Tax Case Nos.1431 & 1432 Of 2007 v. Tax Case Filed Under Section 260A Of The Income Tax Act,1961 Against The Order Of The Income Tax Appellate Tribunal, 'D'bench, Chennai, Dated 16.9.2007 Made In

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Nos.1431 & 1432 of 2007 M/s.NRK ThangamaniAppellant/Appellant Vs. The Joint Commissioner of Income TaxRange III, Coimbatore.Respondent/Respondent Tax Case filed under Section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal, 'D'Bench, Chennai, dated 16.9.2007 made in ITA Nos.1551/Mds/2005and 1552/Mds/2005. Against the Order dated 16/3/2005 made in 225/2003-04 onthe file of the Commissioner of Income Tax, Coimbatore (Appeals)I for the Assessment year 2000-01 and against the Order dated22/09/2003 made in Cr.No. 21A/2003-04 on the file of the JointCommissioner of Income Tax, Range III, Coimbatore and againstthe Order dated 06/03/2003 made in N 329/WDIII(1)/CBE on thefile of the Income Tax Officer, Ward III (i), Coimbatore for theAssessment Year 2000-01. For Appellant : Ms.Sree Lakshmi Valli for M/s.Mallika Srinivasan For Respondent : Mr.T.R.Senthilkumar Senior Standing Counsel assisted by Ms.K.G.Usha Rani, Jr.Standing Counsel The Assessee has filed these two Appeals under Section 260-A of the Income Tax Act, aggrieved by the order of the IncomeTax Appellate Tribunal dated 16.9.2007 for the Assessment Year2000-2001 by which the learned Tribunal dismissed the Assessee'sAppeal and upheld the imposition of penalty under Section 271D https://hcservices.ecourts.gov.in/hcservices/ and 271E of the Income Tax Act 1961 for the alleged violation ofSections 269SS and 269T of the Act. 2. The Findings of the learned Tribunal in this regard arequoted below for ready reference:- "10. In the present case the main crux of theargument of the assessee is that the transactionsare genuine and the money was borrowed due tobusiness expediency. The genuineness of thetransaction can not be held as a reasonable causewhich is clear from the memorandum explaining theprovisions in Finance Bill 1984. The words'reasonable cause' have not been defined under theAct but the same could receive the interpretationwhich is given to the expression 'sufficientcause'. While dealing with th penalty provisionsthe words 'reasonable cause' would mean a causewhich is beyond the control of the assessee. The'reasonable cause' means a cause which prevents areasonable man or man of ordinary prudence actingunder normal circumstances, without negligence orinaction or want of bona fide explanation. It ispertinent to note that as to whether there exists areasonable cause or not. In the present case, theassessee has never explained any reasonable causefor violation of the provisions of section 269SS ofthe Act which invokes the provisions of section271D of the Act for levy of penalty. The only pleaof the assessee that transactions are genuine ismade callous in a place where there is bankingfacility. This plea of the assessee is very vagueand not supported by any iota of evidence. Onemore plea of the assessee is that the transactionswere entered on account of business expediency. Inbusiness every business man needs money, much lessneeds urgently. Money is required to meetdifferent commitments, which may be periodical orday to day commitments. A prudent business manshould plan appropriately the funds management tomeet the requirements of various types. Thelegislature had given discretion to the assessingauthority u/s.273B of the Income Tax Act not tolevy penalty as provided under section 271D of theIncome Tax Act. Under Section 273B of the Act, ifthere is a reasonable and sufficient cause, theauthorities shall not levy penalty depending uponthe circumstances of each case. In the presentcase, the assessee is in the business of IMFL andborrowed money for the purpose of bidding the allotment of IMFL shop. The assessee is not new tothis business and it is not a single transactioneither. Every year the assessee is bidding forallotment of IMFL shop and the Government is givingprior notice regarding the date of bidding.Auction is not conducted by the Government all of asudden without giving time for the bidders toarrange for funds for paying the allotment money,if allotted. The claim of the assessee is that thetransactions are genuine and hence does not fallwithin the ambit of Section 269SS. The claim ofthe assessee is not tenable. Section 269SS wasbrought into the Statute to counter the taxevasion. The assessee is unable to provide anymaterial or evidence to show that there existsreasonable cause for accepting the loan in cash.In earlier year also, the assessee borrowed moneyin cash. The department took a very lenient viewand dropped the penalty proceedings. The assesseeshall not take undue advantage of the liberal viewof the Department. When in the earlier yearitself, the Department had initiated and laterdropped the penalty proceedings, the assessee oughtto have been vigilant and should not have committedthe same mistake in the subsequent years.Repetition of the same mistake by the assessee goesto show the callous attitude of the assessee and isdefinitely a deliberate violation of Section 269SSof the Act. ..........19. We have heard both the parties and perused thematerials on record. This issue is on account ofviolation of provisions of Sec.269T and theconsequent levy of penalty under section 271E ofthe Act. The provisions of sections 269T issimilar to that of 269SS. Section 269T reads asunder:.... .....All the discussions and arguments putforth by us inappeal No.ITA 1551/Mds/05 in the foregoingparagraphs holds good for this issue also in thiscase also, the assessee has failed to providereasonable cause for the need to repay the loans incash and hence there is a deliberate violation ofsection 269T of the Act. Accordingly the levy ofpenalty under Section 271E is justified. We upholdthe order of Learned Commissioner of Income-tax(Appeals). Accordingly the appeal of the assesseeis dismissed." 