Income Tax Appellate Tribunal - Pune
Mohol Nagari Sahakari Pat Purvatha ... vs Department Of Income Tax on 14 March, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri R.K.Panda, Accountant Member.
ITA.No.73/PN/2012
(Asstt. Year : 2007-08)
ACIT, Circle-1,
Solapur. .. Appellant
Vs.
Mohol Nagari Sahakari Pat Purvatha Sanstha Maryadit,
Mohol,
Dist. Solapur. .. Respondent
Assessee by : None
Department by : Ms.Ann Kapthuama
Date of Hearing : 14.03.2013
Date of Pronouncement : 28.03.2013
ORDER
PER SHAILENDRA KUMAR YADAV, JM:
This appeal has been filed by Revenue against the order of the CIT(A) on the following grounds:
1) On the facts and circumstances of the case and in law, the Ld.CIT(A)-III, Pune has erred in deleting the penalty levied U/S.271D of the Income Tax Act, 1961 only on the basis of an affidavit filed by the assessee stating that it has stopped its practice of accepting the deposits in cash in subsequent years.
2) On the facts and circumstances of the case and in law, the Ld.CIT(A)-III, Pune has not offered any opportunity of being heard to the AO.
3) On the facts and in the circumstances of the case, the Ld.CIT(A)-III, Pune ought to have upheld the order of the A.O.
4) It is, therefore, prayed that the order of the CIT(A)-IH, Pune may be set aside and that of the AO may be restored to the above extent.2
2. The only issue in this case is with regard to levy of penalty u/s.271D of the Income Tax Act, by Assessing Officer for alleged contravention of provisions of section 269SS by the assessee. Brief facts of the case are that the assessee is a co-operative credit society engaged in the business of providing credit facilities to its members, advancing loans and accepting deposits etc. The return of income for the assessment year under consideration was filed on 05.10.2007 disclosing income of Rs.75,41,167/- against which deduction u/s.80P was claimed. During the assessment proceedings, it was noticed by the Assessing Officer that the assessee had maintained separate accounts for various deposit schemes on monthly ledger accounts. On perusal of these accounts, it was found that the assessee accepted deposits in cash in excess of Rs.20,000/- in contravention of provisions of section 269SS of the Act. The aggregate of such cash deposits was quantified at Rs.2,14,20,641/-. On a proposal by the Assessing Officer, the Addl.CIT, Solapur, initiated proceedings u/s.271D by issuing statutory notice dated 04.01.2010 requiring the assessee to explain as to why penalty u/s.271D should not be levied for the aforesaid violation of section 269SS of the Act. In response to the same, the assessee submitted that all impugned transactions are genuine in nature and the identity of the depositors was established and, therefore, the same would not attract the provisions of section 269SS of the Act. It was also contended by the assessee that as per the proviso (b) to section 269SS, all the banking companies including co-operative banks are allowed to accept the deposits from their customers or members of any amount by cash. However, the explanation offered by the assessee was not accepted by the concerned Addl.CIT, and he levied penalty of Rs.2,14,20,641/- under the provisions of section 271D for contravention of the provisions of section 269SS of the Act.
3. Matter was carried before the First Appellate Authority, who after taking into consideration the submissions made on behalf of 3 the assessee, deleted the penalty in question. Same has been opposed before us. The Ld. Departmental Representative submitted that the CIT(A) erred in deleting the penalty u/s.271D only on the basis of an affidavit filed by the assessee, inter alia stated that it has stopped its practice of accepting the deposits in cash in subsequent years. Accordingly the order of the CIT(A) be set aside and that of the Assessing Officer be restored. On the other hand, none appeared on behalf of the assessee so matter is being decided on the basis of the arguments of Ld. Departmental Representative and material on record.
