Income Tax Appellate Tribunal - Ahmedabad
Dilipkumar Panachand Shah, Botad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A"
Before SHRI BHAVNESH S AINI, JUDICI AL MEMBER
And SHRI A N P AHUJ A, ACCOUNTANT MEMBER
ITA no.3173/Ahd/2010
(Assessment Year:-2005-06)
Shri Dilipkumar Panachand V/s Addl. Commissioner of
Shah, Prop. Darshan Income-tax, Bhavnagar
Cotton, 61, Sahakarnagar Range-2, Bhavnagar
Society, Botad
PAN: AGYPS 9000 Q
[Appellant] [Respondent]
Assessee by :- Shri A L Thakkar, AR
Revenue by:- Shri S K Meena,DR
O R D E R
A N Pahuja: This appeal by assessee against an order dated 15-09- 2010 of the ld. CIT(Appeals)-XX, Ahmedabad, for the Assessment Year 2005-06, raises the following grounds:-
"[1] The learned Commissioner of Income-tax (Appeals) has erred in confirming the penalty of Rs.1,00,000/- levied by the Assessing Officer u/s 271E of the I.T. Act, 1961.
[2] The learned Commissioner of Income-tax (Appeals) has erred in confirming the penalty of Rs.1,00,000/- levied u/s 271E of the Income Tax Act, 1961 even though the same is illegal and bad in law.
[3] The appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal."
2. Facts, in brief, as per relevant orders are that return declaring income of Rs.34,090/- filed on 27-10-2005 by the assessee, trading in cotton besides being commission agent, after being processed on 8.3.2006 u/s 143(1)) of the Income-tax Act, 1961 [hereinafter referred to as the "Act"], was selected for scrutiny with the service of a notice u/s 143(2) of the Act on 17-10-2006.During the course of assessment proceedings ,the Assessing Officer ['AO' in short] noticed that the assessee made repayment of loan to Smt. 2 ITA no.3173/Ahd/2010 Meenaben P Shah to the extent of Rs.1,00,000/- otherwise than by account payee cheque/bank draft. Accordingly, the Additional Commissioner of Income-tax, Bhavnagar Range-2 issued a show cause notice dated 03-09-2009 u/s 271E of the Act. In response, the assessee replied that there was reasonable cause to make repayment by social pressure and under bonafide belief that the assessee could pay below Rs.20,000/-. However, the Addl. CIT did not accept the submissions of the assessee and levied penalty of Rs.1,00,000/- u/s.271E of the Act for violation of provisions of sec.269T of the Act on the ground that the assessee did not satisfactorily explain as to why such huge deposits were repaid in cash.
3. On appeal, before the learned CIT(A), the ld. AR of the assessee filed written submissions, wherein it was mentioned that the statutory auditor in his report in form no. 3CD reported violation of the provisions of section 269T of the Act in repayment of the loan taken from Mrs. Meenaben Prakashkumar Shah. Since the AO accepted genuineness of the deposits and in all probability the reasonable cause for the making the repayment of the loan/deposit & and the default of section 269T being attributable to a reasonable cause within the meaning of section 273B of the IT Act, penalty proceedings be dropped. It was further pointed out that the provisions of sec. 269SS and 269T found place in the statute book only to counter the evasion of taxes. While referring to circular No.387 dated 6lh July, 1984 and decisions in CIT vs. Shree Ambica Flour Mills Corporation (2008) 6 DTR (Guj) 169; Omec Engineers vs. CTT (2007) 294 ITR 599 ; CIT vs. Saini Medical Store (2005) 277 ITR 420 (P&H), the assessee contended that Smt. Meenaben P Shah, a relative of the assessee having insisted on repayment of her loan in cash, penalty levied by the Addl. CIT be cancelled .After considering the submissions on behalf of the assessee, the ld. CIT(A) upheld the levy of penalty in the following terms:-
"3.3 I have gone through the penalty order as also the submissions of the AR carefully. It is seen that the contentions of the AR during appellate 3 ITA no.3173/Ahd/2010 proceedings remained more or less the same as that during the penalty proceedings. As far as the contention of the AR that penalty cannot be imposed under section 271 E unless the penalty proceedings have been initiated during the course of assessment proceedings is not correct. There is no requirement of law that penalties under section 271 E have to be initiated during the course of assessment proceedings. It is only in respect of penalty proceedings under section 271(1) of the IT Act 1961 that the proceedings have to be initiated during the course of assessment proceedings.