3. Learned counsel for the Assessee Ms.Sree Lakshmi Vallisubmitted that similar penalty proceedings were dropped by theAssessing Authority for the preceding Assessment Year viz.,Assessment Year 1999-2000, vide communication dated 9.11.2005,wherein after considering the facts of the case and ascertainingthe reasonableness which necessitated the acceptance of depositsby cash by the Assessee, the said Additional Commissioner ofIncome Tax found that it was not a fit case for levy of penaltyand therefore, penalty proceedings under Section 271D weredropped and therefore, the learned Tribunal ought not to haveupheld the same penalty for the very next Assessment Year viz.,2000-2001. She further submitted that the Assessee was engagedin the business of Liquor where at the time of bids being givenfor obtaining Liquor Licence at the nick of time, the Assesseehad to deposit the bid amount by way of demand draft and sincethe award of contract in such cases in favour of the Assesseewas uncertain, the Assessee could not keep such demand draftsready and therefore, obtained cash loans from his friends andimmediately utilised the same for drawing of demand draft andprocuring Liquor Contract in question. She submitted that in thevery next Assessment Year, the Assessee opened a separate BankAccount for the said purpose on 31.8.2007 with a national bankand on the next year onwards, the Assessee had started makingsuch Demand Drafts only through bank account. But, for theAssessment Year 2000-2001 though the learned Tribunal noted thesaid fact of dropping of penalty for the preceding year viz.Assessment Year 1999-2000, but, still imposed penalty for theAssessment Year 2000-2001 by observing that the Assessee cannotbe permitted to take undue advantage of the liberal view of theDepartment taken for the Assessment Year 1999-2000. Shesubmitted that deposit of cash was accepted by the Assessee aswell as repayments were made by the Assessee in cash due to theexigencies of business looking into the peculiar nature of thebusiness of the Assessee and therefore, in view of the saidfacts and circumstances prevailing in the year 2000-2001 also,the learned Tribunal ought to have taken a similar view as wastaken by the original Assessing Authority himself in thepreceding year viz., Assessment Year 1999-2000. 4. On the other hand, the learned Senior Standing CounselMr.T.R.Senthilkumar appearing for the Revenue supported theimpugned order and submitted that the nature of business wasvery well known to the Assessee and the very fact of droppingthe penalty proceedings for the preceding year cannot a groundto set aside the similar penalty proceedings in the next yearalso and therefore, the order of the learned Tribunal wasjustified. He relied upon the decision of this court in the caseof Vasan Healthcare (P) Ltd. v. Additional Commissioner ofIncome-tax, Chennai Range-2, Chennai ((2019) 103 Taxman.com 26(Madras). The order passed by the Assessing Authority in the present case is a speaking order for imposition of penalty. 5. The present Appeal was admitted by a coordinate Bench ofthis court on the following substantial questions of law:- "T.C.No.1431/2007: Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is rightin law in confirming the levy of penalty underSection 271D of the Income Tax Act for theassessment year 2000-2001?T.C.No.1432/2008:Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is rightin law in confirming the levy of penalty underSection 271E of the Income Tax Act for theassessment year 2000-2001?" present case is a speaking order for imposition of penalty. 5. The present Appeal was admitted by a coordinate Bench ofthis court on the following substantial questions of law:- "T.C.No.1431/2007: Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is rightin law in confirming the levy of penalty underSection 271D of the Income Tax Act for theassessment year 2000-2001?T.C.No.1432/2008:Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal is rightin law in confirming the levy of penalty underSection 271E of the Income Tax Act for theassessment year 2000-2001?" 6. Having heard the learned counsel for the parties, we aresatisfied that the learned Tribunal could have taken a liberalview of the matter and since the imposition of penalty dependsupon the facts and circumstances of each case and if theAssessee can putforth a reasonable cause for accepting thedeposits in cash then, such circumstances can be considered bythe Assessing Authority to waive or reduce the penalty inquestion. In view of the fact that in similar circumstances andfor the same Assessee, the Assessing Authority himself entirelywaived off the penalty for the preceding Assessment Year 1999-2000 vide communication dated 9.11.2005, the learned Tribunal,in our opinion, fell in error in upholding the imposition ofpenalty by just observing that the Assessee ought not haverepeated such a mistake and ought to have done the transactiononly through Bank which method, in fact, as the learned counselfor the Assessee submitted, was adopted on 31.8.2001 on whichdate, the Bank Account was opened by the Assessee andtherefore, it is only for this Assessment Year 2000-2001 whichstands out and in respect of which the present Appeals areconcerned. The law laid down in the decision of VasanHealthcare (P) Ltd. v. Additional Commissioner of Income-tax,Chennai Range-2, Chennai ((2019) 103 Taxman.com 26 (Madras) isnot applicable to the present case as the facts of the judgmentin that case are distinguishable as there was no such fact ofdropping penalty proceedings in the preceding year in that case. 7. We are, therefore, inclined to take a lenient view infavour of the Assessee in the facts and circumstances of thecase and are inclined to allow the present Appeals in favour ofthe Assessee on the ground that the for the precedingAssessment Year viz., 1999-2000, on the same set of facts andcircumstances, the Assessing Authority himself dropped the penalty proceedings in question. Accordingly, we allow thepresent Appeals of the Assessee and answer the questions framedabove in favour of the Assessee and against the Revenue. Nocosts. Sd/- Assistant Registrar (Insp Cell)//True Copy// Sub Assistant Registrar ssk.To1.The Joint Commissioner of Income Tax Range III, Coimbatore.2.The Commissioner of Income Tax, Coimbatore (Appeals) I3.The Income Tax Officer, Ward III (i), Coimbatore.+1cc to Mr.T.R.Senthil Kumar, Advocate, S.R.No. 77080+2cc to Mr.Mallikasrinivasan, Advocate, S.R.No. 77027T.C.Nos.1431 & 1432 of 2007SR(CO)GN(18/10/2019)