4. As per the provisions of section 273B wherein it has been stated that penalty shall not be imposed on the person for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. The words 'reasonable cause' has not been defined under the Act but the same could receive the interpretation which is given to the expression 'sufficient cause'. While dealing with the penalty provisions, the words 'reasonable cause' would mean a cause which is beyond the control of the assessee. The reasonable cause means a cause which prevents a reasonable man or man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fide explanation. The stand of the assessee is that it has been carrying on its activities and business in rural areas and remote localities of backward talukas and the depositors were either farmers or agriculturalists who are illiterate and not assessed to tax. It was also stated that there was no evasion of tax or concealment of income as the entire income of the assessee was exempt from tax u/s.80P of the Act. It was only an innocent and bonafide mistake because of ignorance of law. It was also submitted that deposits were accepted in cash in the course of routine business and transactions are genuine and accounted for in the books of accounts and the assessee was under bonafide belief that such transactions would not attract penalty u/s.271D of the Act. Such bonafide belief arising out of ignorance of law constitutes a 4 reasonable cause within the meaning of section 273B. The first proviso to section 269SS provides that the provisions of this section shall not apply in case of acceptance of any loan or deposit from or by (a) Government (b) any banking company, post office savings bank or cooperative bank (c) any corporation established by a Central, State or Provincial Act (d) any Government company as defined in section 617 of the Companies Act, 1956 (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may for reasons to be recorded in writing notify in this behalf in the official gazette. Thus, under the first proviso to section 269SS, one of the exceptions is that if the loans or deposits are accepted by a cooperative bank, the same would not fall within the ambit of section 269SS. The ITAT Pune Bench, in the case of Vishal Purandar Nagari Sahakari Pat Sanstha Maryadit in ITA No.1290/PN/2008 dated 22.12.2008 had an occasion to examine the applicability of the said exception to the cooperative societies where it was held that the Pat Sansthas rendered services which are somewhat close to the services usually rendered by the cooperative banks in the sense they accept deposits from the members and give loans to the members. These institutions usually work at the level of talukas and moffusil towns. It is also observed that there is no doubt that these are not banks and are not permitted to carry out the banking business but it is also true that there is a fair degree of similarity in the services rendered by these credit cooperative societies and cooperative banks. The Tribunal held that in these circumstances, the bonafides of assessee's belief for being entitled to the same treatment as banking institutions cannot be rejected outright and such belief constitutes reasonable cause u/s.273B. Same view was taken by the ITAT Pune Bench in the case of Chiplun Taluka Nagari Sah. Pat Sanstha Ltd., in ITA No.666, 667, 669 to 671 & 710/PN/2009 for A.Y. 2003-04 dated 30.06.2009 and in case of Dr.Dada Gujara Nagari Sahakari Pat Sanstha Maryadit vs. Addl.CIT, Range-1, Pune, in ITA.No.50/PN/2009 dated 30.09.2009. Nothing contrary was brought to our knowledge. In view of above, 5 the CIT(A) was justified in holding that assessee's belief for being entitled to the same treatment as cooperative banks under proviso to section 269SS could not be rejected outright and such bonafide belief can be viewed as a reasonable cause u/s.273B. Moreso when the assessee deposed by way of affidavit that it has stopped the practise of accepting deposits in cash in subsequent years after the correct position of law was brought to their notice. Accordingly, he was justified in deleting the penalty levied u/s.271D of Rs.2,14,20,641/-. This reasoned, legal and factual finding needs no interference from our side. We uphold the same.
5. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the open court on this the 28th day of March, 2013.
Sd/- Sd/-
( R.K.PANDA ) ( SHAILENDRA KUMAR YADAV )
ACCOUNTANT MEMBER JUDICIAL MEMBER
gsps
Pune, dated the 28th March, 2013
Copy of the order is forwarded to:
1. The Assessee
2. The ACIT, Circle-1, Solapur.
3. The CIT(A)-III, Pune.
4. The CIT-IV, Pune.
5. The DR "A" Bench, Pune.
6. Guard File.
By Order
//TRUE COPY//
Private Secretary,
Income Tax Appellate Tribunal,
Pune.