Income Tax Appellate Tribunal - Jaipur
Jagvijay Auto Finance (P.) Ltd. vs Assistant Commissioner Of Income-Tax on 5 December, 1994
Equivalent citations: [1995]52ITD504(JP)
ORDER
M.A.A. Khan, Judicial Member
1. This is an appeal from the order dated 5-8-1993, whereby the learned Commissioner of Income-tax (Appeals), Rajasthan-I, Jaipur. CIT(A) confirmed part penalty imposed by the Deputy Commissioner of Income-tax (DCIT) Under Section 27 1D of the Income-tax Act, 1961 (the Act) for violation of the provisions of Section 269SS of the Act.
2. The relevant facts are these:
The assessee-appellant is a private limited company owned by Sri Jagdish Prasad, his wife Smt. Laxmi Devi, their sons S/Sri Ravindra Kumar and Sunil Kumar and some other members of the family. In the course of assessment proceedings in the case of the assessee-company for A. Y. 1990-91 the AO noticed the following receipts viz. -
1. From Smt. Laxmi Devi:
On 21-11-1989 Rs. 75, 000
On 9-12-1989 Rs. 26, 450 Rs. 1, 01, 750
2. From Sri Rainndra Kumar:
On 15-11-1989 Rs. 25, 000
On 9-12-1989 Rs. 26, 450 Rs. 51, 450
3. From Sri Sunil Kumar:
On 12-10-1989 Rs. 7, 000
On 20-02-1990 Rs. 34, 000 Rs. 41, 000
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Total: Rs. 1, 94, 200
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3. The AO was of the opinion that since the assessee-company had taken or accepted the abovementioned receipts otherwise than by account payee cheques of account payee bank drafts in violation of the provisions of Section 269SS of the Act, default punishable Under Section 27 ID was committed by the assessee-company. He, therefore, referred the matter to the DCIT, Alwar for his consideration. On being required by the learned DCIT, the assessee-company explained that in the cases of Smt. Laxmi Devi and Sri Ravindra Kumar the amounts were received through account payee transfer vouchers of Bank of Rajasthan, Alwar wherein both the parties had their Savings Bank Accounts and, therefore, there was no violation of the provisions of Section 269SS. The AO did not accept this explanation. In regard to the receipts from Sri Sunil Kumar, the assessee-company explained that receipt of Rs. 7, 000 on 12-10-1989 fell short of the prescribed limit of Rs. 20, 000 so as to attract the provisions of Section 269SS and the receipt of Rs. 34, 000 on 20-2-1990 was towards the allotment of the shares of the assessee-company and, therefore, did not fall within the purview of either "loan" or "deposit". The AO did not accept this explanation too. He, therefore, levied a penalty of Rs. 1, 94, 200 Under Section 27ID of the Act. In appeal, however, the learned CIT(A) accepted assessee's explanation in respect to the receipts from Smt. Laxmi Devi and Sri Ravindra Kumar and cancelled penalty referable to the amounts received from them. But with regard to the receipts of Rs. 7, 000 on 12-10-1989 and Rs. 34, 000 on 20-1-1990 from Sri Sunil Kumar, the learned CIT(A) held that the receipt of Rs. 7, 000 would go to make the aggregate amount of Rs. 20, 000 or more and that the receipt of application money of Rs. 34, 000 amounted to "loan" or "deposit" within the meaning of the terms used in the language of Section 269SS. He, therefore, confirmed the penalty of Rs. 41, 000 referable to the amounts received from Sri Sunil Kumar.
4. Mr. C. L. Jhanwar, the learned counsel appearing for the assessee-company has advanced two-fold arguments. In the first place the learned counsel submitted that the acceptance of Rs. 7, 000 on 12-10-1989 by the assessee-company from Sri Sunil Kumar did not result in violation of the provisions of Section 269SS in as much as the subsequent acceptance of Rs. 34, 000 on 20-2-1990 would not be considered for finding out such violation. This argument seems to be correct but would not result in any benefit to the assessee-company if the acceptance of Rs. 34, 000 on 20-2-1990 by the assessee-company is held to be acceptance of "loan" or "deposit".
