This appeal by the assessee is directed against the order of the Commissioner (Appeals), Surat, dated 24-2-2000, for assessment year 1990-91.
The ground raised by the assessee in this appeal is that the Commissioner (Appeals) erred in confirming the penalty of Rs. 4,90,324 levied under section 271E of the Act.
The assessing officer levied penalty of Rs. 8,17,324 on the ground that the assessee-company repaid deposits of Rs. 8,17,324 in cash during the assessment year which is violation of the provisions of section 269T of the Income Tax Act. The details of the above amount are reproduced as under: The Commissioner (Appeals) confirmed the penalty to the extent of Rs. 2,06,000 in the name of Amin Enterprises (P) Ltd., and deleted the balance amount on the basis that these did not come in the purview of the term 'deposit'. While confirming the penalty of Rs. 4,90,324 the Commissioner (Appeals) observed that this amount has been expressly kept in the custody of the assessee for earning interest and partakes the nature of deposit as it can be recalled by the depositor by notice.
The Commissioner (Appeals) further observed that it is not the case of the assessee that it was a temporary accommodation. This amount is covered by the term "deposit" as defined in the Income Tax Act. The definition of the word "deposit" as per the Companies Act has no relevance when there is a clear definition of -the term "deposit" in the Income Tax Act, particularly in section 269T itself.
The learned authorised representative reiterated his submissions which were made before the Commissioner (Appeals) and submitted that there was losses of Rs. 52,62,970 in financial year 1988-89 and Rs. 3,41,966 in financial year 1989-90 relevant to assessment year 1990-91. The learned authorised representative further submitted that due to losses the creditworthiness and the credibility of the company was not favourable to the creditors, On account of such situation the creditors insisted upon payments being made in cash only and they were not accepting the cheque or draft. The learned authorised representative urged that in this way there was a reasonable cause for making such payment in cash. He further submitted that in view of section 273B of the Income Tax Act no penalty is leviable for default of provisions Of section 269T of the Income Tax Act, when the default is committed on account of reasonable cause. The learned authorised representative further submitted with reference to object of introducing section 269T that there was no search proceedings conducted in the case of the assessee at the relevant time. He further submitted that the penalty in violation of section 269T is applicable on such cases and not in the cases wherein transaction is genuine and there is reasonable cause for making the cash payment. The learned authorised representative further submitted that the cash payment was made to the sister concern as some of the directors are common. He further submitted that in case of sister concern if payment is made to the sister concern by cash there is no violation of section 269T. It is also the submission of the learned authorised representative that the cash payment was in accordance with the commercial expediency and such violation is in the nature of technical wherein no penalty provision is applicable. The learned authorised representative in support of his contention relied upon the following decisions : 1. ITA Nos. 679, 680/Ahd/1997; Asst. yr. 1991-92, in the case of Navinchandra Uttamram dated 6-8-1997.Asstt. Director of Inspection (Inv.) v. Kum. A.B. Shanti (2002) 255 ITR 258 (SC).
4. ITA 1585/Ahd/1996,- Asst. yr. 1991-92 in Motilal & Co. dated 15-7-1998 (appeal filed by the revenue before the High Court has been rejected vide order dated 1 1-8-1999).Vir Sales Corpn. v. Asstt. CIT The learned authorised representative submitted that the penalty order itself is an invalid order as the period of limitation for imposing penalty provided in section 275(1)(c) that no order imposing a penalty shall be passed after the expiry of the financial year in which the proceedings, in the course of which action for imposing penalty has been initiated, are completed or six months from the end of the month in which action for imposition of penalty is initiated whichever period expires latest. The learned authorised representative submitted that the assessment was made on 9-2-1995, penalty order passed on 8-5-1998 and show-cause notice of penalty issued on 25-11-1997. Since the assessment is made on 9-2-1995 and penalty order passed on 8-5-1998, it is clearly against the provisions of section 275(1)(c). The learned authorised representative in support of his contention relied upon the decision of Tribunal, Ahmedabad Bench, in H. Ajit Bhai & Co. v. Asstt.
CIT (1993) 45 ITD 262 (Ahd).
The learned Departmental Representative relied upon the orders of the lower authorities and submitted that penalty levied is perfectly in order as the penalty proceedings were initiated by issuing show-cause notice dated 25-11-1997 and the penalty proceedings were completed on 8-5-1998, which is well within the limitation provided in section 275(1)(c). He urged that the order of the lower authorities may be confirmed.
We have considered the rival submissions, perused the record and gone through the decisions cited. After considering the totality of the facts of the case we find that the payment is made in cash to sister concern or closely related concern as the directors are common. We find force in the submission of the learned authorised representative that in cases of losses the credibility of the parties goes down and in such situation a cash payment is usually demanded and in that cases cheques are not accepted. It has been also found that both the concerns receiving and giving payments are existing assessees and this is not a case where search and seizure operation was conducted. At the time of introducing sections 269T and 269SS it has been explained by the CBDT that the object of introducing these sections is to ensure that the taxpayer is not allowed to give false explanation for his unaccounted money or if he makes false entries he shall not escape by giving false explanation for the same. During search and seizure unaccounted money is unearthed and the taxpayer gives the usual explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records suitably.
The main object of section was to curb these manners of making false entries in the accounts books and ledger giving an explanation for the same. From the above discussion and in view of various judicial pronouncements in the above cases, we are of the view that the repayment of loan or deposit with a view to meet the urgent business necessities and made under the bona fide belief is a valid excuse and constitutes a reasonable cause within the meaning of section 273B and in the case of reasonable cause no penalty is leviable. The above view is supported by the order of the Tribunal, Ahmedabad Bench, in the case of Vir Sales Corpn. v. Asstt. CIT (supra.). We accordingly set aside the order of the lower authorities and cancel the penalty levied of Rs. 4,90,324.