Tc/185/2004 Of Commissoner Of Income Tax-Vii v. M/S.kundrathur Finance& Chit

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.1.2006 THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A) Nos.185 of 2004 & 1542 to 1544 of 2005 Appeals under Section 260A of the Income Tax Act, 1961 againstthe common order of the Income Tax Appellate Tribunal, Madras 'D'Bench dated 5.6.2003 in ITA Nos.999, 1000, 1001 and 1002/Mds/2000for the assessment years 1996-97, 1997-98, 1998-99 and 1999-2000against the order of the Commissioner of Income Tax (Appeals) III,Chennai dated 03.03.2000 and made in ITA.NO.210,211,212 & 213/1999-2000/A.III against the order of the Joint Commissioner of IncomeTax, Range-V, Chennai 600 006, dated 4.5.1999 and made in CRP.NO.21(9)/R.V/1996-97 to 1999-2000. (Delivered by P.D.DINAKARAN,J.) The appeals are directed against the order dated 5.6.2003 madein ITA Nos.999, 1000, 1001 and 1002/Mds/2000 for the assessmentyears 1996-97, 1997-98, 1998-99 and 1999-2000. https://hcservices.ecourts.gov.in/hcservices/ 2. The brief facts of the case are stated as under: The assessee is a partnership firm engaged in the business ofchit and finance. During the survey, it was found that the assesseehad accepted the cash deposits of more than Rs.20,000/- incontravention of Section 269SS of the Act. Hence, after giving anopportunity pursuant to the show cause notice, the JointCommissioner imposed a penalty by exercising the power under Section271D of the Act, equal to the amount of deposits in excess ofRs.20,000/- received in cash during the period relevant to theassessment years 1996-97 to 1999-00. Hence, the assessee preferredan appeal before the Commissioner of Income Tax (Appeals), whoallowed the appeal, which was subsequently confirmed by theTribunal. Hence, the above appeal. 3. The learned counsel for the appellant raised the followingsubstantial questions of law for our consideration. (a) Whether in the facts and circumstances of the case, theTribunal had enough material to hold, and was right inholding that the assessee was justified in receivingdeposits exceeding Rs.20,000/- in cash when thedepositors did not have bank accounts? (b) Whether in the facts and circumstances of the case, theTribunal was right in deleting the penalty underSection 271D on the ground that the depositors did nothave bank accounts, when section 269SS provides forpayment either by cheque or bank draft?" 4. Both the Commissioner as well as the Tribunal concurrentlyfound that within the jurisdiction of the assessee finance, viz.Kundrathur, there is no banking facility for the depositors, whoare, apart from the partners, pensioners, house wives andagriculturists. The explanation offered by the assessee was that inthe absence of any banking facility in the locality concerned and inview of the business of the assessee, the deposits made by thedepositors cannot be rejected on the only ground that they had notbeen paid by way of cheque as contemplated under section 269SS ofthe Act. On the other hand, it was not the case of the departmentthat banking facilities are available within the jurisdiction of theassessee's business place viz. Kundrathur and the depositors wereoperating bank accounts. Under such circumstances, both theCommissioner and the Tribunal, exercising the discretion conferredunder section 273B of the Act came to the conclusion that thetransactions were found to be genuine and bona fide, and that thedepositors did not have bank account and therefore, the assessee was in no position to request them to make the deposits by cheque,assuming the same was in contravention of Section 269SS of the Act.5. In this regard, it is apt to refer section 273B of the Act,which reads as follows: in no position to request them to make the deposits by cheque,assuming the same was in contravention of Section 269SS of the Act.5. In this regard, it is apt to refer section 273B of the Act,which reads as follows: "Penalty not to be imposed in certain cases.Notwithstanding anything contained in the provisions ofclause (b) of sub-section (1) of section 271, section 271A,section 271AA, section 271B, section 271BA, section 271BB,section 271C, section 271D, section 271E, section 271F,section 271FA, section 271FB, section 271G, clause © orclause (d) of sub-section (1) or sub-section (2) of section272A, sub-section (1) of section 272AA or section 272B orsub-section (1) of section 272BB or sub-section (1) ofsection 272BBB or clause (b) of sub-section (1) or clause(b) or clause (c) of sub-section (2) of section 273, nopenalty shall be imposable on the person or the assessee,as the case may be, for any failure referred to in the saidprovisions if he proves that there was reasonable cause forthe said failure." (emphasis supplied) 6. The Apex Court, interpreting the powers conferred on therevenue under Section 273B of the Act in ASST. DIRECTOR OFINSPECTION (INVESTIGATION) v. A.B. SHANTHI (255 ITR 258) held thatif there was a genuine and bona fide transaction and the taxpayercould not get a loan or deposit by account-payee cheque or demanddraft for some bona fide reason, the authority vested with the powerto impose penalty has a discretion not to levy penalty. 7. If that be so, since the authorities concerned havingexercised the power conferred on them and satisfied that thetransactions are bona fide on materials facts, viz. (i)there is nobanking facility within the business jurisdiction of the assessee,viz. Kundrathur; and (ii) it is not the case of the revenue that there is any bankingfacility nearby and the depositors are operating the funds throughbanks, but the authorities have come to the conclusion that thetransactions are genuine and bona fide. Therefore, it may not be proper for this Court to interfere withsuch discretion exercised by the authorities below, having satisfiedwith the reasonable cause for the failure to comply with Section269SS of the Act. 8. We are, therefore, of the view that there is no error orillegality in the order of the Tribunal and therefore, no https://hcservices.ecourts.gov.in/hcservices/ interference is warranted. Finding no merit to entertain the aboveappeals, the same are dismissed. kplSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Income Tax Appellate Tribunal,Madras "D" Bench, Madras.2. The Commissioner of Income Tax VII,Chennai.3. The Commissioner of Income Tax(Appeals) III, Chennai.4. The Joint Commissioner of Income Tax,Range V, Chennai.5. The Central Board of Direct Taxes,New Delhi.6. The Income Tax Officer,Special Ward, Tambaram.+1 CC to Mr.Pushya Sitaraman, Advocate, SR No.3630VC(CO)BG/24.2.2006 T.C.(A).Nos.185 of 2004 &1542 to 1544 of 2006