5. Section 269SS, as is relevant for our purposes provides that-
269SS. No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in his section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, -
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) 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
(c) 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.
It may be noted that Section 269SS contemplates three different situations for its application. Clause (a) prohibits receipt in cash of loan or deposit, individually or their aggregate amount collectively, in sums of Rs. 20, 000 or more. Clause (b) contemplates a situation where loans or deposits in small sums, not amounting to or exceeding Rs. 20, 000, might have been taken or accepted in past and had remained unpaid but if at the time of taking or accepting further loan or deposit it is found that the unpaid amount of loan or deposit is Rs. 20, 000 or more and even then further loan or deposit or any amount is taken or accepted this clause would stand attracted. Clause (c) takes into account the situations in Clauses (a) and (b) and lays down that if the amount or aggregate amount referred to in Clause (a) together with the amount or the aggregate amount referred to in Clause (b) amounts to or exceeds Rs. 20, 000, then the default contemplated in this clause would be committed.
6. In the instant case no violation of Clause (a) was committed as the taking or accepting the loan or deposit of Rs. 7, 000 did not exceed the limit of Rs. 20, 000. No default contemplated under Clause (b) was also committed as on the date of taking or accepting Rs. 34, 000 in cash from Sri Sunil Kumar, the loan or deposit of Rs. 7, 000 taken or accepted earlier and remaining unpaid did not amount to or exceed the prescribed limit of Rs. 20, 000. It is altogether a different thing that the taking or accepting of Rs. 34, 000 in cash, if such taking or acceptance fell within the definition of the term "loan" or "deposit", would itself attract the provisions of Clause (a) of Section 269SS. But since both the amounts of Rs. 7, 000 and Rs. 34, 000 shall have to be taken into account (provided the receipt of Rs. 34, 000 on 20-2-1990 is of the character of "loan" or "deposit") for the purposes of application of Clause (c) and the aggregate amount of the two would far exceed the limit of Rs. 20, 000 the default Under Section 269SS(c) would be committed. Assessee's case would thus fall within the purview of Clause (c) of Section 269SS for the purposes of computation of penalty leviable Under Section 27 ID of the Act and both the amounts of Rs. 7, 000 and Rs. 34, 000 (if the taking or acceptance of the latter amount is of the character of "loan" or "deposit") shall be considered for the purposes of levying penalty under that provision.
7. It may be true that the provisions contained in Section 269SS do neither have a direct relevance to the computation of assessee's income nor are they specifically annually based. But in order to counter-act the evasion of tax by an assessee the position of mode of acceptance, payment or repayment of various receipts by him shall have to be seen in the course of the assessment proceedings for a particular assessment year. In that sense of the matter the provisions of Section 269SS shall have relevance to the computation of assessee's income and shall also be deemed to be annually based for the provisions would become relevant in that assessment year in which the violation thereof is committed.
8. Now the pertinent question which arises for serious consideration in this case is whether the taking or accepting of the amount of Rs. 34, 000 by the assessee-company from Sri Sunil Kumar, admittedly byway of application money for purchase of the shares of the company, was of the character of "loan" or "deposit" contemplated in Section 269SS. At page 5735 of Chaiurvedi and Pithisaria's Income-tax Law, Fourth Edition, Volume V, the meanings of the terms "deposit" and "loan" have been explained in the following manner: -
'Deposit' and 'Loan' - these two are not identical in meaning. It is true that both in the case of a loan and in the case of a deposit there is a relationship of a debtor and a creditor between the party giving money and the party receiving money. But in the case of a deposit, the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money-the benefit normally being earning of interest from a party who customarily accepts deposits. Deposits could also be for safe-keeping or as a security for the performance of an obligation undertaken by the depositor. In the case of a loan, however, it is the borrower at whose instance and for whose needs the money is advanced. The borrowing is primarily for the benefit of the borrower although the person who lends the money may also stand to gain thereby by earning interest on the amount lent. Ordinarily, though not always, in the case of a deposit, it is the depositor who is the prime mover while in the case of a loan, it is the borrower who is the prime mover. The other and more important distinction is in relation to the obligation to return the amount so received. In the case of a deposit which is payable on demand, the deposit would become payable when a demand is made. In the case of a loan, however, the obligation to repay the amount arises immediately on receipt of the loan. It is possible that in case of deposits which are for a fixed period or loans which are for a fixed period, the point of repayment may arise in a different manner. But by and large, the transaction of a loan and the transaction of making a deposit are not always considered identical.
