In this appeal preferred by the Revenue, the dispute is regarding penalty under section 271-D of the Income Tax Act, 1961 (hereinafter referred as the “Act”) imposed for contravening the provisions of section 269-SS of the Act.
The appeal was admitted on the following substantial questions of law :–
“Whether the Income Tax Appellate Tribunal was justified in law in deleting the penalty under section 273-D of the Income Tax Act, 1961 amounting to Rs. 46,00,000 which was levied on account of violation of section 269-SS of the Income Tax Act, 1961 on the technical ground without going to the spirit of provisions of section 269-SS of the Income Tax Act, 1961.”
In an attempt to answer the above question, it is appropriate to narrate some brief facts giving rise to this appeal.
The respondent- assessee is a registered firm with four partners dealing in purchase and sale of sugar on commission basis. It has four sister concerns that are assessed to tax separately.
In the assessment year 1994-95, the assessing officer noted that the books of the respondent- assessee contains certain credit and debit entries to the tune of Rs. 46 lakh and Rs. 55 lakh respectively. Thus, the assessing officer felt that the respondent- assessee had received loans or deposits to the extent of Rs. 46 lakh through non-banking channel in contravention of section 269-SS of the Act. Accordingly, he levied penalty of the equal amount under section 271-D of the Act. This penalty amount has been deleted by the Commissioner (Appeals). The ITAT maintained the order of the Commissioner (Appeals) holding that the provisions of section 269-SS of the Act is to unearth unaccounted money and is not applicable if the transactions are transparent and inter se the sister concerns.
It is aggrieved by the deletion of the above penalty imposed under section 271-D of the Act that the Revenue has preferred this appeal.
Sri Piyush Agarwal, learned counsel for the Revenue, has argued that as the books of the respondent- assessee shows entries of deposits of Rs. 46 lakh in the absence of any evidence or finding that the said amount was received through banking channel, there is a clear breach of section 269-SS of the Act making the respondent- assessee liable to penalty under section 271-D of the Act.
On the other hand, Sri Ashish Bansal has argued that the amount shown to have been received by the respondent- assessee was not received in cash but through transfer from banking media and since the aforesaid entries arise out of normal day-to-day business transactions, they were not in the nature of loan or deposit so as to attract the provisions of section 269-SS of the Act.
Section 269-SS of the Act at the relevant time was as under :–
‘‘269SS. Mode of taking or accepting certain loans, deposits.–No person shall after the 30-6-1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,–
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more :–
The aforesaid provision prohibits receipt of any amount of Rs. 20,000 or above otherwise than by way of account payee cheque /account payee draft or through use of electronic clearing system through a bank account of any loan or deposit after 30-6-1984.
In other words, after 30-6-1984 all persons are supposed to receive loan or deposit of Rs. 20,000 or more only through the banking channel as stipulated above and in no other manner subject to the exception carved out under the two provisos to section 269-SS of the Act.
In the present case, we are not concerned with the exception as the respondent- assessee does not fall in any of the exceptional clause.
Section 271-D provides for the penalty for failure the comply with the section 269-SS of the Act. It lays down that if any person takes or accepts any loan or deposit in contravention of provisions of section 269-SS of the Act, he shall be liable to pay penalty equal to the amount of the loan or deposit so taken or accepted.
A plain reading of the section 271-D establishes that it is a mandatory provision and a person contravening section 269-SS of the Act in any manner cannot escape from the payment of penalty equivalent to the amount so received as loan or deposit by him.
It is well settled principle of interpretation that the taxing statutes have to be construed strictly and that when the language is clear and unambiguous, it has to be construed in the literal sense bereft of any equitable or social reasons or any hardship likely to be suffered.
It is also well recognized that where there is any violation of any provision and a penalty is provided, the fact that the transaction is bona fide, genuine or is doubtful or any other of the like things are not at all germane for the imposition of the penalty.
In view of what has been said above, for the purposes of imposing penalty under section 271-D of the Act, there has to be breach of section 269-SS of the Act. The breach would occur only if Rs. 20,000 or more of loan or deposit is received after 30-6-1984 by the respondent- assessee through non-banking channel.
The order of the assessing officer records that it is a fact that the assessee had accepted deposits, otherwise than by account payee cheque /draft, though the same may be transactions with the sister concerns. The assessee could not have received the deposits under consideration otherwise than by way of account payee cheque /draft etc.
