Janardhanam Balaji v. The Additional Commissioner Of Income Tax,Kancheepuram Range,Kancheepuram

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.08.2017 CORAM : The Hon'ble Ms.INDIRA BANERJEE, CHIEF JUSTICEAND The Hon'ble Mr.JUSTICE M.SUNDAR Tax Case Appeal Nos.413 and 414 of 2017 andC.M.P.No.10330 of 2017 inT.C.A.No.414 of 2017 Janardhanam Balaji Vs. .. Appellant in both appeals/Appellant The Additional Commissioner of Income Tax,Kancheepuram Range,Kancheepuram. .. Respondent in both appeals/Respondent Tax Case Appeals are preferred under Section 260A of theIncome Tax Act, 1961 against the order of the Income TaxAppellate Tribunal, 'D' Bench, Chennai dated 7[th] April, 2017 inITA Nos.3011/MDS/2016 and 3077/MDS/2016 respectively against theOrder of the Commissioner of Income Tax (Appeals)-7, Chennaidated (1) 29.09.2016 and made in I.T.A.No.105/CIT(A)-7/2015-16and (2) 18.10.2016 and made in I.T.A.No.104/CIT(A)-7/2015-16respectively against the Order of the Additional Commissioner ofIncome Tax, Kancheepuram Range, Kancheepuram, dated 29.02.2016and made in PAN No. /2012-13 against the Order of theIncome Tax Officer, Ward-2(I/C), Tiruvallur, Kancheepuram, dated13.03.2015 and madein PAN No. for the assessment year2012-13. For Appellant in both Appeals : Mr.G.Baskar For Respondentin both Appeals: Mr.Karthick Ranganathan (Judgment of the Court was made by The Hon'ble Chief Justice) Both these appeals are against a judgment and order dated7[th] April 2017 passed by the Income Tax Appellate Tribunal,rejecting the appeals being I.T.A.Nos.3011 and 3077/Mds/2016filed by the appellant assessee against orders dated 29[th]September 2016 and 18[th] October 2016 of the learned Commissionerof Income Tax (Appeals)-7, Chennai confirming levy of penaltyunder Sections 271E and 271D of the Income Tax Act, 1961(hereinafter referred to as 'IT Act') on the appellant assessee,in respect of the assessment year 2012-2013. 2The appellant Assessee was running a petrol pump andhad filed return of income disclosing income of Rs.5,53,851.00.In course of assessment proceedings, the learned AssessingOfficer noted that the Assessee had been maintaining a book,namely, Sundry Debtors ledger, which reflected cash payments andcash receipts from various parties. When the assessment wascompleted, certain disallowances were made in respect ofinterest payment under Section 40(a)(ia) of the IT Act, businesspromotion expenses of Rs.80,153.00 and claim under Chapter VIAfor Rs.1,04,864.00. 3After assessment, the Assessment Officer directed thatpenalty proceedings under Section 271(1)(c) of the IT Act beinitiated separately. Notice under Section 274 of the IT Act wasissued to the Assessee on 31[st] August, 2015. Penalty was levied,as it was found that there had been violation of Sections 269SSand 269T of the IT Act by reason of receipt of cash loan andrepayment of loan in cash during the same assessment year.Penalty of Rs.14,40,000.00 was imposed in respect of loanreceived in cash under Section 271D of the IT Act and furtherpenalty of Rs.14,40,000.00 was imposed under Section 271E of theIT Act in respect of the loan amount repaid in cash. 4The Assessee appealed against the orders of theAdditional Commissioner of Income Tax imposing penalty. Theappeals were, however, rejected by the Commissioner of IncomeTax (Appeals) by two separate orders dated 29[th] September 2016and 18[th] October 2016 in ITA No.105/CIT(A)-7/2015-16 and ITANo.104/CIT(A)-7/2015-16 respectively. Paragraph No.6 of theorder of the Commissioner of Income Tax (Appeals) in ITANo.105/CIT(A)-7/2015-16, which contains a summary of reasons forthe decision in the two appeals, is set out herein below :“6.Penalty under Section 271D of the Act isimposed for violation of the provisions of Section269SS of the Act. Section 269SS of the Act provides https://hcservices.ecourts.gov.in/hcservices/ 4The Assessee appealed against the orders of theAdditional Commissioner of Income Tax imposing penalty. Theappeals were, however, rejected by the Commissioner of IncomeTax (Appeals) by two separate orders dated 29[th] September 2016and 18[th] October 2016 in ITA No.105/CIT(A)-7/2015-16 and ITANo.104/CIT(A)-7/2015-16 respectively. Paragraph No.6 of theorder of the Commissioner of Income Tax (Appeals) in ITANo.105/CIT(A)-7/2015-16, which contains a summary of reasons forthe decision in the two appeals, is set out herein below :“6.Penalty under Section 