Rajasthan High Court - Jaipur
Ito vs Maheshwari Nirman Udyog on 27 March, 2002
Equivalent citations: (2004)86TTJ(NULL)410
ORDER
B.L. Khatri, A.M. This is an appeal by the revenue against the order of Commissioner (Appeals), Jodhpur, for assessment year 1993-94.
2. In this case, the assessing officer had levied a penalty of Rs. 5,05,300 under section 271D of the Act for violation of provisions contained in section 269SS of the Act which prohibits taking or accepting from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft. According to Dy. CIT, Bikaner Range, Bikaner, the assessee had accepted the loan/deposit of Rs. 5,05,300 from its sister-concern M/s G.P. Taparia, Nokha. The assessing officer was not satisfied with the reasons given by the assessee and he has levied a penalty of Rs. 5,05,300.
3. The learned Commissioner (Appeals) after careful consideration of the facts of the case, held that the assessee is a contractor doing business in a remote area of Nokha Tehsil. The assessee had to make spot payments to the labour, etc. and for that the assessee needed cash. Therefore, the assessee borrowed the money from sister-concern at the work site. Therefore, it is only a technical breach of law and for a mere technical breach, no penalty was exigible. Therefore, the penalty levied by the Dy. CIT, Bikaner Range, Bikaner, was cancelled by him.
4. The learned Departmental Representative relied upon the order of the Dy. CIT, Bikaner Range, Bikaner.
5. The learned authorised representative made the following submissions :
5.1 The transaction with sister-concern was not covered by section 269SS of the Act. It is an admitted position of facts that there are transactions between two sister-concerns. The assessing officer and the learned Dy. CIT both have used the words "sister-concern" with reference to M/s G.P. Taparia. At least two persons are common partners and these are the persons who are at the helm of affairs of both the firms inasmuch as they are the persons taking all important business decisions and are also involved in framing policy matters. This being the admitted position of facts, the frequent and day-to-day transactions between the two are on account of the current transactions for which separate running/current accounts had already been maintained. It is notable that the assessee had also received some amount on deposits from M/s G.P. Taparia. However, the same were kept in a separate account. Thus, the intention of the parties are very clear that whenever the amount had been given or received as a deposit the same had been treated accordingly, There is no allegation of contravention in those cases. The learned authorised representative relied upon the following judgments :
(i) Vir Sales Corporation v. Asstt. CIT (1994) 50 TTJ (Ahd) 130
(ii) Mothoot M. George Bros. v. Asstt.. CIT (1993) 46 ITD 10 (Cochin)
(iii) Moolchand Ashok Kumar v. Dy. CIT 21 Tax World 763 (Jp)
(iv) Manoj Lalwani v. Jt. CIT 23 Tax World 434 (Jp) 5.2 The learned Dy. CIT has not categorically mentioned whether the transactions are of loan or deposit as held in the case of A.M. Shamsudeen v. Union of India & Ors. (2000) 244 ITR 266 (Mad), 5.3 The learned Dy. CIT is of the opinion that section 269SS uses the words "any person" hence sister-concern can also be covered. Again he did not appreciate the submissions correctly inasmuch as what was submitted was that the transactions with sister-concern is neither a loan nor deposit. Hence, sections 269SS and 269T will not apply. He relied upon the following citations :
(i) Chandra Cement Ltd. v. Dy. CIT (2000) 68 TTJ (JP) 35
(ii) Unique Constructions v. Dy. CIT (1995) 52 TTJ (Bom) 96
(iii) Vir Sales Corpn. v. Assistant Commissioner (supra)
(iv) (1993) 47 TTJ (Coch) 434 (supra) 5.4 The learned Dy. CIT further objected that non-payment of interest is not relevant. It may be a decisive element but in any case it is one of the factors while deciding a transaction to be of loan or deposit, as held by the Hon'ble Tribunal, Jaipur Bench in the case of Moolchand Ashok Kumar v. Dy. CIT (supra).
