Income Tax Appellate Tribunal - Amritsar
Narotam Singh Mann vs Ito on 25 January, 2002
Equivalent citations: (2004)90TTJ(ASR)683
ORDER
H.L. Karwa, J.M.:
This is an appeal by the assessee and is directed against the order of the Commissioner (Appeals), Bhatinda, dated 20-9-2000, confirming the penalty of Rs. 2,75,000 imposed by the Jt. CIT, Bhatinda Range, Bhatinda, under section 271D of the Income Tax Act, 1961.
2. The assessee is an individual and the assessment year involved is 1997-98. During the course of assessment proceedings, while examining the bank account No. 2068 of the assessee with the Punjab National Bank, the assessing officer noticed the credit entries of Rs. 75,000 and Rs. 2,00,000 on 26-11-1996, and 28-11-1996, respectively. It was explained by the assessee that the amounts were deposited out of the sale proceeds of plot sold by his wife, Smt. Jagtaran Kaur, who was also an existing assessee with the Assistant Commissioner, Investigation Circle, Bhatinda. The assessing officer, observed that the amount was received in cash by the assessee and he had also deposited the same in his own account was in violation of the provisions of section 269SS of the Income Tax Act, 1961. The assessing officer held that the assessee had either received deposit or loan and, therefore, the matter was referred to the Joint Commissioner, Bhatinda, for imposition of penalty under section 271D of the Act, who had the jurisdiction to impose the penalty for violation of the provisions of section 269SS of the Act. A notice under section 274 read with section 271D was issued to the assessee. In response to the said notice, the assessee stated as under :
"The assessee Narotarn Singh Mann and Smt. Jagtaran Kaur are husband and wife and amount of Rs. 75,000 and Rs. 2,00,000 belonging to Smt. Jagtaran Kaur was invested for the common cause of the family, through the bank a/c of Sh. Narotam Singh Mann; that hence the aforesaid amounts are neither loan nor any deposit with Shri Narotarn Singh; that hence the assessee had not violated the provisions of section 269SS of the Income Tax Act, 1961.", The Joint Commissioner did not find any force in the above contention of the assessee. It is stated that both Shri Narotam Singh Mann and Smt. Jagtaran Kaur, i.e., husband and wife were State Govt. employees and were existing assessees with the Income Tax Department, and, therefore, they were separate entities in the eyes of law. the assessing officer noted that the assessee had accepted Rs. 75,000 and Rs. 2,00,000 on 26-11-1996 and 28-11-1996 respectively, in cash from Smt. Jagtaran Kaur, wife of the assessee, which was deposited by him in the bank account. Consequently, he opined that the assessee had accepted loans/deposits in violation of the provisions of section 269SS of the Act. Therefore, he imposed a penalty of Rs. 2,75,000 under section 271D of the Act.
3. When the matter was taken to the Commissioner (Appeals), in appeal, the following line of argument was taken :
(1) That the assessee and his wife were working in the Civil Hospital, Bhatinda, and their daughter was studying at Ghaziabad in Medical College. Smt. Jagtaran Kaur, wife of the assessee, sold plot No. 502C of 500 sq. yards in Model Town, Bathinda for consideration of Rs. 5,00,000 on 20-11-1996, and received the amount in cash.
(2) That the wife of the assessee paid capital gains tax as she was a regular assessee with the Assistant Commissioner, Investigation Circle, Bathinda.
(3) That after selling the plot the assessee's wife kept the amount at residence when her husband suggested to her that being big amount of Rs. 5,00,000, it will be safe to deposit the same in the bank account.
(4) That the sale deed was registered on 26-11-1996, for the sale of plot with the Sub-Registrar, Bathinda and the amount was deposited partly in his bank account on 26-11-1996, and the balance amount was utilised for purchasing agricultural land measuring 37 Kanals 10 Marlas in village Bajak and the remaining amount was given as an advance and the sale deed was got registered on 27-3-1997, whereas the amount was given as advance on 2-12-1996. In support of the above contention, the assessee also produced a copy of bank account.