271D of the Act isimposed for violation of the provisions of Section269SS of the Act. Section 269SS of the Act provides https://hcservices.ecourts.gov.in/hcservices/ that any loan or deposit shall not be taken oraccepted from any other person otherwise than by anaccount payee cheque or account payee bank draftif, (a) the amount of such loan or deposit or theaggregate amount of such loan and deposit; or(b) on the date of taking or accepting such loan ordeposit, any loan or deposit taken or acceptedearlier by such person from the depositor isremaining unpaid and the amount or the aggregateamount remaining unpaid; or (c) the amount or the aggregate amount referred toin clause (a) together with the amount or theaggregate amount referred to in clause (b), istwenty thousand rupees or more :Thus it is clear that no person can accept any loanor deposit of Rs.20,000/- or more otherwise than byway of an account payee cheque or an account payeedraft. The limit of Rs.20,000/- will also apply toa case even if on the date of taking or acceptingsuch loan or deposit, any loan or deposit taken oraccepted earlier by such person from such depositoris remaining unpaid and such unpaid amount alongwith the loan or deposit to be accepted, exceedsthe aforesaid limit. Similarly, penalty underSection 271E of the Act is imposed for violation ofthe provisions of Section 269T of the Act. Section269T of the Act provides that any branch of abanking company or a cooperative society, firm orother person shall not repay any loan or deposit.Otherwise than by an account payee cheque oraccount payee bank draft drawn in the name of theperson, who has made the loan or deposit, if (1) The amount of the loan or deposit together withinterest is Rs.20,000/- or more, or (2) The aggregate amount of loans or deposits heldby such person, either in his own name or jointlywith other person on the date of such repaymenttogether with interest, is Rs.20,000/- or more.The contention of the Authorized Representativethat the each of the transaction and repayment wasbelow Rs.20,000/- and hence do not attract themischief of the provisions of Section 269SS andSection 269T respectively is not a validproposition. The Act mentions not just the 'amountof such loan or deposit', but also the 'aggregateamount of such loan or deposit'. Hence, in myconsidered view the provisions of Section 269SS andSection 269T of the Act clearly get attracted atthe threshold level.” 5Learned Commissioner of Income Tax (Appeals) arrived atthe factual finding that provisions of Sections 269SS and 269Twere clearly attracted as the contention of the representativeof the Assessee that each of the transaction and repayment werebelow Rs.20,000.00 was unsubstantiated. The Assessee appealedbefore the Tribunal and the appeals have also been dismissedholding that violation of Sections 269SS and 269T of the IT Actattract penalty. The imposition of penalty has been upheld. Thefindings are factual. 6Section 260A(1) of the IT Act provides as follows :“260A.(1)An appeal shall lie to the HighCourt from every order passed in appeal by theAppellate Tribunal [before the date ofestablishment of the National Tax Tribunal], ifthe High Court is satisfied that the case involvesa substantial question of law.” 6Section 260A(1) of the IT Act provides as follows :“260A.(1)An appeal shall lie to the HighCourt from every order passed in appeal by theAppellate Tribunal [before the date ofestablishment of the National Tax Tribunal], ifthe High Court is satisfied that the case involvesa substantial question of law.” 7An appeal lies under Section 260-A of the IT Act, onlywhen there is a substantial question of law. We find that thereis no question of law involved in this appeal much less anysubstantial question of law. 8In Sir Chunilal V. Mehta & Sons Ltd. vs Century Spg. &Mfg. Co. Ltd. reported in AIR 1962 SC 1314, the Supreme Courtagreed with and approved a Full Bench Judgment of this Court inRimmalapudi Subba Rao vs Noony Veeraju And Ors reported in AIR1951 Mad 969 and laid down the principles for deciding when aquestion of law becomes a substantial question of law. 9In Hero Vinoth Vs. Seshammal reported in (2006) 5 SCC545, the Supreme Court followed Sir Chunilal V. Mehta & Sons(supra) and other judgments and summarized the tests to find outwhether a given set of questions of law were mere questions oflaw or substantial questions of law. 10The relevant