1. This appeal of the assessee is directed against the order dt. 23rd Sept., 1999, of CIT(A), Bathinda, for the asst. yr. 1995-96. In this appeal, the assessee has taken the following effective grounds : 1. That the learned CIT(A) Bhatinda has erred both on facts and law while passing the order under Section (6) (sic) of the IT Act, 1961.
2. That the learned CIT(A) Bhatinda, has erred in upholding the order of Dy. CIT, Ambala Range, Ambala, imposing penalty under Section 271D amounting to Rs. one lac.
3. That the learned CIT(A), Bhatinda, has erred in not following the KVSS certificate issued by the designated authority.
2. It was noticed that the assessee had filed the appeal late by 18 days. Therefore, the assessee was issued a defect memo on 17th Jan., 2000, The assessee filed a petition for condonation of delay placed at p 1 of the paper book stating that delay in filing the appeal was due to the fact that he was suffering from CADC hypertension CPNP for which he had been advised complete bed rest from 6th Dec., 1999, to 30th Dec., 1999. However, it was found that appeal memo had been signed on 28th Dec., 1999, which perhaps shows that the assessee was able to attend to such work. However, on the date of hearing the learned counsel for the assessee strongly pleaded that the assessee was a retired salaried person and non-condonation of delay would cause an irreparable loss and injustice. He, therefore, pleaded that delay in this case may be condoned. The learned Departmental Representative did not raise any specific objection to the submissions of the learned counsel. Considering the fact that the delay is only for 18 days and in the interest of justice we consider it a fit case for condonation of delay. Therefore, the delay is condoned and appeal is admitted.
3. Briefly stated, the facts of the case are that the assessee had filed the return for the asst. yr. 1995-96 on 27th Feb., 1997, declaring therein income of Rs. 76,328, which comprised of salary income and interest income from Golden Forests (India) Ltd. (hereinafter shortly referred to as GFIL). During the course of assessment proceedings, the AO observed that the assessee had accepted cash loan of Rs. 1 lac from his son Shri Pardeep Kaushik in violation of provisions of Section 269SS. In response to the query raised by the AO, the assessee submitted that he had not taken or accepted any cash loan from his son Shri Pardeep Kaushik. The amount of Rs. 2 lacs was withdrawn from the bank account and deposited with the GFIL on which the assessee had received commission of Rs. 8,000. Thus, the total deposits with GFIL, aggregated to Rs. 2,08,000. It was agreed between the father and son that an amount of Rs. 1,04,000 each would be the deposit in the names of father and son and income arising therefrom would be the income of father and son. Thus, the assessee denied having taken loan from his son. The AO completed the assessment under Section 143(3) on 31st March, 1998. On a reference from the AO, the Dy. CIT initiated penalty proceedings under Section 271D for accepting cash loan of Rs. 1 lac from his son in violation of provisions of Section 269SS. It may, however, be added that the genuineness of the amount of Rs. 1 lac was not doubted by the AO and no addition on this account had been made. Income arising from the deposit of Rs. 1,04,000 with GFIL was assessed in his hands. Similarly, assessment in the case of his son was also completed by the AO under Section 143(3) and interest income of Rs. 23,558 on deposit of Rs. 1,04,000 in his name was taxed in his hands. No addition on account of non-genuineness of loan was also made in his hands.
4. In reply to the show-cause notice issued under Section 271D, the assessee denied having accepted any loan of Rs. 1 lac from his son. It was submitted that amount of Rs. 1 lac was withdrawn from the bank account and deposited with GFIL. It was also submitted that interest on respective deposits made by the assessee and his son has been separately assessed in their respective hands. However, the Dy. GIT was not satisfied with the explanation given by the assessee on the ground that amount of Rs. 1 lac was withdrawn by Shri Pardeep Kaushik out of his savings bank a/c No. 10370 with the Punjab National Bank, Pinjore.