In view of the above, it was submitted before the learned Commissioner (Appeals) that the assessee had not taken any loan or accepted the deposit from his wife. It was contended that the provisions of section 269SS of the Act were not applicable and there was no violation of the provisions of the said section.
3.1 The learned Commissioner (Appeals) asked for report from the Income Tax Officer, Ward-2, Bathinda, who vide his letter dated 19-9-2000, stated that the assessee and his wife are existing assessees. He also confirmed that Smt. Jagtaran Kaur sold a plot of land for Rs. 5,00,000 vide R.D. No. 4388, dated 21-11-1996, As regards two credit entries of cash for Rs. 75,000 and Rs. 2,00,000 on 26-11-1996, and 28-11-1996, it was explained that same were deposited in the bank out of the sale proceeds of aforesaid plot of land. The assessing officer further stated that Smt. Jagtaran Kaur, wife of the assessee, was also maintaining her bank account independently. The assessing officer further stated that this contention of the assessee that the amount was given by Smt. Jagtaran Kaur to the assessee for the safe custody of the amount independently could not be termed as "loan" or "deposit" was not acceptable because Smt. Jagtaran Kaur was herself maintaining the bank account independently and she could very well deposit the amount in her bank account for safe custody. The assessing officer concluded in his letter that Smt. Jagtaran Kaur advanced a loan of Rs. 2,75,000 to the assessee in cash, which in turn, was deposited by him in his bank account and, thus, there was clear violation of the provisions of section 269SS of the Act and the penalty of Rs. 2,75,000 under section 271D of the Act was rightly imposed.
3.2 The learned Commissioner (Appeals) concluded that a sum of Rs. 2,75,000 was deposited in cash on 26-11-1996 and 28-11-1996 in the bank account of the assessee even when Smt. Jagtaran Kaur was also maintaining her account in the bank independently. He opined that the amount given by Smt. Jagtaran Kaur to her husband for safe custody was merely an afterthought. He further pointed out that the, amount was ultimately used for the purchase of land by the son of the assessee and not returned to Smt. Jagtaran Kaur. Keeping in view the above facts, the learned Commissioner (Appeals) confirmed the penalty.
4. Before us, Shri Sudhir Sehgal, advocate, the learned counsel for the assessee, reiterated the submissions made before the authorities below. He further pointed out that the Joint Commissioner, Bhatinda, has wrongly levied the penalty under section 271D of the Act by holding that the receipt of cash and its subsequent deposit in his own account by the assessee was in violation of the provisions of section 269SS of the Act as the same amounts to 'deposit' loan', under the wrong notion of law and facts. According to him, the assessee had neither received the deposit nor taken any loan, as alleged by the assessing officer. The learned counsel for the assessee submitted that the essence of a deposit is that there must be liability to return it to the party by whom or on whose behalf it is made on the fulfilment of certain conditions. According to him, in the case of "deposit" and "loan", there is a relationship of a debtor and creditor between the party giving money and the party receiving money. In the instant case, the assessing officer has not established on record that there was a relationship of a debtor and creditor between the assessee's wife and the assessee. The assessing officer himself was not sure wheffier the transaction in question, was loan or deposit. However, the assessing officer failed to appreciate this fact that loan and deposit are not identical in meaning and cannot always be interchanged. Shri Sudhir Sehgal, advocate, the learned counsel for the assessee, also pointed out that in the instant case, Smt. Jagtaran Kaur handed over Rs. 2,75,000 to the assessee not as a deposit/loan, however, the same was invested in the name of the son of the assessee for purchase of agricultural land. He also contended that neither the assessee nor Smt. Jagtaran Kaur have any intention to get the same back as the amount was ultimately used for the purchase of land in the name of their son. It was also brought to our notice that the joint statement of accounts submitted before the assessing officer at the time of assessment revealed that no such liability to return has been shown and hence there was no liability to return it to Smt. Jagtaran Kaur, although the amounts were routed through the bank account of the assessee. Accordingly, it was submitted that the assessee had neither received a loan nor deposit and, therefore, penalty levied by the learned Joint Commissioner was against the provisions of law. Alternatively, it was submitted by the learned counsel for the assessee that an innocent mistake due to ignorance of the relevant provisions of law coupled with the fact that the transactions, in question, were genuine and hona flde transaction will constitute a reasonable cause and accordingly, it was submitted that there was no justification for imposing the penalty under section 271D of the Act.
