Delhi High Court
Asstt. Cit vs Ruchika Chemicals & Investment (P) Ltd. on 18 April, 2002
Equivalent citations: (2004)88TTJ(DEL)85
ORDER
R.S. Syal, A.M.:
This appeal by the revenue is preferred against the order passed by Commissioner (Appeals) on 17-12-1996, in relation to assessment year 1993-94 deleting the penalty imposed under section 271D. The solitary ground projects the grievance of the revenue as under :
"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in accepting assessed's explanation of there being bona fide belief that such transactions were not covered under section 269SS of the Act, despite the fact that out of total transactions of Rs. 39,87,063 transactions amounting to Rs. 19,51,093 were through account payee cheques. "
2. Briefly stated the facts of the case are, that the assessing officer while completing assessment under section 143(3) noted that the assessed- company had accepted loans and deposits by way of transfer entries from Sh. D.K. Gupta (individual), Smt. Poonam. Gupta, Sh. D.K. Gupta (HUF), Smt. Chandra Kala Devi, Ms. Ruchika Gupta, Ms. Nidhi Gupta, Sh. Keshav Gupta and M/s Mangal Sales (P) Ltd. Penalty proceedings under section 271D were initiated for violation of the provisions of section 269SS of the Act. In response to the show-cause notice it was stated on behalf of the assessed that no loan was accepted through cash in excess of Rs. 20,000 and hence the provisions of section 269SS were not violated. The assessing officer opined that if any persons takes or accepts loan or deposit otherwise than by an account payee cheque or account payee draft of Rs. 20,000 or more he is liable to penalty under section 271D. He, therefore, held that the assessed had violated the provisions of section 269SS and accordingly imposed a penalty of Rs. 39,87,063 under section 271D.
3. The action of the assessing officer was assailed before the first appellate authority and various submissions were made in support of the fact that no penalty was liable to be imposed. It was submitted that all the shareholders of the assessed-company were members of Sh. D.K. Gupta's family and, therefore, the provisions of section 269SS were not attracted because of close relation of the assessed with all the depositors. Reliance was also placed on Circular No. 387, dated 6-7-1984, to contend that the provisions of section 269SS were introduced prohibiting against taking or accepting certain loans and deposits in cash in search cases alone. The rationale behind the provisions was stated to be curbing the practice of the assesseds at the time of search and seizure proceedings stating in respect of undisclosed cash that it was obtained from certain persons to establish its genuineness. It was also pointed out that out of total transactions aggregating to Rs. 39.87 lakhs, transactions worth Rs. 19.51 lakhs were through account payee cheques and only the balance of Rs. 20.35 lakhs were through transfer entries. The learned Commissioner (Appeals) concurred with the submissions advanced on behalf of the assessed and relying on provisions of section 273B held that there was a reasonable cause for not complying with the provisions of section 269SS. It was also held that there were no cash transactions and mere transfer through book entries would not attract the imposition of penalty under section 271D.
4. Before us, the learned Departmental Representative opened his arguments by contending that the Commissioner (Appeals) grossly erred in deleting the penalty under section 271D which was rightly levied by the assessing officer. Taking us through the provisions of section 269SS the learned Departmental Representative submitted that these provisions were clear in the sense that it was mandated that no loans or deposits could be accepted otherwise than by account payee cheque or account payee draft exceeding a specified amount and if, subject to other provisions of this section any loan or deposit was accepted otherwise than by account payee cheque or account payee draft, the penalty was exigible. As in the present case the amounts in question were not accepted through account payee cheques or drafts, the learned Departmental Representative pleaded that the assessing officer had rightly imposed the penalty. It was also asserted by the learned departmental Representative that the Commissioner (Appeals) had wrongly taken into consideration Circular No. 387, dated 6-7-1984, for allowing relief to the assessed. It was stated that since this circular was not in accordance with the language of section 269SS, it was also stated that in taxing statute only literal interpretation of the provisions of the Act is required to be done and there is no question of any equity or the liberal interpretation while construing the provisions. It was further submitted that the Commissioner (Appeals) had not correctly appreciated the facts of the case vis-a-vis the true legal position and as such his order deserves to be struck down.
