• May
  • 30
  • 2012

Penalty Us/ 271D applies only when Assessee accepts cash Loan Exceeding Rs. 20,000/- from a person

Facts are exactly identical what was before the Hon’ble Bombay High Court (supra) and in each of case cash loan is not exceeding Rs. 20,000/- rather it is exactly Rs. 20,000/-. Since there is a circular and which is a beneficial circular under section 269SS of the Act and Hon’ble Bombay High Court has interpreted circular no. 572 dated 3rd August 1990 (supra) wherein vide para 3 relevant portion of clause 43 is as under:

“43. Secs. 271C, 271D and 271E, which were inserted in the I T Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provided for the levy of penalties for certain defaults. Penalty under s. 271C was levied for failure to deduct tax at source. Penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft. Penalty under s. 271E may be levied for failure to comply with the provisions of s. 269T relating to repayment by a company, including a banking company, a co-operative society or a firm, of deposits, including interest, exceeding Rs. 20,000/- the aggregate otherwise than by an account payee cheque or bank draft.”

As the issue is squarely covered by the decision of Hon’ble Bombay High Court, cited supra and Board circular no. 572 dated 03.08.1990, we delete the penalty so levied by Addl. CIT and upheld by CIT(A).

IN THE ITAT  KOLKATA BENCH ‘A’

Gopal Sarkar

v.

Additional Commissioner of Income-tax, Range-49, Kolkata

IT Appeal No. 131 (Kol.) of 2012

[assessment year 2002-03]

MAY 7, 2012

ORDER

Mahavir Singh, Judicial Member - This appeal by assessee is arising out of order of CIT(A)-XXXVI, Kolkata in Appeal No. 718/CIT(A)-XXXVI/Kol/Wd.-1,Nadia/09-10 dated 02.09.2011. Assessment was framed by ITO, Ward-49(3), Kolkata u/s. 143(3)/254 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2002-03 vide his order dated 28.12.2007. Penalty in dispute was imposed by Addl. CIT, Range-49, Kolkata u/s. 271D of the Act vide his order dated 19.09.2008.

2. This appeal by assessee is barred by limitation by 298 days and assessee has filed condonation petition along with medical certificate stating the reason that assessee is chronically ill as he was having high diabetes and hypertension. He was advised complete rest during the above stated period of 298 days. Even otherwise on merits the assessee has a clear case where penalty u/s. 271D of the Act was levied in spite of circular in favour of assessee. As the assessee has a very strong case and the substantial justice will lose its shine in technical delay. Hence, we are of the view that delay of this appeal be condoned and appeal be admitted. Hence, we admit the appeal and adjudicate the same.

3. The only issue in this appeal of assessee is against the order of CIT(A) confirming the penalty imposed by Addl. CIT, Range-49 u/s. 271D of the Act in contravention to provisions of section 269SS of the Act. Briefly stated facts of the case are that Assessing Officer observed during the assessment proceeding that the assessee had accepted loans totaling to Rs. 1,20,000/- in cash from six persons for an amount of Rs. 20,000/- each. Before him, assessee’s claim was that the loan creditors were not assessed to tax and that they did not have any bank account and since the assessee wanted to purchase a car he took loans in cash from six persons. While imposing penalty the Addl. CIT held that the assessee did not deny receiving loans in cash in contravention of the provisions of section 269SS of the Act. Hence, he imposed the penalty u/s. 271D of the Act. Aggrieved, assessee preferred appeal before CIT(A), who upheld the action of Addl. CIT. Being further aggrieved, assessee is now in appeal before us.

4. We have heard rival submissions and gone through facts and circumstances of the case. Before us Ld. Counsel for the assessee admitted the fact that the assessee had received a sum of Rs. 20,000/- from each of six creditors totaling to Rs. 1,20,000/- in cash. The reasonable cause for receipt of this cash loan was that the assessee was to purchase a car and he has received cash loan from relatives, who are neither income tax assessee nor having any bank account. Hence, he has no other alternative except to receive loans in cash for an amount of Rs. 20,000/-from each of them. These facts are undisputed but before us Ld. Counsel for the assessee relied on CBDT Circular No.572 dated 03.08.1990 reported in (1999) 87 CTR (St.) 1, and stated that this circular has clearly brought out the provision of section 269SS explaining that “for taking or accepting any loan or deposit in excess of Rs. 20,000/-” Ld. Counsel for the assessee stated that the word in excess of amounts exceeding Rs. 20,000/-. He also relied on the decision of Hon’ble Bombay High Court in the case of CIT v. Madhukar B. Pawar [2008] 218 CTR 59, wherein Hon’ble Bombay High Court vide para 4 considered the issue as under:

“4. It is now well settled that circulars issued by CBDT are statutory character and are binding on the Departmental authorities. The authorities including AO and other consequently would be bound by that circular. In the instant case, CBDT for the purpose of attracting s. 271D has set out that the loan or deposit should be in excess of Rs. 20000/- is true that what CBDT has stated may be contrary to the expressed language of s. 269SS which uses the expression “twenty thousand rupees or more”. The law and the CBDT circulars can be spelled out from the following judgments of the Supreme Court. In Navnit Lal. C. Javeri v. K.K. Sen. AAC [1965] 56 ITR 198 (SC), a Constitution Bench of the Supreme Court observed “It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under s. 5(8) of the Act.” Navnit Lal (supra) was followed in Ellerman Lines Ltd. v. CIT 1972 CTR (SC) 71 : [1971] 82 ITR 913 (SC). In UCO Bank v. CIT [1999] 154 CTR (SC) 88: [1999] 237 1TR 889 (SC), the law was restated and it was held that circular of CBDT are legally binding on the Revenue and this binding character attaches to the circulars even if they be found not in accordance with the correct interpretation of the section and they depart or deviate from such construction, when they are issued in exercise of the statutory powers under s. 119. It was however clarified that the Board cannot pre-empt a judicial interpretation of the scope and ambit of the provision and further could not impose a burden on the taxpayer higher than what the Act itself, on a true interpretation, envisages. It was observed that the Board has the statutory power under s. 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute. In CST v. Indra Industries [2001] 168 CTR (SC) 50: [2001] 248 ITR 338 (SC), the Court further observed that the taxing authority cannot be heard to advance an argument that it is contrary to that interpretation.”

5. Considering above, we find that the facts are exactly identical what was before the Hon’ble Bombay High Court (supra) and in each of case cash loan is not exceeding Rs. 20,000/- rather it is exactly Rs. 20,000/-. Since there is a circular and which is a beneficial circular under section 269SS of the Act and Hon’ble Bombay High Court has interpreted circular no. 572 dated 3rd August 1990 (supra) wherein vide para 3 relevant portion of clause 43 is as under:

“43. Secs. 271C, 271D and 271E, which were inserted in the I T Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provided for the levy of penalties for certain defaults. Penalty under s. 271C was levied for failure to deduct tax at source. Penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft. Penalty under s. 271E may be levied for failure to comply with the provisions of s. 269T relating to repayment by a company, including a banking company, a co-operative society or a firm, of deposits, including interest, exceeding Rs. 10,000/- the aggregate otherwise than by an account payee cheque or bank draft.”

As the issue is squarely covered by the decision of Hon’ble Bombay High Court, cited supra and Board circular no. 572 dated 03.08.1990, we delete the penalty so levied by Addl. CIT and upheld by CIT(A).

5. In the result, assessee’s appeal is allowed.


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