9. As explained by the Supreme Court in the case of CIT v. Bazpur Co-operative Sugar Factory Ltd. [1988] 172 ITR 321 the essence of a "deposit" is that there must be a liability to return it to the party by whom or on whose behalf it is made on the fulfilment of certain conditions. The 'liability to return' the money taken or accepted by a person from the other may arise in or from transactions of various types and characters. But such transactions only which have the character of "loan" or "deposit" would attract the provisions of Section 269SS. In a case of "advance" received towards the price of some goods as defined in Section 2(1) of the Sales of Goods Act, 1930 and which definition includes stock and shares also, the "liability to return" would arise when the sale of goods is not affected. That liability would not be there at the time of taking or accepting the advance by the seller. The basic character of such receipt would not be that of a "loan" or "deposit". The enlargement of the meaning of "deposit" by the Direct Tax Laws (Amendment) Act, 1987 so as to include "deposit of any nature" would also have no relevance in the instant case for the reason that such enlargement of the meaning of the said term would be effective in the case of a person other than a company. It follows, therefore, that if the basic character of a receipt of money in cash in the sum of Rs. 20, 000 or more does not have the character of "loan" or "deposit" at the time of taking or accepting the amount of the receipt by a company, the provisions of Section 269SS would not stand attracted. Our views, we think are fortified by the decisions of the Tribunal in the cases of Muthoot M. George Bankers v. Asstt. CIT [1993] 46ITD 10 (Cochin), ITO v. Rajendra Trading Co. [1993] 48 ITD 210, Deccan Farms & Distilleries Ltd. v. Velabai Laxmidas Bharji [1979] 49 Comp. Cas. 321 (Bom.) and Bazpur Cooperative Sugar Factory Ltd. (supra).
10. In the instant case it is the admitted position that the amount of Rs. 34, 000 was taken in cash on 20-2-1990 by the assessee-company from Sri Sunil Kumar by way of application money for the purchase of shares of the assessee-company. The said amount was deposited in Bank on the same day and duly reflected in Share Application Money A/c and Cash Book of the assessee-company. Since allotment of the shares could not be possible or made the said amount was transferred to the Loan A/c of Sri Sunil Kumar. It may thus be noted that at the time of taking or accepting the amount of Rs. 34, 000 on 20-2-1990 by the assessee-company there was no obligation or liability on it to return the same to Sri Sunil Kumar as the same was intended to go to enhance the capital of the assessee-company. Till the date of allotment of the shares there was no liability on the assessee-company to return the amount of Rs. 34, 000 to Sri Sunil Kumar. Such liability arose only when the allotment of shares could not be made to him. The amount of Rs. 34, 000 thus had no character of a "loan" or "deposit" on 20-2-1990 when it was received in cash. It is the well-settled proposition of law that where the breach of a provision in a Statute is to cast a penal liability on the subject such provision should be construed strictly. Keeping that principle in mind it cannot be said in this case that provisions contained in Section 269SS were violated when the assessee-company took or accepted an amount of Rs. 34, 000 on 20-2-1990 from Sri Sunil Kumar by way of Application Money for purchase of shares of the assessee-company. That being so, the assessee-company committed no default Under Section 269SS so as to be liable for penalty Under Section 27 ID. The penalty imposed upon the assessee has thus to be cancelled.
11. The penalty of Rs. 41, 000 imposed on the assessee-company Under Section 27 ID for default Under Section 269SS of the Act is hereby cancelled and consequently the appeal allowed.