5. Shri Tarsem Lal, the learned Departmental Representative supported the orders of the authorities below. He further submitted that there is no dispute that the assessee had accepted Rs. 75,000 and Rs. 2,00,000 on 26-11-1996 and 28-11-1996, respectively in cash from Smt. Jagtaran Kaur, which was deposited by him in his bank account. He, therefore, submitted that the provisions of section 269SS of the Act are clearly applicable to the facts of the present case.
6. We have carefully considered the ri~al submissions and have also perused the orders of the authorities below. Admitted facts of the case are that the assessee and his wife Smt. Jagtaran Kaur were working in Civil Hospital, Bathinda, Smt. Jagtaran Kaur sold plot No. 502C of 500 sq. yds. in Model Town, Bathinda for a consideration of Rs. 5,00,000 on 20-11-1996, and received the amount in cash. There is no dispute that the wife of the assessee had paid capital gains tax as she was a regular assessee with the Assistant Commissioner, Investigation Circle, Bathinda. The sale deed was registered on 26-11-1996, and the amount was deposited partly in the bank account of the assessee on 26-11-1996, and 28-11-1996. It was explained by the assessee before the IT authorities below that the amount of Rs. 2,75,000 were received out of the sale proceeds as aforesaid plot of land sold by his wife, Smt. Jagtaran, Kaur. It is also apparent from the records that the amount was ultimately spent for the purchase of land by the son of the assessee. In other words, the amount of Rs. 2,75,000 was invested in the purchase of agricultural land in the name of the son of the assessee and Smt. Jagtaran Kaur. Section 271D read with section 273B of the Income Tax Act, 1961 provides a discretion on the authority to levy or not to levy penalty. The discretion has to be exercised judicially considering the relevant facts of particular case. It is true that the authority imposing the penalty should not exercise his power to impose penalty in each and every case. In this backdrop, we shall examine as to whether the authorities were justified in levying the penalty under section 271D of the Act. It is true that both in the case of loan and in the case of deposit, there is always a relationship of debtor and creditor Between the parties receiving money. So far as the deposit is concerned, the delivery of money is usually at the instance of the depositor and it is for the benefit of the person, who deposits the money. In the instant case, the amount of Rs. 2,75,000 received by the assessee was ultimately utilised for purchasing ,the land in the name of the assessee's son. In other words, neither the assessee nor the wife of the assessee had taken any benefit. In other words, Smt. Jagtaran Kaur, the alleged depositor, has not taken any benefit. In the case of a loan, it is the borrower at whose instance and for whose needs the money is advanced. In other words, the borrowing is primarily for the benefit of the borrower although the person, who lends the money, may also gain thereby earning interest on the amount lent. In the instant case, there was no intention on the part of Smt. Jagtaran Kaur to earn the interest on the amount of Rs. 2,75,000. At the same time, it is also not the case of the revenue that the assessee was in need of any money or the assessee had borrowed the money for his benefit. In other words, the department has miserably failed to show that the transaction was either a 'deposit' or 'loan' in any manner. It is also not the case of the department that Smt. Jagtaran Kaur had received the interest from the assessee or the assessee had paid any interest on the amount of Rs. 2,75,000. Thus, it can safely be held that the assessee had not received any deposit or loan, as alleged by the departmental authorities. Section 269SS of the Act provides that no person shall, after the 30-6-1984, take or accept 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 twenty thousand rupees or more. As regards scope and effect of section 269SS, it has been clarified by the Board vide departmental Circular No. 387, dated 6-7-1984, as under :
"Prohibition against taking or accepting certain loans and deposits in cash 32.1. Unaccounted cash found in the course of searches carried out by the IT department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits and taxpayers are also able to get confirmatory letters from such persons in support of their explanation.
