The Commissioner Of Income Tax, Bathinda v. The Faridkot-Bathinda Kshetriya Gramin Bank, Bathinda

ITA No.159 of 2002 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ***** ITA No.159 of 2002 & other connected cases being ITA Nos.193 & 205 of 2002Date of decision : 14.7.2010 The Commissioner of Income Tax, Bathinda Vs. .....Appellant The Faridkot-Bathinda Kshetriya Gramin Bank, Bathinda .....Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Savita Saxena, Advocate, for the appellant Mr. Akshay Bhan, Advocate, for the respondent--- -ADARSH KUMAR GOEL (J): 1.This order will dispose of ITA Nos. 159, 193 and 205 of2002, filed by the appellants, as the issue involved in all these appealsis common as to applicability of provision of penalty under Section271-E of the Income Tax Act, 1961 (for short “the Act”). The factshave been noticed from Income Tax Appeal No.159 of 2002.2.The assessee is a rural bank constituted under theprovisions of Regional Rural Banks Act, 1976. The assessee madecash payment to its customers for repayment of certain fixed depositsexceeding Rs.20000/- in violation of Section 269-T of the Act. TheAssessing Officer imposed penalty under Section 271-E of the Act, ITA No.159 of 2002 on that ground. The CIT (A) upheld the penalty. On further appeal,the Tribunal held that the payments to the customers were genuinetransactions and bonafide. The penalty could not be sustained.Observation of the Tribunal are; “In the above background, this plea of the assesseecannot be rejected that at the relevant time, the paymentpassing officer of bank was new and had no knowledgeabout the Income Tax law, particularly, the provisions ofSection 269-T read with Section 271-E of the IncomeTax Act, 1961. However, the departmental authoritieshave also not rejected this contention of the assessee. Onthis account, it can be held that due to ignorance of law,the concerned officer was under the bonafide belief thatre-payments exceeding Rs.20,000/-can be made in cashalso. It is true that the staff of the assessee bank onlyand their exposure to the bank and other laws likeIncome Tax was very limited and this plea of theassessee has definitive weightage in the present context.Further more, it is an admitted fact that the assessee-bankhad no training college of its own as in the case of othernationalised banks. Section 271-E read with Section273-B of the Income Tax Act, 1961 provides that if theassessee proves that it was prevented by reasonablecause from complying with the provisions of abovesections, no penalty can be imposed. The courts of thecountry have held that ignorance of law can be taken as a valid plea for non-compliance of provisions of IncomeTax Laws and Rules. At the same time, it has also beenheld by the various Benches of the Tribunal thatordinarily a plea as to the ignorance of law cannotsupport the breach of a statutory provision, but the factof such an innocent mistake due to ignorance of therelevant provisions of law coupled with the fact that thetransactions, in question, were genuine and bonafidetransactions and were undertaken during the regularcourse of the business, will constitute a reasonablecause”. 3.We have heard learned counsel for the parties.4.Section 269-T deals with cases where repayment of certainloans or deposits exceeding Rs.20000/-is made otherwise than by theaccount payee cheque or account payee bank draft drawn in the nameof the person who had made the loan or deposit. Failure to complywith the aforesaid provision entails penal consequences under Section271-E of the Act. 5.Section 269-SS of the Act relates to taking or accepting ofcertain loans and deposits by an account payee cheque or accountpayee bank draft where amount exceeds to Rs.20000/- and Section271-D of the Act enumerates penalty for the violation of the same.The Hon'ble Supreme Court in Assistant Director of Inspector 3.We have heard learned counsel for the parties.4.Section 269-T deals with cases where repayment of certainloans or deposits exceeding Rs.20000/-is made otherwise than by theaccount payee cheque or account payee bank draft drawn in the nameof the person who had made the loan or deposit. Failure to complywith the aforesaid provision entails penal consequences under Section271-E of the Act. 5.Section 269-SS of the Act relates to taking or accepting ofcertain loans and deposits by an account payee cheque or accountpayee bank draft where amount exceeds to Rs.20000/- and Section271-D of the Act enumerates penalty for the violation of the same.The Hon'ble Supreme Court in Assistant Director of Inspector Investigation Vs. A.B.Shanti,(2002) 255 ITR 258 whileconsidering the provision of Section 269-SS and 271-D had held thatwhere the transaction is bonafide, mere technical violation is not enough to attract the penal provision of Section 271-D of the Act.The relevant observations are as under:- “The object of introducing Section 269SS is to ensurethat a taxpayer is not allowed to give false explanationfor his unaccounted money, or if he has given some falseentries in his accounts, he shall not escape by givingfalse explanation for the same. During search andseizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he hadborrowed or received deposits from his relatives orfriends and it is easy for the so-called lender also tomanipulate his records later to suit the plea of thetaxpayer. The main object of Section 269SS was to curbthis menace”. It was further recorded as under:- “It is important to note that another provision, namelySection 273B was also incorporated which provides thatnotwithstanding anything contained in the provisions ofSection 271D, no penalty shall be imposable on theperson or the assessee, as the case may be, for any failurereferred to in the said provision if he proves that therewas reasonable cause for failure and if the assesseeproves that there was reasonable cause for failure to takea loan otherwise than by account payee cheque oraccount payee demand draft, then the penalty may not belevied. Therefore, undue hardship is very much mitigated by the inclusion of Section 273B in the Act. Ifthere was a genuine and bonafide transaction and if forany reason the taxpayer could not get a loan or depositby account payee cheque or demand draft for somebondfide reasons, the authority vested with the power toimpose penalty has got discretionary power”. 6.The provisions of Section 269-SS are analogous to Section269-T while Section 271-E is para-materia with Section 271-D of the Act. 7.In view of the findings recorded by the Tribunal, as noticedearlier, the question raised about the leviability of penalty has to bedecided against the revenue. The appeal is accordingly, dismissed.8.A photocopy of this order be placed on each file of theconnected case. (ADARSH KUMAR GOEL)JUDGE 14th July, 2010akm (AJAY KUMAR MITTAL)JUDGE