5. In the oppugnation, the learned counsel for the assessed supported the order passed by the Commissioner (Appeals). His marathon submissions were the reiteration of reasoning given by the Commissioner (Appeals) for deleting the penalty. In specific, the learned counsel submitted that the provisions of section 269SS were not attracted in its case because the relation between the assessed- company and other depositors was very close and all the transactions were at the instance of Sh. D.K. Gupta, who was managing the affairs of all the group concerns. As the office of the company was situated at the same place where the offices of other sister concerns were situated and Sh. D.K. Gupta along with his family members was also living at the same premises, the learned counsel submitted that these were the transactions between closely connected persons and hence the provisions of section 269SS were not applicable on such transactions. It was tendered that section 269SS was brought into existence to disregard the explanation given by taxpayers during the course of search and seizure proceedings in respect of undisclosed cash found during search operations. As the provisions were introduced to conter this device, the learned counsel pleaded that this could not be applied to normal proceedings other than that of search and seizure. Reverting to the contention of the learned departmental Representative that circular was not binding on the Commissioner (Appeals), the learned counsel asserted that all the circulars issued by the CBDT are binding on all the income-tax authorities. For this proposition reliance was placed on the decision of Apex Court in the case of CST v. Indira Industries (2001) 168 CTR (SC) 50 : (2001) 248 ITR 338 (SC). It was also submitted by the learned counsel that the assessed filed its return of income at Rs. 2,53,310 which was accepted by the department while making assessment under section 143(3) and the assessed income was also at the same amount. The learned counsel pleaded that the assessing officer had not doubted the genuineness of the transactions and he, therefore, exceeded his jurisdiction when he imposed penalty under section 271D on the ground that in respect of genuine transactions also, penalty was liable to be imposed. It was pointed out that section 269SS falls under Chapter XX-B. While stressing upon the words "to counteract evasion of tax" in the heading of this chapter, the learned counsel pleaded that section 269SS could only be restored to where there was evasion of tax. Reliance was placed on Shree Sajjan Mills Ltd. v. CIT (1985) 156 ITR 585 (SC) for this proposition. As in the present case the income was assessed at the same figure at which it was declared in the return, the learned counsel asserted that there was no evasion of tax and hence the provisions of section 269SS could not be taken note of.
6. The learned counsel contended that even on merits, the assessed was not liable to be visited with penalty under section 271D for the reason that section 269SS, was applicable only where the transactions of loans and deposits were routed through cash. While referring to clause (iii) of Explanation to section 269SS, the learned counsel submitted and it is made clear that the loan of deposits referred to in this section meant only loan or deposit of money. Relying on the decision of the Apex Court in the case of CIT v. Kasturi and Sons Ltd. (1999) 237 ITR 24 (SC), the learned counsel pleaded that the term money referred to actual cash and not any other thing or benefit which could be evaluated in terms of money. A further contention was raised by the learned counsel that the assessed acted under a bona fide belief that the provisions of section 269SS were not attracted when the loan transactions were routed through transfer entries and hence the provisions of section 273B came into its aid to suggest that no penalty could be inflicted where the assessed established that there was a reasonable cause for non-compliance with the provisions. In the final analysis the learned counsel submitted that the Commissioner (Appeals) was fully justified in deleting the penalty which was imposed by the assessing officer on misappreciation of the provisions of section 269SS read with section 271D.
7. We have considered the rival submissions in extenso in the light of material placed before us and precedents relied upon. It is manifest that the assessed- company accepted certain loans and deposits from the director, his family members and its sister concerns by way of transfer entries in its books of accounts for which the penalty was imposed by the assessing officer. In order to evaluate the contentions raised by the rival parties before us, it is necessary to consider the provisions of section 269SS. The relevant portion of the section 269SS provides that no person shall take or accept from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate of such loan and deposit taken or accepted earlier is Rs. 20,000 or more. When this portion of section is analysed it comes to light that there is prohibition on taking or accepting of any loan or deposit from any person otherwise than by account payee cheque or account payee bank draft. Certain entities have been incorporated in this section on whom the provisions shall not operate. Clause (iii) of Explanation to this section provides that loan or deposit means loan or deposit of money. It is true that Circular No. 387, dated 6-9-1984, has explained the object and scope of introducing the provisions of section 269SS as under :
"(xxiv) Prohibition against taking or accepting certain loans and deposits in cash -.
32.1 Unaccepted 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 firm 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 ........
On perusal of the portion of the circular extracted above it becomes apparent that section 269SS was introduced with a view to counter the device which enabled taxpayers to explain unaccounted cash as representing loans taken from various persons in the case of search and seizure proceedings. But this is not the end in itself. This circular shows the background for the introduction of section. Therefore, to claim that section 269SS is applicable only in the case of search and seizure proceedings is wholly devoid of merits for the reason that the language of section 269SS clearly puts bar on taking or accepting loan (except) through account payee cheques or account payee drafts beyond a specified limit. There is no reference in the provision as regards its applicability only in the search and seizure proceedings. Had there been such intention of the legislature then instead of putting this section under Chapter XX-B it would have been incorporated in Chapter XIII-B or Chapter XIV-B which deals with the provisions relating to search and seizure cases. As the applicability of this section by its clear words has been restricted only to search and seizure cases, we hold that section 269SS applies in all circumstances and is not confined to only search and seizure cases.
