HIGH COURT OF DELHI
Commissioner of Income-tax
Versus
Sahara India Mutual Benefit Co. Ltd.
IT Appeal Nos. 846,848,to 851 & 876 of 2011†
September 20, 2012
ORDER
R.V. Easwar, J.
The Revenue has filed these six appeals, two for the assessment year 1993-94 and one each for the assessment years 1992-93, 1996-97, 1999-2000 and 2000-2001. The appeals are directed against the common order of the Income Tax Appellate Tribunal (“Tribunal”) dated 4th November, 2010, upholding the orders of the CIT(A) cancelling the penalties levied on the assessee as follows:-
| ITA Nos. | Assessment years | Penalty under Section 271D | Penalty under Section 271E |
| 846 & 849/2011 | 1993-94 | 98,23,600/- | 33,13,132/- |
| 851/2011 | 1992-93 | 62,10,800/- | — |
| 850/2011 | 1999-2000 | — | 5,16,33,730/- |
| 848/2011 | 1996-97 | 52,65,00,000/- | — |
| 876/2011 | 2000-2001 | — | 8,76,42,197 |
2. The assessee is a public limited company engaged in the business of mobilisation of deposits from its members. It is registered as a mutual benefit company under Section 620A of the Companies Act, 1956. It can accept deposits only from its share holders/members and nobody else.
3. Section 269SS of the Income Tax Act, 1961 (“Act” for short) says that any person who accepts a loan or deposit in excess of Rs. 20,000/-, in cash, from any other person, will be liable to penalty of an equivalent amount under Section 271D of the Act. Repayment of the loans or deposits, in cash in excess of Rs. 20,000/- is also punishable with penalty of an equivalent amount under Section 271E. Section 273B provides that if the assessee is able to show reasonable cause for accepting or repaying the loans/deposits in cash in violation of the provisions of Section 269SS and Section 269T, no penalty is imposable.
4. We may take up the appeals for the assessment year 1993-94 (ITA Nos.846 & 849/2011) as the lead matter. While completing the assessment under Section 144 read with Section 148 and Section 251, the Assessing Officer noticed that the assessee had collected deposits in contravention of the provision of Section 269SS and that had also repaid them in violation of Section 269T. He, therefore, referred the matter to the Additional Commissioner of Income Tax, Central Range, Lucknow who is the competent authority for imposing the penalty. Before him the assessee submitted a list, duly certified by its Chartered Accountant, along with the ledgers containing the details for the acceptance of the deposits to the tune of Rs. 98,23,600/- in cash. Similar details and ledgers were also produced in respect of the default in repayment of the deposits to the extent of Rs. 33,13,132/-. A reply running to about 127 pages was filed before the Additional CIT giving reasons as to why penalty should not be imposed under Sections 271D and 271E. The summary of the reply is as below:-
(a) The assessee, being a mutual benefit company under the Companies Act, can accept the loans or deposits only from its share holders or members who are known and identifiable. The deposits are thus genuine. It amounts to the company taking deposits from itself.
(b) The deposits are mobilized under various saving schemes collected through more than 600 branches of the agents spread across the country. They are located in remote areas where the savings and the contributions to the schemes are small. The field workers motivate the members/share holders to effect savings and deposit them with the assessee. The procedural formalities are more or less the same as in the case of opening an account in the banks.
(c) In several cases, the agents of the assessee had faced difficulties in opening bank accounts since banks refused to accommodate the agents who were seen as competitors affecting the business of the banks. The agents could not, therefore, open bank accounts for collection and repayment of the deposits.
(d) The branches were situated in rural areas with inadequate banking facilities and it was difficult for the share holders/members residing in these areas to open bank accounts due to logistics and other problems. There was little exposure to the banking habit.
(e) The agents of the assessee were not in a position to refuse to accept legal tender.
(f) The percentage of deposits received/repaid in cash, in violation of Section 269SS and 269T, out the total deposits/repayments, is as follows :