4. The next contention of the AR is that section 269SS and section1269 T were brought onto the statute book only to counter evasion taxes. The AR further argued that if the genuineness of the loan or deposit was accepted as those, no question of levy of penalty arises. The above contention of the AR has no merits. It is settled law that when the words in the statute are clear and unambiguous then there is no need to look at any other material to arrive at the meaning of the words. Section 269T is clearly applicable whenever loan or deposit in excess of Rs.20,000/- is repaid by any means other than by account payee cheque.
4.1 It has been held in the case of ITO V. Narsingh Ram Ashok Kumar reported in [1985] 47 ITD 38 [Pat.Trib) that penalty under section 271D was leviable even if the loan was genuine but no satisfactory explanation was given as to why the loan had been obtained in cash.
4.2 In view of the above it is clear that penalty under section 271E of the IT Act, 1961 can be levied even if the loan or deposit is genuine but has been taken by any means other than by account payee check or draft and the assessee does not have any satisfactory explanation for doing so.
4.3 The AR has further argued that Meenaben P. Shah is a housewife and also relative of the appellant. The peculiar circumstances of the depositor being a lady, and in that emergency was very insistent that the deposit be repaid to her. The AR has not been able to elaborate or substantiate with any evidence what such emergency was and why the appellant had to repay the deposit in cash. In the absence of any evidence, it is clear that no compelling situation existed which forced the assessee to make the payment of such amount in cash. In view of the above penalty under section 271 E of the IT Act 1961 was clearly leviable in this case.
4.4 The AR has relied on the case of CIT V. Shri Ambica Flour Mills Corp. [2008] 6 DTR (GUJ) 169 wherein the Gujarat High Court held that - where transactions were between sister concerns the default was only venial in nature and no interference was called for in the orders of the Tribunal which deleted the penalty under section 271 D and section 271 E. In that case, it was to be noted that the managing partner was common to all the sister concerns and it was held that the transactions are not in the 4 ITA no.3173/Ahd/2010 nature of deposits or loans. In the instant case however there is no such relation between the two entities. The appellant is an individual and the persons to whom the payment has been made is also an individual. The appellant has no control over the affairs of Meenaben P. Shah. In view of the above the ratio of the said decision does not apply to the instant case.
4.5 The AR has also relied on the case of Omec Engineers V. CIT (2007) 294 ITR 599 wherein it was held that no penalty could be levied in respect of a transaction made in violation of S.269SS if the transaction was genuine. The genuineness or otherwise of the transaction made in violation of S.269T clearly does not alter the levy of penalty u/s.271 E. 4.6 In the case of Madanlal Mahaveer Prasad v/s. Income-tax Appellate Tribunal & Others reported in 269 ITR 377, the Hon'ble Rajasthan High Court has held that when there was violation of section 269T and no reasonable cause was shown by the assessee, the Penalty u/s.271E was leviable. Even in the case of ITO vs. Narsingh Ram Ashok Kumar (Supra) it has been held that penalty u/s.271D is leviable even if the loan was genuine but no satisfactory explanation was given as to why the loan had been obtained in cash.
4.7 Further, it would be seen that the situation where the transaction itself was not genuine the addition would not be made u/s.269SS but u/s. 68 of the IT Act, 1961. Further the penalty in such cases would be levied u/s. 271(1)(c) and not u/s.271E.
4.8 The AR has also relied on the case of CIT V. Saini Medical Store [2005] 277 ITR 420(P& H.) wherein it was held that if there was a reasonable cause then penalty under section 269T could not be levied. It has already been discussed earlier in this order that there was no reasonable cause for the assessee to have made the repayment in cash. In view of the above the ratio of the above decision does not apply to the instant case.
4.9 In view of the above, the levy of penalty in the instant case is justified. The same is hence confirmed."
4. The assessee is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned AR on behalf of the assessee while reiterating their submissions before the learned CIT(A) relied upon the decision in CIT vs. Sunil Kumar Goel [2009] 315 ITR 163 (P&H) and contended that transactions being genuine, no penalty can be imposed. The learned DR, on the other hand, 5 ITA no.3173/Ahd/2010 supported the impugned order and added that therebeing no reasonable cause at all in making repayment of loan in cash, the findings of the ld. CIT(A) be upheld.
5.. We have heard both the parties and gone through the facts of the case as also the aforecited decision relied upon by the ld. AR. Indisputably, the amount of Rs. 1 lacs accepted as loan by the assessee ,has been repaid to Mrs. Meenaben P Shah in cash, in instalments below Rs. 20,000/- each. The relevant dates of repayment are not evident from the impugned order nor have been placed before us. Before proceeding further, we may have a look at the relevant provisions of sec. 269T of the Act, which reads as under:
"No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if-
(a) the amount of the loan or deposit together with the interest, if any, payable thereon, or
(b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits, is twenty thousand rupees or more:........................................"