8. That apart it is important to note that Income Tax Act is a fiscal statute and it has to be interpreted strictly on the basis of plain language used in it. In this process it is not open to read the words in the Act which have not been so used. Recently, the Hon'ble Apex Court in Vikrant Tyres Ltd. v. Income Tax Officer (2001) 247 ITR 821 (SC), on the interpretation of the provisions has laid down as under :
"if this process courts must adhere to the words of the statute and the so-called equitable commitments of these words of the statute are not permissible. The task of the court is to construe the provisions of taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the fact of the case and in that process the taxpayer brought within the net is caught otherwise he had to go scot free."
More recently the Hon'ble Delhi High Court in the case of CST v. International Airport Authority of India (2002) 254 ITR 159 (Del), has laid down that the taxing statutes are to be literally interpreted. In the light of these judicial pronouncements we are of the considered opinion that when the language of section 269SS clearly provides for its application under all circumstances, it is not possible to restrict, as contended by the learned authorised representative, only to search and seizure cases.
9. As regards the applicability of circular on the income-tax authorities we would like to point out that the circulars are binding on all the income-tax authorities. But these are not binding on the assesseds or courts. assesseds are free to assail the circulars before the Courts. Hon'ble Apex Court in (2001) 248 ITR 338 (SC) (supra) has laid down to this effect. The income-tax authorities have been listed in section 116 of the Income Tax Act, 1961. It is clear that the Tribunal is not an income-tax authority and hence we are not bound to follow the circular in question.
10. Now, we would deal with the contention raised by the learned counsel as regards the marginal note of Chapter XX-B which reads as under : "Requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax". It states that the provisions' contained in this chapter are to counteract evasion of tax. The case was made by the learned counsel that since the transactions recorded by the assessed were genuine and the income returned was the assessed income and in the absence of any finding contrary to the genuineness of the transactions by the assessing officer it was not open to the assessing officer to impose penalty under section 271D for violation of section 269SS. It is no doubt true that the heading of this chapter provides that the sections in this chapter are to counteract the evasion of tax. At the same time it is equally true that nowhere in the body of section 269SS or other sections falling in this chapter has it been provided that if the transactions are found to be genuine then the provisions of these sections would not apply.. The marginal note only indicates the intention of the legislature and cannot override the clear language incorporated in the sections. It is well-settled that while interpreting the provisions of section the marginal note is not decisive and cannot run contrary to substantive provisions contained therein. Only in case of doubt the heading can be considered as aid for construction. Hon'ble Bombay High Court in Dharmavat Provisions Store v. CIT (1983) 139 ITR 700 (Bom) has laid down that the marginal note to a section cannot restrict the plain meaning of the language used in the section itself. To similar effect is another decision of the Hon'ble Bombay High Court in R.B. Shreeram Religious & Charitable Trust v. CIT (1988) 172 ITR 373 (Bom). In the light of this legal position, it is noted that there is no ambiguity in the language of section 269SS and, therefore, we have no hesitation in holding that the provisions of section 269SS are not only to counteract the evasion of tax but also to regulate certain transactions of money in a specified form. If the contention of the assessed that no penalty is exigible because genuineness of transaction was not doubted, is accepted, it would lead to anomalous results. It is important to bear in mind that section 269SS is not to judge the genuineness or otherwise of the credit entries appearing in account books. For this purpose the provisions of section 68 have been incorporated which deal with unexplained credits appearing in assessed's books of accounts. The provision of section 269SS are in addition to section 68 and not substitute of it. Both sections have their own separate field to operate in. When a transaction of taking loan or deposit from a person is held to be ingenuine, obviously the issue would close at the applicability of section 68 itself. On the contrary, section 269SS does not deal with the genuineness or otherwise of the loans and deposits accepted by the assessed but it only requires the regulation of loans and deposits in a specific manner exceeding a specified limit. As such, we hold that this contention of the learned counsel is bereft of any force and we cannot restrict ourselves to the marginal note of the Chapter XX-B itself.