5.5 The assessee was also prevented by reasonable cause for accepting the amount in cash. The assessee had undertaken various sites in the remote area at a time when no Banking facilities were available and as a matter of prevailing trade practice and also due to necessity, the assessee was required to make payment to the labourers towards their wages, etc. There were admittedly no Banks at the sites and, therefore, even if there are Banks they are in the city where the assessee had its head office and this will not change the situation.
5.6 The learned Dy. CIT further objected on the ground that the assessee never pleaded ignorance of law. Had the assessee been conversant with these technicalities of transactions, it could have avoided the allegation of the contravention and impugned penalties. This fact itself shows a clear ignorance on its part. The assessee was rather advised that these transactions are not in the nature of loan or deposit which is evident from the tax audit report also where the tax auditor had not reported any contravention of these provisions.
5.7 Both the parties are admittedly income-tax assessees. The amount given and accepted was duly explained amount. Hence, there was no addition made under section 68 of the Act.
5.8 While interpreting penalty provisions the legislative intent and the object behind the enactment plays important role and has always to be kept in mind. The CBDT vide its Circular No. 387, dated 6-7-1984, had explained that these provisions were enacted to curb the black money so that a party in a search cannot explain the available cash with reference to any third person. There were no such facts in the instant case.
5.9 In any case, the default, if any, was a mere technical and venial breach of law inasmuch as both the persons are assessed to tax. There was no blame of the involvement of black money. He has referred to the judgment of Hon'ble Supreme Court in the case of Hindustan Steels Ltd. v. State of Orissa (1972) 83 ITR 26 (SC).
5.10 The learned authorised representative further contended that there was urgent business need to make the payment as per explanation submitted before the Commissioner (Appeals) (p. 4). On account of harvesting season, the labourers had left the job. The assessee had to engage new labourers to complete the work in time. Therefore, the assessee had taken money from sister-concern in Sriganganagar District and not at Nokha for the purpose of advancing money to the labourers to be engaged.
6. We have considered the rival submissions. The learned authorised representative contended that transactions between two sister-concerns are not covered by the provisions of section 269SS. For the purpose, he has relied upon four judgments. In the case of Mothoot M. George Bros, v. Assistant Commissioner (supra) it was held as under:
"In the instant case, there was transfer of funds from and to the sister- concerns. There was no evidence to show that money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister-concerns and the assessee were owned by the same family group of people with a common managing partner with centralised accounts under the same roof. Transfer of funds had taken place in a whimsical manner. Therefore, it was rather difficult to say that the transactions were in the nature of deposits or loans with certain conditions attached to them, either as regards the period of such deposits or loans or with regard to their repayments. From the copies of the accounts furnished, all that could be gathered was that funds had been transferred from and to the sister-concerns as and when required and since the managing partner was common to all the sister-concerns, the decision to transfer the funds from one concern to another concern or to repay the funds could be said to have been largely influenced by the same individual. In other words, the decision to give and the decision to take rested with either the same group of people or with the same individual, In such circumstances of the case, the transactions inter se between the sister concerns and the assessee could not partake of the nature of either 'deposit' or 'loan', though interest might have been paid on the same."
Therefore, we find that the funds had been borrowed from the sister-concern not at Nokha where the assessee had Bank account but in Sriganganagar District for eingagement of fresh labourers. Therefore, we agree with the contention of the learned authorised represntative on this ground. The assessee had undertaken various sites at remote area at a time where no Banking facilities are available and money was urgently required and there was no Banks at the sites. This is considered to be a reasonable cause.
7. Tax auditor, in the tax audit report, had not reported any contravention of provisions of law. Therefore, we agree with the Commissioner (Appeals) that the assessee cannot. be penalised for a mere technical or venial breach of law. We decline to interfere with the order of the Commissioner (Appeals).
8. In the result, the appeal is dismissed.