N.V. Balasubramanian, J.
1. This writ petition is for a writ of certiorari to quash the order of the Commissioner of Income-tax, Tamil Nadu-II, passed in his proceedings C. No. 1241-11(9) of 1995-96, dated March 15, 1996.
2. The writ petitioner is a partnership firm assessed by the Deputy Commissioner of Income-tax, Special Division, Madras. The assessment of the petitioner for the assessment year 1992-93 under the provisions of the Income-tax Act, was completed on March 17, 1995, on a total income of Rs. 29,89,760, and the Assessing Officer noticed during the course of his assessment that the petitioner had repaid two loans in cash, on April 8, 1991, a sum of Rs. 46,690 and on April 15, 1991, another sum of Rs. 50,000. The Deputy Commissioner of Income-tax was of the view that there was a violation of the provisions of Section 269T of the Income-tax Act, 1961, and levied penalty of Rs. 96,690 under Section 271E of the Income-tax Act, after giving the petitioner an opportunity to be heard.
3. The petitioner filed a revision petition before the Commissioner of Income-tax under Section 264 of the Income-tax Act, seeking cancellation of the order of penalty levied under Section 271E of the Income-tax Act. The Commissioner of Income-tax held that the provisions of Section 269T speak of mode of repayment of loan, i.e., by account payee cheque or draft and the section has been introduced to prevent the assessee found in the possession of unexplained cash at the time of search, etc., explaining away the same as loans received from certain parties by cash. He held that the provisions of Section 269T were attracted to the facts of the case and he was also of the view that the mere fact that the loans were treated as genuine loans and accepted as genuine by the Department would not be a material consideration for the non-levy of penalty under Section 271E of the Act. According to him, it is for the petitioner to prove the presence of reasonable cause for committing the default under Section 269T of the Income-tax Act and the petitioner has not explained the reason for his acceptance of the loans in cash in the first instance from these two lenders and made repayment of the same in cash. The Commissioner did not accept the explanation offered by the petitioner that the parties did not have any bank account and hence the loans were repaid in cash. He, therefore, held that the petitioner has committed default under Section 269T of the Income-tax Act and confirmed the penalty levied by the Deputy Commissioner of Income-tax.The writ petitioner has challenged the order of the Commissioner of Income-tax, Madras, in the present writ petition on the score that the breach was only technical and not penal in nature and the Assessing Officer has treated the transaction as genuine and there was only a technical breach of the provisions of Section 269T of the Income-tax Act. It is also stated that the provisions of Section 269T of the Act deals only with the deposits and it has no application in a case of repayment of loan and the respondents themselves have admitted that the transactions are loans and accepted the same as genuine. It is also stated that the provisions of Section 269T are not applicable to the transaction in question.
4. The learned counsel for the petitioner has submitted and reiterated the averments made in the affidavit filed in support of the writ petition that the petitioner has established reasonable cause for repaying the loan in cash and the order of the Commissioner that the petitioner has not established any reasonable cause for repaying the same in cash is not sustain-able in law. Learned senior counsel for the Income-tax Department has submitted that the section has been introduced with the object of preventing cash transaction above the limit prescribed in Section 269T and if the cash transactions are permitted, it will lead to innumerable complications in the matter of assessment of income, particularly, in cases where search operations are carried out and the cash is found in search and the explanation given by the assessee normally would be that the cash represented a loan. He also submitted that the provisions of Section 269T of the Act are wide enough to cover the loan. The further submission of learned senior counsel for the respondent is that since Section 269T was in force when the loans were repaid on April 8, 1991, and April 15, 1991, the provisions of Section 269T operate notwithstanding the fact that the loans were obtained prior to the introduction of Section 269T of the Act.
5. I have carefully considered these submissions of the parties. I am of the view that the Commissioner was quite justified in holding that the petitioner has not established the reasonable cause to repay the loan in cash to the lenders. The fact that the loans have been treated as genuine at the time of completion of the petitioner's assessment or the person to whom the amounts have been repaid have no banking facility are not relevant considerations which would constitute reasonable cause for the petitioner to repay the same in cash. The burden of proving' that the petitioner was prevented by reasonable cause from repaying the loan in cash is on the petitioner and when the petitioner has not discharged his burden and when the Commissioner found that there is no reasonable cause, for making the payment in cash, I am not inclined to interfere with the finding rendered by the Commissioner.