32.2. With a view to countering this device, which enables taxpayers to explain away. unaccounted cash or unaccounted deposits, the Finance Act, 1984, has inserted a new section 269SS in the Income Tax Act debarring persons from taking or accepting, after 30-6-1984, 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 with effect from 1-4-1989) or more. This prohibition will also apply in cases where 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 to not), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 (raised to Rs. 20,000 with effect from 1-4-1989) or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs. 10,000 (raised to Rs. 20,000 with effect from 1-4-1989) or more."
From the above circular, it would be clear that it was never the intention of the legislature to apply provisions of section 269SS of the Act in genuine cases. Briefly, this is not a search case and the assessee and his wife were government servants. They were not engaged in any business or profession. In other words, their main source of income was salary income. Admittedly, Smt. Jagtaran Kaur had received a sum of Rs. 5,00,000 on account of sale of plot. It is also apparent from the record that ultimately the amount given to her husband was utilised for the purchase of agricultural land in the name of their son. In this background and also keeping in view the Board's circular, it can be said that the authorities below were not justified in invoking the provisions of section 269SS of the Act and ultimately levying the penalty of Rs. 2,75,000 under section 271D of the Act.
6.1 In the case of Shreenath Builders v. Dy. CIT (2000) 66 TTJ (Ahd-Trib) 113, the Ahmedabad Bench of the Tribunal held that a harmonious construction of the relevant provisions of sections 271D, 271E and 273B clearly reveals that the use of the expression "shall be liable to pay" in sections 271D and 271E and the provisions of section 273B providing that no penalty would be leviable if the person concerned proves that there was reasonable cause for the said failure clearly indicates that these provisions give a discretion to the authorities to impose the penalty or not to impose the penalty. The Ahmedabad Bench of the Tribunal further held that such a discretion has to be exercised in a just and fair manner having regard to the entire relevant facts and materials existing on records. In the said decision, it has also been held that ordinarily a plea as to the ignorance of law cannot support the breach of a statutory provisions but the fact of such an innocent mistake due to ignorance of the relevant provisions of law, coupled with the fact that the transactions in question are genuine and bona flde transactions and were undertaken during the regular course of its business, will constitute a reasonable cause.
6.2 This Bench of the Tribunal in the case of ITO v. Rattan Singh Maan Singh (1995) 127 Taxation 97 (Trib) has held that the penalty under section 271E was not leviable since the assessee was under a bona fide belief that the payments to the agriculturists were not covered by section 269T of the Income Tax Act, 1961. Thus, the Tribunal held that there was a reasonable cause and penalty levied by the assessing officer and confirmed by the Commissioner (Appeals) was deleted.
6.3 The Amritsar Bench of the Tribunal in the case of The Manager, State Bank of India, Khurla Khingra & Ors. v. CIT & Ors. in ITA No. 620/Asr/1990 vide its order dated 31-8-2000 held that TDS procedure and law is generally misunderstood at times and it is the duty of the department to draw education programme for DDOs and should be given proper publicity. The Tribunal deleted the penalty imposed under section 272A(2)(f) of the Income Tax Act, 1961, holding that ignorance of law can be considered as a reasonable cause for non-compliance of the provisions relating to TDS.
6.4 As we have already held above that on merits, there was no justification for levying the penalty. Even otherwise also, there is merit in the alternative contention of the learned counsel for the assessee and in that view of the matter also, it could be held that ignorance of law can be taken as excuse for not complying with the provisions of law.
6.5 Viewed from any angle, in the facts and the circumstances of the present case, levy of penalty was not justified and accordingly, we delete the same.
7. In the result, the appeal is allowed.