paragraphs of the judgment of the SupremeCourt in Hero Vinoth (supra) are set out herein below : “21. The phrase “substantial question of law”,as occurring in the amended Section 100 CPC isnot defined in the Code. The word substantial,as qualifying “question of law”, means—of havingsubstance, essential, real, of sound worth,important or considerable. It is to beunderstood as something in contradistinctionwith—technical, of no substance or consequence,or academic merely. However, it is clear thatthe legislature has chosen not to qualify thescope of “substantial question of law” by https://hcservices.ecourts.gov.in/hcservices/ suffixing the words “of general importance” ashas been done in many other provisions such asSection 109 of the Code or Article 133(1)(a) ofthe Constitution. The substantial question oflaw on which a second appeal shall be heard neednot necessarily be a substantial question of lawof general importance. In Guran Ditta v. RamDitta [(1927-28) 55 IA 235 : AIR 1928 PC 172]the phrase “substantial question of law” as itwas employed in the last clause of the thenexisting Section 100 CPC (since omitted by theAmendment Act, 1973) came up for considerationand their Lordships held that it did not mean asubstantial question of general importance but asubstantial question of law which was involvedin the case. In Sir Chunilal case [1962 Supp (3)SCR 549 : AIR 1962 SC 1314] the ConstitutionBench expressed agreement with the followingview taken by a Full Bench of the Madras HighCourt in Rimmalapudi Subba Rao v. Noony Veeraju[AIR 1951 Mad 969 : (1951) 2 MLJ 222 (FB)] :(Sir Chunilal case [1962 Supp (3) SCR 549 : AIR1962 SC 1314] , SCR p. 557) “When a question of law is fairlyarguable, where there is room fordifference of opinion on it or where theCourt thought it necessary to deal withthat question at some length and discussalternative views, then the question wouldbe a substantial question of law. On theother hand if the question was practicallycovered by the decision of the highestcourt or if the general principles to beapplied in determining the question arewell settled and the only question was ofapplyingthoseprinciplestotheparticular fact of the case it would notbe a substantial question of law.” This Court laid down the following test asproper test, for determining whether a questionof law raised in the case is substantial: (SirChunilal case [1962 Supp (3) SCR 549 : AIR 1962SC 1314] , SCR pp. 557-58) “The proper test for determining whether aquestion of law raised in the case issubstantial would, in our opinion, bewhether it is of general public importanceor whether it directly and substantiallyaffects the rights of the parties and if so https://hcservices.ecourts.gov.in/hcservices/ This Court laid down the following test asproper test, for determining whether a questionof law raised in the case is substantial: (SirChunilal case [1962 Supp (3) SCR 549 : AIR 1962SC 1314] , SCR pp. 557-58) “The proper test for determining whether aquestion of law raised in the case issubstantial would, in our opinion, bewhether it is of general public importanceor whether it directly and substantiallyaffects the rights of the parties and if so https://hcservices.ecourts.gov.in/hcservices/ whether it is either an open question inthe sense that it is not finally settled bythis Court or by the Privy Council or bythe Federal Court or is not free fromdifficulty or calls for discussion ofalternative views. If the question issettled by the highest court or the generalprinciples to be applied in determining thequestion are well settled and there is amere question of applying those principlesor that the plea raised is palpably absurdthe question would not be a substantialquestion of law.” 22. In Dy. Commr. v. Rama Krishna Narain [1954SCR 506 : AIR 1953 SC 521] also it was held thata question of law of importance to the partieswas a substantial question of law entitling theappellant to a certificate under (the then)Section 100 CPC. 23. To be “substantial” a question of law mustbe debatable, not previously settled by law ofthe land or a binding precedent, and must have amaterial bearing on the decision of the case, ifanswered either way, insofar as the rights ofthe parties before it are concerned. To be aquestion of law “involving in the case” theremust be first a foundation for it laid in thepleadings and the question should emerge fromthe sustainable findings of fact arrived at bycourt of facts and it must be necessary todecide that question of law for a just andproper decision of the case. An entirely newpoint raised for the first time before the HighCourt is not a question involved in the caseunless it goes to the root of the matter. Itwill, therefore, depend on the facts andcircumstance of each case whether a question oflaw is a substantial one and involved in thecase or not, the paramount overall considerationbeing the need for striking a judicious balancebetween the indispensable obligation to dojustice at all stages and impelling necessity ofavoiding prolongation in the life of any lis.