6. I am also of the view that the contention of learned counsel for the petitioner that the provisions of Section 269T are not applicable as the loans were obtained in the year 1983 or 1984 is not well founded. In my view, the date on which the loans were obtained is not relevant for the applicability of Section 269T of the Act and the question has to be considered when the loans were repaid. The loans were admittedly repaid in the year 1991 and at that time, the provisions of Section 269T have come into force and the question whether the provisions were in force on the date when the loans were taken is not relevant for the applicability of Section 269T. Admittedly, the provisions of Section 269T were in force on the date when the loans were repaid in cash and, therefore, I reject the submission of learned counsel for the petitioner that the provisions of Section 269T are not applicable as the loans were obtained prior to the introduction of the provisions of Section 269T as untenable.
7. However, the submission of learned counsel for the petitioner that the provisions are not applicable to the repayment of loans is well founded. Section 269T is found in Chapter XXB 'requirement as to mode of acceptance, payment or repayment in certain cases to counteract evasion of tax'. Section 269SS of the Income-tax Act deals with the mode of taking or accepting certain loans and deposits. Under Section 269SS of the Act, where any loan or deposit is taken or accepted from any person and the aggregate amount of the deposit or loan exceeds Rs. 20,000 or more, Section 269SS provides that such loans or deposits should be accepted by an account payee cheque or account payee bank draft. In other words, the receipt of cash in such cases would attract the levy of penalty. We are concerned with Section 269T of the Act. Section 269T of the Act deals with the mode of repayment of certain deposits and under Section 269T of the Act, if the deposit is repaid otherwise than as permitted, i.e., otherwise than by way of account payee cheque or account payee bank draft by the company, co-operative society, etc., and the repaid deposit exceeds Rs. 10,000 or more, it shall be repaid by the account payee bank draft or account payee cheque. The expression 'deposits' is defined in Section 269T to mean any deposit of money which is repayable after notice or repayable after the period and in the case of a person other than a company, includes deposit of any nature.
8. The Deputy Commissioner of Income-tax as well as the Commissioner of Income-tax have accepted the case of the assessee-firm that it had repaid the loans in cash. The Deputy Commissioner has also accepted at the time of completion of assessment that the assessee had borrowed certain sums of money and the transactions were regarded as loan transactions. In view of the finding of the Deputy Commissioner of Income-tax as well as the Commissioner of Income-tax that the transactions are loans, the further question that arises is whether the provisions of Section 269T are attractedto the loan transactions. We have seen that the provisions of Section 269SS which deal with the loans and deposits. On the other hand, Section 269T deals with the repayment of deposits. I am of the view that the provisions of Section 269T do not deal with repayment of loans.
9. Firstly, there is a distinction between a loan and a deposit. In the case of loan, it is the duty of the debtor to seek the creditor and repay the money to him or to repay the money according to the agreement. But, in the case of the deposit, it is generally the duty of the depositor to go to the banker or the person with whom the money has been deposited as the case may be, and make a demand for the repayment of the same. The distinction between loan and deposit is noticed in two earlier decisions of this court, in the case of V. Balakrishnudu v. Narayanaswamy Chetty [1914] 24 iC 852 and Kishtappa Chetty v. Lakshmi Ammal, AIR 1923 Mad 578. A Division Bench of the Oudh High Court in Chaturgun v. Shahzady, AIR 1930, Oudh 395, after noticing the decisions of this court held that there is a distinction between the loan and deposit and the following observation of the Oudh High Court is relevant for the purpose of this case (page 396) :
'The word 'deposit' as pointed out by the Madras High Court in V. Balakrishnudu v. Narayanaswamy Chetty [1914] 24 iC 852 is derived from the Latin depositum, a technical word used in the Roman law of bailment for a bailment of a specific thing to be kept for the bailor and returned when wanted, as opposed to commodatum where a specific thing is lent to the bailee to be used by him and returned. In popular language, commodatum is translated by the word loan' and the distinction between deposit and loan is this : that a deposit is to be kept by the depositee for the depositor and the loan is to be kept by the borrower for himself. Thus, I deposit my hat in the cloak room. My hat is not to be used by the depositee, but is to be kept for me and returned to me on my demand ; but I lend my money to a friend and he can do what he likes with it as long as he returns it to me either on demand or at some specified time. It may be, as observed by Sir Walter Schwabe the then Chief Justice of the Madras High Court in Kishtappa Chetty v. Lakshmi Ammal, AIR 1923 Mad 578, that article 145 covers more than the depositum of Roman law, and his Lordship observed that the framers of the Indian Limitation Act 'meant to use simple and plain language', but I take this to mean that the word 'deposit' is used in the ordinary sense of the word in the English language, and as far as I am aware the word 'deposit' does not cover a transaction of the nature of a loan. The transaction that we have to consider is a loan. The plaintiff lent the defendant these ornaments to be used by the latter in a religious procession. There was no question of trust or quasi-trust. It was a mere loan for the benefit of the borrower and in my opinion, Article 145 has no application.'