The aforesaid finding of the assessing officer reads as under:-
“It is a fact that the assessee has accepted deposits, which are otherwise than by account payee cheque /draft.”
The Commissioner (Appeals) in its order does not record any finding to the contrary and as such, the aforesaid finding of the assessing officer that it is fact that the assessee had accepted deposits, which are otherwise than by account payee cheque /draft stands undisturbed. The ITAT has also not touched the above finding in any manner.
In view of the aforesaid facts and circumstances, the finding as recorded by the assessing officer that the respondent-assessee received deposits otherwise than by cheque or draft stand confirmed.
Once the aforesaid finding remains undisturbed, a clear breach of section 269-SS of the Act occur inasmuch as the aforesaid receipt of deposit is after 30-6-1984 and is not in the manner provided under the aforesaid provision.
The contention that the said entries are not in the nature of the loan or deposit on the face of it are not acceptable for the reason that once any amount has been received by the respondent- assessee and the same is shown to have been received in its books of accounts, it partakes the nature of the deposit.
Accordingly, the panel provision of section 271-D gets attracted, leaving no scope for the respondent- assessee to escape from the liability of the penalty.
Sri Ashish Bansal has placed reliance upon an unreported judgment of the Division Bench of this Court dated 11-12-2013 passed in Income Tax Appeal No. 242 of 2005, The CIT v. M/S Saurabh Enterprises.
In the said case, the assessing officer for violation of section 269-SS /269-T of the Act had levied penalties under section 271-D and 271-E of the Act, which were knocked down by the Commissioner (Appeals) and affirmed by the Tribunal.
On the basis of the report obtained from the assessing officer that the transaction, in question, involved no cash, the Court held that the transaction was not a cash transaction and merely on the basis of book entries, no inference of violation of section 269-SS /269-T of the Act can be drawn and thus, the appeal of the Department was dismissed.
The aforesaid decision is of no avail to the respondent-assessee inasmuch as the Court therein has only considered that the transaction is not of cash on the basis of the report of the assessing officer, whereas in the present case, there is no such report and the finding of the assessing officer that the assessee has accepted deposit otherwise than by account payee cheque/draft remains undisturbed, meaning thereby that the entries of deposit appearing in the books of the respondent- assessee were not by way of any banking transaction.
Sri Bansal has relied upon another decision of the Division Bench of this Court dated 19-1-2017 rendered in the case of assessee itself i.e. Income Tax Appeal No. 379 of 2012, The CIT-I, Kanpur v. M/S Sunil Sugar Company, Kanpur.
The said appeal was in respect of the penalty imposed under section 271-E of the Act for violating section 269-T of the Act. The appeal of the Revenue against the deletion of the penalty was dismissed as the Tribunal recorded a clear finding of fact that the transactions of deposits were only through bank accounts. This is not the position in the case at hand. Therefore, the aforesaid decision is also of no assistance to the respondent- assessee.
The decision of the DehLi High Court in the case of CIT v. Noida Toll Bridge Company Limited, 262 ITR 260 to the effect that the transfer entries in the books of account by crediting or debiting the accounts of the parties will not amount to the taking or accepting loans or deposits is also of no help to the respondent- assessee as the assessing officer has recorded a clear finding of fact of acceptance of deposit and there is no evidence on record to prove that the entries of receipt of Rs. 46 lakh appearing in the account books of the respondent- assessee, involved no money or was through the medium of bank. Moreover, in the said case, the Tribunal had recorded that the transaction was by way of an account payee cheque and there was no payment in cash.
Since the language of the provision is crystal clear, the object or the purpose of the enactment of said provision has no say in the matter.
In view of the aforesaid facts and circumstances, the breach of section 269-SS of the Act is apparent making the respondent- assessee liable for penalty under section 271-D of the Act.
The respondent- assessee had not made out a case to prove that it had a reasonable cause which had occasioned the above breach to get any advantage under section 273-B of the Act.
Therefore, the ITAT and Commissioner (Appeals) both have committed mistake of law in deleting the penalty imposed under section 271-D upon the respondent- assessee.
Consequently, the two orders dated 11-10-2014 passed by ITAT and 27-9-1996 passed by Dy. CIT are set aside.
Accordingly, the question framed above is answered in favour of the Revenue and it is held that the ITAT was not justified in deleting the penalty under section 271-D of the Act, which was levied for violation of section 269-SS of the Act.
The appeal stands allowed.