The entire deposit of Rs. 2 lacs was made with the GFIL in the name of the assessee on 20th July, 1994, which included a loan of Rs. 1 lakh from his son. The receipt for the entire amount was issued in the name of the assessee and interest was also paid on the entire deposit of the assessee. The Dy. GIT, therefore, concluded that deposit of Rs. 2 lacs was made by taking a loan of Rs. 1 lac from his son Shri Pardeep Kaushik and the same violated the provisions of Section 269SS.Therefore, the Dy. CIT imposed a penalty of Rs. 1 lac under Section 271D.5. Being aggrieved with the order of the Dy. CIT, the assessee took the matter in appeal before the CIT(A), who confirmed the penalty by observing that if deposit of Rs. 2 lacs with GFIL was joint, the receipt for the same should have been issued either in their joint names or in favour of both father and son accepting the loan of Rs. 1 lac. Aggrieved further, the assessee has now preferred the present appeal before us.
6. The learned counsel for the assessee submitted written submissions reiterating the same arguments, which were raised before the authorities below. He submitted that the assessee and his son had joint a/c No. 10370 with the Punjab National Bank, Pinjore. The amount of Rs. 2 lakhs withdrawn from the bank account represented assessee' own money of Rs. 1 lac and his son's own money of Rs. 1 lac. The same was deposited with GFIL, Manimajra. Though the receipt was issued in the name of the assessee yet the intention of the assessee and his son from the very beginning was to share the interest income from GFIL in equal share and the same was shown accordingly in their respective returns.
He drew our attention to pp 20 to 26 of the paper book, which are copies of assessment orders in the case of the assessee and his son and submitted that the AO had accepted the deposits of Rs. 2 lacs with GFIL as genuine and no addition had also been made. He submitted that interest income on the respective deposits received from GFIL was shown in their respective returns and had been assessed as such. Therefore, the genuineness of the transaction had never been doubted by the AO. He submitted that the transactions in question being not a loan, provisions of Section 269SS were not attracted and consequentially penalty under Section 271D could not have been sustained by the CIT(A).
He also relied on the following decisions : (i) Dr. B. G. Panda vs. Dy. CTT (2000) 111 Taxman 86 (Cal-Trib) (Mag); Even otherwise, he submitted that when the transactions in question had been accepted as genuine, no penalty could be levied under Section 271D merely for the technical default. He relied on the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC). He also submitted that if the transactions were between the close family relations, no penalty under Section 271D could be imposed. For this proposition, he relied on the decision of Tribunal, Calcutta Bench in the case of Dr. B.G. Panda, cited supra. He also made an alternative submission on the ground that for the asst.
yr. 1995-96, the assessee had made a disclosure under the KVSS, which was accepted by the CIT(A). This declaration was made on 29th Sept., 1990. The penalty was imposed on 30th Sept., 1998. He submitted that KVSS clearly provided immunity from penalty and prosecution. Therefore, the Dy. C1T was not correct in imposing a penalty under Section 271D on 30th Sept., 1998, after the assessee had made the declaration.
7. The learned Departmental Representative did not make any specific submissions except relying on the orders of the authorities below.
8. We have heard both the parties and carefully considered the rival submissions. We have examined the facts, evidence and material on record. We have also perused the orders of the authorities below and referred to the various decisions to which our attention was drawn.
Sec. 269SS provides that no person shall take or accept from any other person, any loan or deposit otherwise than by an account-payee cheque or account-payee bank draft if the amount of such loan or deposit is Rs. 20,000 or more. A plain reading of the section makes it clear that provisions of Section 269SS shall be applicable only in cases of loan and deposits of Rs. 20,000 and above. But it is obligatory on the part of the Revenue to establish that amount covered under the transactions was either a loan or a deposit. From a perusal of the assessment order and reply submitted before the Dy. CIT in response to the show-cause notice, the stand of the assessee has been consistent i.e., the assessee had never taken any loan from his son Shri Pardeep Kaushik. In fact, the assessee had also produced a bank pass book along with his reply dt. 16th Dec., 1997, before the AO during the course of assessment proceedings. The contention of the assessee is that bank account No. 10370 was a joint account in the names of son and the father. Amount of Rs. 2 lacs was withdrawn from this joint bank a/c and deposited with GFIL. The assessee has also been claiming that amount of Rs. 1 lac deposited with GFIL represented his own money and Rs 1 lac given by his son contributed his money. This fact is also supported by the evidence that income by way of interest on respective deposit of Rs. 1 lac each had been shown in their respective returns. If the intention of the assessee was to borrow a sum of Rs. 1 lac from his son without interest, the entire income should have been shown in the hands of the assessee. Though the Department has contended that Rs. 1 lac was indeed a loan from son, yet income by way of interest in respect of loan Rs. 1 lac has not been included in the hands of the assessee. When the bank pass book was produced before the AO, it was the duty of the AO to ascertain the fact whether the assessee had independent source of deposit of Rs. 1 lac in the joint account, which was ultimately utilized for depositing the same in GFIL. The mere fact that GFIL had issued one receipt in the name of the assessee would not be a conclusive evidence that the deposit was made by the father alone, when in fact income arising from their respective deposits was being enjoyed both by the father and the son. In the case of penalty, the onus was entirely on the Revenue to establish that transaction of Rs. 1 lac was in fact a loan, particularly when the assessee has all along denied such fact. In the case of Mohan Karkare vs. Dy. CIT (supra), Tribunal, Indore Bench has held that amount, which is neither a loan nor a depos.it, would not attract provisions of Sections 269SS and 271D.Considering the fact that the Department has not been able to establish the fact that transaction was indeed a loan from his son, we are of the view that Dy. CIT was not justified in imposing the penalty under Section 271D and the CIT(A) was not justified in confirming the same.
