Judgment:
F.I. Rebello, J.
1. Revenue is in appeal against the order of Tribunal. The assessee had taken from seven persons a loan of Rs. 20,000 each. This is a finding of fact and not in dispute. On behalf of the Revenue, the learned Counsel draws our attention to the statutory provisions of Section 269SS of the IT Act which uses the expression 'is twenty thousand rupees or more'. In other words, according to the learned counsel, if a person takes any loan in excess of Rs. 20,000 other than by cheque that would result in breaching the provisions of Section 269SS and consequently, penalty could be levied under Section 271D of the IT Act.
2. From this, the question of law as framed reads as under:
Whether on the facts and circumstances of the case in law, the penalty did not urge in holding that the provision of Section 269SS would not apply to the loan or deposit taken in cash of Rs. 20,000 or more and, apply only to the loan what would have taken in cash in excess of Rs. 20,000?
3. The learned Counsel for the assessee has relied on a circular issued by CBDT vide Circular No. 572 dt. 3rd Aug., 1990 [(1990) 87 CTR (St) 1]. The relevant portion of which reads as under:
43. Sections 271C, 271D and 271E, which were inserted in the IT Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provide for the levy of penalties for certain defaults. Penalty under Section 271C is levied for failure to deduct tax at source. Penalty under Section 271D may be levied for failure to comply with the provisions of Section 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft. Penalty under Section 271E may be levied for failure to comply with the provisions of Section 269T relating to repayment by a company, including a banking company, a co-operative society or a firm, of deposits, including interest, exceeding Rs. 10,000 in the aggregate otherwise than by an account payee cheque or bank draft.
(emphasis, italicised in print, supplied by me)
4. It is now well settled that circulars issued by CBDT are statutory in character and are binding on the Departmental authorities. The authorities including AO and other consequently would be bound by that circular. In the instant case, CBDT for the purpose of attracting Section 271D has set out that the loan or deposit should be in excess of Rs. 20,000. It is true that what CBDT has stated may be contrary to the express language of Section 269SS which uses the expression 'twenty thousand rupees or more'. The law and the CBDT circulars can be spelled out from the following judgments of the Supreme Court. In Navnit Lal C. Javeri v. K.K. Sen AAC : [1965]56ITR198(SC) , a Constitution Bench of the Supreme Court observed 'It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under Section 5(8) of the Act.' Navnit Lal (supra) was followed in Ellerman Lines Ltd. v. CIT : [1971]82ITR913(SC) . In UCO Bank v. CIT : [1999]237ITR889(SC) , the law was restated and it was held that circulars of CBDT are legally binding on the Revenue and this binding character attaches to the circulars even if they be found not in accordance with the correct interpretation of the section and they depart or deviate from such construction, when they are issued in exercise of the statutory powers under Section 119. It was however clarified that the Board cannot pre-empt a judicial interpretation of the scope and ambit of the provision and further could not impose a burden on the taxpayer higher than what the Act itself, on a true interpretation, envisages. It was observed that the Board has the statutory power under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute. In CST v. Indra Industries (2001) 168 CTR (SC) 50 : (2001) 248 ITR 338, the Court further observed that the taxing authority cannot be heard to advance an argument that it is contrary to that interpretation.
5. Considering the circular issued by the CBDT and the loan being not in excess of Rs. 20,000 from each person the interpretation given by the Tribunal to the said circular, the question of law does not arise and consequently, the said appeal is dismissed. The AO could not have acted contrary to the circular.