11. Another contention was also raised by the learned counsel that section 269SS is not applicable where the loans and deposit transactions are with sister concerns only. A perusal of section 269SS reveals that it bars any "person" from taking or accepting loan from any other "person" otherwise than by account payee cheque or account payee bank draft on fulfillment of certain conditions. The reference in this section is to a 'person'. Sec. 2(31) defines "person" to include individual, HUF, company, firm, etc. It thus points out that no person can take or accept loans or deposits subject to the provisions of this section from any other person otherwise than by an account cheque or account payee bank draft. In the body of the section we have not seen any stipulation which restrict its application only to entities outside the ground and family of the assessed. The assessed is a separate person and when it takes or accepts loan or deposits from its directors or partners or relatives or other sister concerns, such other distinct person also comes into picture. One person is giving loan and the assessed- company, another person, is accepting loan. It, therefore, boils down that two person are involved in the transaction of accepting loan. To contend that the assessed and its sister concern/relatives are one and the same person, is wholly in contravention of the provisions of the Act. Clearly, the sister concerns or the directors or their relatives are different persons. In our considered opinion it is not legally correct to contend that the assessed and its sister concerns are one and the same person and the transactions with the sister concerns are outside the scope of section 269SS. We have not come across any stipulation in the body of this section to this effect which provides for the inapplicability of this section on transactions between sister concerns.
12. Now, we would deal with the main question as to whether the provisions of section 269SS are attracted on the transfer entries as it is so in the present case. No doubt, the main part of section 269SS as considered in one of the preceding paras, provides that no person shall take or accept loans from any other person otherwise than by account payee cheque or account payee bank draft. If the section is read up to here, it would show that there is a bar on taking or accepting loan or deposit by any mode other than account payee cheque or account payee bank draft. But the position does not stop here. Clause (iii) of Explanation to section 269SS clarifies the purport of "loan or deposit" as loan or deposit of money. When this Explanation is read with the main section it brings to light that only the transactions of loans or deposits which are covered within the ambit of this section are that of "money'. If the loan or deposit transaction is not that of money, then it would go out of the purview of section 269SS and resultantly no penalty under section 271D can be imposed. The term 'money' has not been defined in this section. It was fairly admitted by-both the sides that the term 'money' is not defined anywhere in the Income Tax Act, 1961. No authority is required to be cited for the proposition that if a term or an expression is not defined in the Act, then the meaning to be assigned to it is as is understood in common parlance. The Hon'ble Supreme Court had the occasion to consider the meaning of term "money" in Kasturi and Sons Ltd. (supra), in the context of section 41(2) and it was laid down as under :
"It is obvious that the legislature has deliberately used the word 'moneys'. Wherever the legislature intended to refer to payment in kind other than cash or money, it has taken care to provide specifically therefore. For example, in section 41(1) itself, the legislature has used the expression, "whether in cash or in any other manner whatsoever". There are several sections in the Act which refer to benefits other than cash through the value thereof can be ascertained in terms of cash or benefits which are convertible in cash (see sections 17, 23(3), 28(iv), 40A(2)(a), 93(4)(c)), For example, section 28(iv) speaks of the value of any benefit or perquisite, whether convertible into money or not, arising from business or profession When the legislature has instead of using any word such as 'benefit' used only the term 'money', it can refer only to money as understood in the ordinary common parlance."
The Shorter Oxford English Dictionary defines "money" as a current coin; metal stamped in pieces as a medium of exchange and measure of value, b. Hence, anything serving the same purposes as coin, late ME. c. in mod. use applied indifferently to coin and to such promissory documents representing coin (esp, bank-notes) as are currently accepted as a medium of exchange".
The Law Lexicon by Sh. P. Ramantha Iyer defines 'money' as under :
Money (moneta)-That metal, be it gold or silver, which receives authority by the prince's impress to be current; for as wax is not a seal without a print, so metal is not money without impression. (Co. Ltd. 207). Money is said to be the common measure of all commerce, through the world, and consists principally of three parts, the material whereof it is made, being silver or gold; the denomination or intrinsic value, given by the king, by virtue of his prerogative; and the King's stamp thereon. (1 Hale's Hist. P.H. 188).
The definition of the term 'money' in these dictionaries and as laid down by Apex Court is a pointer to the fact that 'money' means 'cash'. When clause (iii) of the Explanation is read with main section, the natural coroliary that follows is that the restriction contained in section 269SS is against accepting loan or deposit in cash alone. The other modes of loans or deposits including creation of credit through transfer entries are outside the scope of section 269SS. If the arguments of the learned Departmental Representative that this section applies on transfer entries as well, is accepted, it would amount to stretching the ambit of this section beyond clause (iii) of the Explanation which restricts itself only to loan or deposit of money. We, therefore, hold that the transfer entries do not fall within the ken of section 269SS. As in the present case no loan or deposit was accepted in cash in excess of the amount specified in the section, we are of the considered opinion that the Commissioner (Appeals) was justified in deleting the penalty. That apart we find that the assessed was under bona fide belief and rightly so that the provisions of section 269SS are not attracted on account of transfer entries. We confirm the action of Commissioner (Appeals) on that count also.
13. In the result the appeal of the revenue stands dismissed.