Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax vs Dhanji R. Zalte on 9 June, 2000
Equivalent citations: [2001]78ITD397(PUNE)
ORDER
Chhibber, Accountant Member
1. The common grievance projected in these six appeals by the Revenue is that the learned CIT(A) is not justified in deleting the penalties levied by the Assessing Officer under section 271E of the Income-tax Act, 1961.
2. The assessee is an Advocate carrying on legal profession for the last more than 25 years. He is dealing in cases of farmers pertaining to compensation on compulsory acquisition of their lands by the Government. There was a search and seizure action on the premises of the assessee from 21-8-1995 to 22-8-3995. Various incriminating documents and records were seized by the department during the course of search and, accordingly, the Assessing Officer passed the assessment order on 24-8-1996 for the Block period 1-4-1985 to 21-8-1995 under section 158BC read with section 143(3) of the Act. While scrutinising the seized documents in the course of assessment proceedings for the Block period, the Assessing Officer observed that the assessee had repaid loans/deposits in excess of Rs. 20,000 by otherwise than account-payee cheques/demand draft. According to the Assessing Officer, the assessee, had contravened the provisions of section 269T read with 271E. He accordingly, initiated penalty proceedings under section 271E. In response to the show-cause notice. The assessee filed a detailed explanation which has been reproduced by the ClT(A) on pages 2 & 3 of his order. The crux of the explanation was that the assessee had taken loans and not deposits and, as such, no penalty could be levied under section 271E. The Assessing Officer was not satisfied with the explanation furnished and He levied the following' penalties :
Assessment year Amount of penalty
1991-92 Rs. 50,885
1992-93 Rs. 4,14,623
1993-94 Rs. 8,37,342
1994-95 Rs. 6,52,600
1995-96 Rs. 16,49,013
1996-97 Rs. 4,17,400
3. The assessee appealed to the CIT(A). The CIT(A) observed that right from the search till the assessment proceedings, the assessee had all along been claiming that the amounts in question received in cash were loans. Accordingly, the repayments to the tune of Rs. 40,21,865 in cash were only pertaining to loans and not to deposits and, as such provisions of section 273E are not attracted. In view of the above position and relying upon the judgment of the Delhi High Court in the case of Baidya Nath Plastic Industries (P.) Lid. v. K.L. Anand, ITO [1998] 230 ITR 522 deleted the impugned penalties.
4. Shri Adhir Jha, the learned D.R. strongly supported the orders of the Assessing Officer. He submitted that both in loans and deposits, there is an act of borrowing. For example, in case of companies when the company borrows money by way of deposits, there is borrowing only and, in that sense, in the present case also, the assessee had not borrowed money, but the persons who had advanced money to the assessee were depositing the same with the assessee. He, therefore, submitted that the provisions of section 271E are clearly attracted and the CIT(A) is not justified in deleting the impugned penalties.
5. Shri K.A. Sathe, the learned counsel for the assessee, strongly supported the orders of the learned CIT(A). He submitted that during the course of search in the premises of the assessee certain documents were seized which showed that the assessee had made borrowings from several parties. The assessee was examined in this connection. He drew our attention to the statement of the assessee recorded under section 132(4) placed in the compilation at pages 42 to 45 and submitted that the assessee has all along contended that he has raised loans. He submitted that there is a distinction between the expression 'loan' and 'deposit'. For this, he relied upon the Commentary by Chaturvedi & Pithisaria on page 5735 (Vol. V, 4th Edn.). According to the learned counsel, the interpretation of section 273E put by the learned CIT(A) that it applies only to the cases of 'deposit' and not to loans' is correct and accordingly, the orders of the CIT(A) deserve to be upheld.
6. We have considered the rival submissions and perused the facts on record. A plain perusal of the provisions of sections 269SS and 269T reveals that whereas provisions of section 269SS apply to acceptance of loan or deposit, provisions of section 269T apply only to repayment of deposit. The Legislature seems to have made a conscious distinction between the expression 'loan' and 'deposit'. The General Law also makes a clear distinction between the two. For example, under the Limitation Act, different limits have been set out for instituting suits for recovery of loan and deposit. The Chambers 20th Century Dictionary, New Edition 1983, defines a 'deposit' as "that which is deposited or put down; a sum of money paid to secure an article, service etc.", while it defines 'loan' as "anything lent, especially money at interest; the act of lending; the condition of being lent; an arrangement for lending." Thus, there is a marked distinction between a loan and a deposit. This distinction between the two expressions has been brought out in a Commentary by Chaturvedi & Pithisaria on page 5735 (Vol. V, 4th Edn.) in following words) "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 money 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.