10. In Baidya Nath Plastic Industries (P.) Limited v. K.L. Anand, ITO : [1998]230ITR522(Delhi) ,. the Delhi High Court considered the provisions of Section 269T and held-that the provisions of Section 269T would apply to the case of repayment of the deposits and not to cases of repayment of loans. The Delhi High Court held that in case two interpretations are possible, an interpretation which takes the assessee out of the clutches of a penal provision should be preferred. I am in agreement with the reasoning and conclusion of the Delhi High Court.
11. The submission of learned senior counsel for the Commissioner of Income-tax that the expression 'deposit' is widely defined under Section 269T and it would include the loan is not acceptable. He submitted that considering the object behind the section there is no distinction between loan and deposit. According to him in the case of a loan, the amount is repayable after notice or it may be repayable after the expiry of the period and in any case, the expression deposit is widely defined to include deposits of any nature and therefore, according to him the repayment of loan should also be considered to fall within the scope of Section 269T. The expression deposit is defined to include an amount which is repayable after notice and includes a deposit of any nature, but there is no express provision to include the loan obtained by a person within the meaning of the term 'deposit'. All deposits may take the form of loan and it is not necessary that all loans should take the form of deposits. Even that apart, Section 269SS of the Act which occurs in Chapter XXB of the Act, deals with two different kinds of transactions, namely, loans and deposits. Section 269SS was introduced by the Income-tax (Second Amendment) Act, 1981, and by the same amendment, Section 269T was also inserted with effect from July 11, 1981. At the time when Section 269SS was introduced by the Income-tax (Second Amendment) Act, 1981, the amount covered under Section 269SS, was Rs. 10,000 which was increased to Rs. 20,000 by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. In my view, when the Legislature, while introducing both the sections by the same Amendment Act, 1981, made a distinction between loan and deposit and knowing very well the distinction between the two concepts, introduced Section 269T to cover one kind of transaction, namely, the deposit. It is not permissible for this court to enlarge the scope of the term 'deposit' in Section 269T of the Act to include the transaction of loan. It may be true that the loan transaction may have some of the attributes, qualities and characteristics of the deposit. The loan may be repayable on notice or may be repayable after a fixed period. But, the intention of the party making the deposit and the intention of the person taking the loan are quite different. I am also unable to accept the submission of learned senior counsel that loan transactions have all attributes of deposits and, therefore, both should be equated together and Section 269T would apply evento loan transactions. As already observed by me, the mere presence of some of the attributes of the loan transaction in a deposit would not be sufficient to regard the loan as a deposit. As observed by the English judge, the chimpanzee may have a head, may have eyes, nose, ears, body, leg's but on that account, a chimpanzee cannot be treated as a human being. Similarly, the mere presence of some of the attributes of the loan in a deposit would not render the loan a deposit. They are two different transactions in the commercial world and by interpreting and by expanding the scope of the term 'deposit' in Section 269T of the Act, it is impermissible for this court to enlarge the concept and take in the concept of loan transaction also within the meaning of Section 269T of the Act. In my view, the provisions of Section 269T are not applicable to repayment of loan transaction and this section is intended to cover and cover only the repayment of deposits over and above the amount prescribed in the section. Therefore, the Assessing Officer and the Commissioner after having held that the transactions in question were repayment of loans, have erred in holding that there was a violation of the provisions of Section 269T by the petitioner. I, therefore, hold that penalty levied on the alleged violation is not justified in law. Accordingly, the impugned order passed by the Deputy Commissioner which was confirmed by the Commissioner of Income-tax is quashed. The writ petition is allowed. Rule nisi is made absolute. No costs. Consequently, W. M. P. No. 18512 of 1996 is dismissed.