Even otherwise, we find that the AO had accepted the source and genuineness of deposit of Rs. 2 lacs with GFIL and no addition had been made in either of the cases. Therefore, there is obviously no intention on the part of the assessee to defraud the Revenue. Provisions of Sections 269SS and 269T were brought in the statute book to counter the evasion of tax in certain cases as stated under Chapter XX-B of the IT Act. The intention of the legislature in bringing these sections in the statute book was to avoid certain instances of tax evasion whereby huge transactions were made outside the books of accounts by way of cash. So far as this case is concerned, undoubtedly, there is neither any evasion of tax nor concealment of income. Even if it is assumed for argument's sake that the impugned transaction was a loan, even then no penalty under 271D would be exigible merely for technical violation of the section. The operation of Section 271D is not automatic and provisions of Section 273B fetter it. It is only in a case where the person is unable to establish the existence of a reasonable cause for non-compliance with the provisions that penalty would be leviable. In the case of ITO vs. Laxmi Enterprises (1990) 185 ITR 595 (AP), the Andhra Pradesh High Court, by referring to provisions of Section 269SS, where the expression used is "person is liable for penalty" has held that the word "liable" used in the section gives discretion to the Court with regard to the imposition of fine or penalty. The Court may either choose or impose fine or may dispense with the imposition of fine. When such discretion exists with regard to the imposition of fine itself, it could not be said that the Court has no discretion with regard to the quantum of fine to be imposed. Thus, mere default or non-compliance with the provisions of Section 269SS would not automatically attract the penalty under Section 271D. Further, the law is well settled that penalty will not be imposed merely because it is lawful to do so. Reliance in this regard is placed on the judgment of Hon'ble apex Court in the case of Hindustan Steel Ltd. vs. State of Orissa, "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." 9. Apart from the above, the decision of the Tribunal, Bombay Bench (SMC) in the case of Dr. Deepak Muchala, cited supra, also supports the view that where genuineness of loan has not been doubted, there is no justification for levying penalty under Section 271D. This also finds support from the decision of Tribunal, Jaipur Bench in the case of Asstt. CIT vs. Jag Vijay Auto Finance (P) Ltd. (2000) 68 TTJ (Jpj 44 and the decision of Tribunal, Calcutta Bench in the case of Dr. B.J.Panda, cited (supra). We may also derive support from the decision of ITAT, Chandigarh Bench, dt. 16th Jan., 2001, in the case of ITO vs.
Canal Lining Material Co. (ITA Nos. 1551 & 1552/Chd/93 for asst. yr.
1990-91).
10. Having regard to the facts and circumstances of the case and the legal position discussed above, we are of the view that the CIT(A) was not justified in confirming the penalty imposed by the AO under Section 271D. We, therefore, set aside the order of the CIT(A) and cancel the penalty. All the grounds relating to this issue are allowed.
11. Since we have allowed assessee's grounds on the main plea, we do not consider it necessary to discuss the alternative plea of the assessee with regard to the declaration made under the KVSS.