'Loan' and 'deposit' are not identical in meaning and cannot always be interchanged. Some loans may be deposits and some deposits may be loans. But all loans are not deposits or vice versa. The dividing line between a loan or deposit is undoubtedly thin : the two, however, are not synonymous Pennwatt India Ltd. v. Registrar of Companies [1987] 62 Comp.,Cas. 112 (Bom.); also see, Durga Prasad Mandelia v. Registrar of Companies [1987] 61 Comp. Cas. 479 (Bom,)
7. The Hon'ble Delhi High Court in the case of - Baidya Nath Plastic Industries (P.)Ltd. (supra)', has distinguished the expression "deposit" in contra-distinction to the term "loan". The Hon'ble High Court further held that when two interpretations are possible, the interpretation which took the assessee out of the clutches of the penal provisions must be preferred. We have perused the statement of the assessee recorded under section 132(4) placed in the compilation at pages 42 to 45. In question No.3 on page 42, a question was asked to the assessee to give details regarding 16ans taken by him from various parties. The question No. 4 is also in regard to the records maintained by the assesses in regard to these loans, Subsequent questions also are in regard to the advances received and interest paid by the assessee on the same. The statement of one of the creditors, Shri Vishnu L. Patil (page 23 of the paper book) was also perused by usr He was also asked regarding the loans obtained by the assessee from him. In short, the department's case has always been that the assessee has borrowed different sums of money-by way of loans in different years from 1990-91 to 1996-97 in contravention of section 269SS. Accordingly, what the assessee repaid were loans and not deposits and therefore, provisions of section 271E are not applicable.
8. The contention of the learned D.R that there is no distinction between loan and deposit because there is an act of borrowing in both is not correct. The learned D.R. gave the example, i.e., in case of company, when the company borrows money by way of deposits there is borrowing only and, in that sense, in the present case also the assessee had not borrowed money but the persons who had advanced money to the assessee were depositing the same with the assessee. This example is fallacious because when the company solicits deposits, it does so to the public at large without identifying the individual depositors. In response to this general appeal, a person who wants to deposit his money by way of investment does so to earn income by way of interest. Thus, the initiative in depositing money comes usually from the depositor. This is not the case with the assessee, because he has made specific borrowings from different persons and these constitute loans in his hands. The Revenue's approach has also been always that the assessee had borrowed loans. This would be evident from the fact that in the concluding portion of the penalty order the Assessing Officer himself states as under :
"Considering the above discussion, I am of the confirmed opinion that the assessee has contravened the provisions of section 269T by repaying the loans or deposits exceeding certain limits otherwise than by an account payee cheques or account payee bank drafts. I therefore levy penalty of Rs. 8,37,342 under section 27IE of the Income-tax Act, 1961."
It is seen from the above that the Assessing Officer himself has not made any distinction between the loans and deposits. In fact, no specific charge has been leveled against the assessee, whether the assessee had repaid loans or deposits. The assessee's case is that he has repaid the loans and not deposits and, therefore, question of invoking provisions of section 27IE for contravention of section 269T could not have arisen. For want of specific charge in this case, in our opinion, levy of penalty by the Assessing Officer is totally unjustified. The Ahmedabad Bench of the Tribunal in the case of Bombay Conductors & Electricals Ltd. v. Dy. CIT [1996] 56 TTJ(Ahd) 580 has held that where the Department itself was not sure whether return of money was deposit or loan, penalty under section 271D was not attracted; (This was one of the reasons for deleting the penalty).
9. To conclude, there is a marked distinction between 'loan' and 'deposit' as brought out 'supra; the assessee-repaid loans and not deposits; and, therefore, question of invoking provisions of section 271E for contravention of section 269T does not arise.
Accordingly, we uphold the orders of the CIT(A) and decline to interfere,
10. In the result, the, appeals are dismissed.