/1993, dt. 10th March, 1998 (Taxman-Magazine-Vol.111 p. 86), wherein the following observations were made:
"In the instant case, the wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. This transaction was not for commercial use. The amount directly received by the husband, i.e., the assesses, was to the extent of Rs. 17,000 only and the balance amount of Rs. 26,000 was given by the payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the Karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no 'interest' element was involved and there was no promise to return the amount with or without interest. It was clear that the money given by the wife was a joint venture of the family. Taking into consideration overall facts and circumstances of the case, it could be said that the aforesaid piece of legislation was not applicable in the instant case. By taking the liberal view and applying the golden rule of interpretation, the assessee had a reasonable cause within the meaning of Section 273B. Therefore, the penalty should be deleted."
From the above decision, it would be clear that the Calcutta Bench of the Tribunal held that there was a reasonable cause within the meaning of Section 273B of the Act. It is true that the Calcutta Bench of the Tribunal has considered overall facts and the circumstances of the case. Even keeping in view the contents of the Departmental Circular No. 387 dt. 6th July, 1984, it was never the intention of the legislature to punish a party involved in a genuine transaction. Therefore, by taking a liberal view in the instant case, the assessee had a reasonable cause within the meaning of Section 273B of the Act. The Calcutta Bench of the Tribunal further stated as under:
"The communication/transaction between the husband and wife are protected from the legislation as long as they are not for commercial use. Otherwise, there would be a powerful tendency to disturb the peace of families, to promise domestic broils, and to weaken or to destroy the feeling of mutual confidence which is the most enduring solace of married life."
Thus, keeping in view the entire facts of the present case, and also keeping in view the intention of the legislature in enacting the provisions of Section 269SS, I am of the view that the assessee was prevented by sufficient cause from receiving the money by an account payee cheque or account payee bank draft.
10.2. Without prejudice to the above, as an alternative submission, it was contended by the learned counsel for the assessee that in any case, the assessee has received contribution from his wife under the bona fide belief that as the amount was available in cash and she was not giving the amount as a loan and does not require to receive by account payee cheque or account payee bank draft. It was further contended that the amount, in question, was being given by his wife with a clear understanding that the same was contribution for the acquisition of the immovable property. According to the learned counsel for the assessee, for the sake of argument, if it is assumed that there was a default, the default can be considered as a venial breach of law. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd v. State of Orrisa (supra), has held as under:
"An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. 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 on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of, the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute."
In the instant case, the assessee was of the opinion that the amount in question did not require to be received by an account payee cheque or account payee draft. Thus, in my opinion, there was a reasonable cause and no penalty should have been levied.
10.3. From the above, it would be clear that in the instant case, the assessee has taken plea that firstly there was no violation of the provisions of Section 269SS of the Act. Secondly, there was a reasonable cause. Thirdly, the assessee was under the bona fide belief that he was not required to receive the amount otherwise than by an account payee cheque or account payee draft. As an alternative submission, it was contended that the default can be considered either technical or venial breach of the provisions of law and, therefore, no penalty under Section 271D of the Act was leviable.
11. In view of the above discussion, I am of the firm view that no penalty under Section 271D was leviable. It is well settled law that penalty provisions should be interpreted as it stands and, in case of doubt, in a manner favourable to the tax payer. If the Court finds that the language is unambiguous or capable of more meaning than one, then the Court has to adopt the provisions which favours the assessee, more particularly so where the provisions relate to the imposition of penalty.
12. In view of the above, I cancel the penalty of Rs, 35,000 sustained by the CIT(A).
13. In the result, the assessee's appeal is allowed while the Departmental appeal is dismissed.