5.1 As regards plea of the ld. AR that the transaction is genuine ,it has been held in Chaubey Overseas Corporation vs. CIT,303 ITR 9(All.),the applicability of section 269T is not dependent on the facts as to whether the transaction is genuine or of doubtful character. Even the genuine deposits are also covered under section 269T. The source of deposit, capacity of the depositors, etc. are wholly irrelevant so far as the applicability of section 269T is concerned. Similar views were expressed in the aforesaid decision in Narsingh Ram Ashok Kumar(supra) referred to by the ld. CIT(A).Thus, plea of the ld. AR regarding 6 ITA no.3173/Ahd/2010 genuineness of the transactions while repayment of loan in cash is not tenable in the context of levy of penalty u/s 271E of the Act.
5.2 Moreover, we find that the provisions of section 273B provide that notwithstanding anything contained in the provisions of section 271E of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure. In the case under consideration, it was argued before the ld. CIT(A) that Mrs. Meenaben P. Shah was a housewife and a relative of the assessee and was very insistent that the loan be repaid to her. However, neither before the ld. CIT(A) nor before us the ld. AR substantiated with any evidence his said assertion that Mrs. Meenaben P. Shah insisted on repayment in cash. Accordingly, the ld. CIT(A) while distinguishing the decisions relied upon on behalf of the assessee ,upheld the levy of penalty ,especially when there was nothing to suggest that transactions were between two sister entities and there was no other reasonable cause for the assessee to make repayment of loan in cash. Thus, reliance by the ld. AR on the aforesaid decision in Sunil Kumar Goel(supra) is also misplaced. The ld. CIT(A),inter alia, relied upon decision in Madanlal Mahaveer Prasad v/s. Income-tax Appellate Tribunal & Others, 296 ITR 377,wherein the Hon'ble Rajasthan High Court held that when there was violation of section 269T and no reasonable cause was shown by the assessee, the penalty u/s.271E was leviable. The ld. AR appearing before us did not even attempt to distinguish the said decision relied upon by the ld. CIT(A) and merely reiterated their submissions before the ld. CIT(A). In these circumstances, especially when there is no material before us so as to enable us to take a different view in the matter, we are not inclined to interfere with the findings of the ld. CIT(A). Simply because the amount of loan of Rs. 1,00,000 has been re-paid in cash in sums not exceeding Rs. 20,000/- each , would not absolve the assessee from rigour of section 269T of the Act as is clear from the aforesaid provisions itself. As already stated, the transaction was a repayment of loan, was not at all in dispute. The plea on behalf of the assessee that he was compelled to make the payment in cash, otherwise then by account payee 7 ITA no.3173/Ahd/2010 cheques and drafts, has neither been substantiated before the lower authorities nor any such material and evidence in support of this plea has been placed before us. No confirmation from Mrs. Meraben P Shah has been filed to the effect that she insisted upon the assessee to make the payment in cash or the said party was in urgent need of money and as such could not wait for clearance of the cheques. The assessee also did not produce an iota of evidence about any financial difficulty being faced by Mrs. Meraben P Shah or that she was in urgent need of money .A mere verbal submission without any substantive evidence to back it cannot be considered sufficient to prove the assessee's case that the money was urgently required by Mrs. Meraben P Shah . In these circumstances, we are, therefore, of the considered opinion that the assessee has not been able to establish that the assessee was prevented by sufficient and reasonable cause for not complying the provisions of section 269T of the Act.. Therefore, considering the totality of the facts and circumstances, we have no hesitation in upholding the order of ld. CIT(A), confirming the penalty amounting to Rs.1,00,000/- levied by the Addl. CIT under section 271E of the Act. Accordingly, ground nos.1 &2 in the appeal are dismissed.
6. No additional ground having been raised before us in terms of residuary ground no.3 in the appeal, accordingly, this ground is dismissed.
7. In the result, appeal is dismissed.
Order pronounced in the court today on 5 -08-2011
Sd/- Sd/-
(BHAVNESH S AINI) (A N P AHUJ A)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 5 -08-2011
Copy of the order forwarded to:
1. Shri Dilipkumar Panachand Shah, Prop. Darshan Cotton, 61, Sahakarnagar Society, Botad 8 ITA no.3173/Ahd/2010
2. Addl. Commissioner of Income-tax, Bhavnagar Range-2, Bhavnagar
3. CIT concerned
4. CIT(A)-XX, Ahmedabad
5. DR, ITAT, Ahmedabad Bench-A, Ahmedabad
6. Guard File BY ORDER Deputy Registrar Assistant Registrar ITAT, AHMEDABAD