(See Santosh Hazari v. Purushottam Tiwari[(2001) 3 SCC 179] .) 24.The principles relating to Section 100 CPCrelevant for this case may be summarised thus :(i) An inference of fact from the recitals orcontents of a document is a question of fact.But the legal effect of the terms of a documentis a question of law. Construction of a documentinvolving the application of any principle oflaw, is also a question of law. Therefore, whenthere is misconstruction of a document or wrongapplication of a principle of law in construinga document, it gives rise to a question of law.(ii) The High Court should be satisfied that thecase involves a substantial question of law, andnot a mere question of law. A question of lawhaving a material bearing on the decision of thecase (that is, a question, answer to whichaffects the rights of parties to the suit) willbe a substantial question of law, if it is notcovered by any specific provisions of law orsettled legal principle emerging from bindingprecedents, and, involves a debatable legalissue. A substantial question of law will alsoarise in a contrary situation, where the legalposition is clear, either on account of expressprovisions of law or binding precedents, but thecourt below has decided the matter, eitherignoring or acting contrary to such legalprinciple. In the second type of cases, thesubstantial question of law arises not becausethe law is still debatable, but because thedecision rendered on a material question,violates the settled position of law .(iii) The general rule is that High Court willnot interfere with the concurrent findings ofthe courts below. But it is not an absoluterule. Some of the well-recognised exceptions arewhere (i) the courts below have ignored materialevidence or acted on no evidence; (ii) thecourts have drawn wrong inferences from provedfacts by applying the law erroneously; or (iii)the courts have wrongly cast the burden ofproof. When we refer to “decision based on noevidence”, it not only refers to cases wherethere is a total dearth of evidence, but alsorefers to any case, where the evidence, taken asa whole, is not reasonably capable of supportingthe finding.” 11In M.Janardhana Rao Vs. Joint Commissioner of IncomeTax [2005 273 ITR 50 (SC)], the Hon'ble Supreme Court held thatthe principles contemplated under Section 100 of the Code ofCivil Procedure would apply to Section 260-A of the IT Act too. 12 Right of appeal is not automatic. Right of appeal isconferred by statute. When statute confers a limited right ofappeal only in a case which involves substantial questions oflaw, it is not open to this Court to sit in appeal over thefactual findings arrived at by the Assessing Officer, AppellateCommissioner and the Appellate Tribunal. Hence, both theseappeals cannot be entertained. 13Both Tax Case Appeals are dismissed. No costs.Consequently, connected miscellaneous petition is closed. Sd/- Asst.Registrar (CCC) /true copy/Sub Asst. Registrar vvkTo 1.The Assistant RegistrarIncome Tax Appellate Tribunal,'D' Bench, Chennai.Income Tax Appellate Tribunal,'D' Bench, Chennai. 2.The Commissioner of Income Tax (Appeals)-7,Room No.221, 121 M.G.Road,Nungambakkam, Chennai-600 034.Room No.221, 121 M.G.Road,Nungambakkam, Chennai-600 034. 3.The Additional Commissioner of Income Tax, Kancheepuram Range, No.96, M.M.Avenue, Kancheepuram-631 501. Kancheepuram Range, No.96, M.M.Avenue, Kancheepuram-631 501. 4.The Income Tax Officer,Ward-2, Tiruvallur,No.96, M.M.Avenue, Kancheepuram-631 501Ward-2, Tiruvallur,No.96, M.M.Avenue, Kancheepuram-631 501 5.The Secretary,Central Board of Direct Taxes,New Delhi.Central Board of Direct Taxes,New Delhi. +1cc to Mr.G.Baskar, Advocate Sr. 55359 +2cc to Mr.Karthick Ranganathan, Advocate Sr. 55395 & 55396 T.C.A.Nos.413 and 414 of 2017 GR(CO)VR(11/09/2017)