Commissioner of Income Tax Vs. Manoj Lalwani - Court Judgment

Excerpt:
- - in view of these peculiar circumstances, the tribunal held that the cash loan was taken by the assessee in the exceptional circumstances and it is a case of reasonable cause which was proved by the assessee. notwithstanding anything contained in the provisions of (clause (b) of sub-section (1) of) (section 271, section 271-a, (section 271aa), section 271-b (section 271ba), (section 271-bb), section 271-c, section 271-d, section 271e, (section 271f, (section 271-g), clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 271-a, sub-section (1) of section 272aa) or (sub-section (1) of section 272a, sub-section (1) of section 272aa) or (sub-section (1) of section 272bb or) clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure).'4. as per section 269ss of the act of 1961 after 30th day of june, 1984 no person is allowed to take of accept from any other person any loan or deposit otherwise than by account payee cheque or account payee ban but when we read section 271d with section 273b of the act of 1961 which begins with non- obstinate clause 'notwithstanding anything contained in the provisions of section 271d',it is clear that in spite of the provision of section 271d, the enactment following, namely, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. under section 273b a judicial discretion is left with the assessing authority not to levy a penalty under section 271d if the authority is satisfied that there was a reasonable cause for not complying with the provisions of section 269ss of the act of 1961. 5. in the present case the tribunal has found that the assessee is an exporter and was in urgent need of the money for complying with the time bound supplies and,therefore, he took a loan of rs. the loan was taken as he did not have sufficient time and funds and, that there was no intention to violate the provision of section 269ss of the act of 1961. the tribunal, in these circumstances, has arrived at a conclusion that the cash loan was taken by the assessee in the exceptional circumstances and that it is a case of reasonable cause, as a consequence thereof set aside the penalty imposed by the revenue authorities.naolekar, j.1. following substantial questions of law arise for adjudication by this court :- 1. 'whether, in the facts and circumstances of the case the tribunal had erred in law in deleting the penalty under section 271d for violation of provisions of sections 269ss of the act?' 2. 'whether, for levying the penalty under section 271d forviolation of section 269ss of the act is it required by the assessing officer to look into genuineness of loan or deposit?' the facts of this case are that the assessee is a proprietor of m/s viva art creation and engaged in the export business of garments. the assessment was completed under section 143(1)(3) of the income tax act, 1961 (for short, 'the act of 1961') on 30.11.1998. later on the assessing officer noted that the assessee has taken loan of rs. 2.5 lacs in cash. this was noted from page no. 3 of tax audit report. as per para 10 of the said report mukesh kumar manwani had advanced cash loan of rs. 2.5 lacs to the assessee. on the basis of the information received from the assessing officer, the joint c.i.t. issued a show cause notice dated 24.12.1998, requiring the assessee to show cause why an order imposing penalty should not be passed under section 271d. the assessee filed reply dated 15.3.1999 showing the urgency of taking loan in cash for his 100% export oriented business which constitute a reasonable cause and requested to drop the penalty proceedings. the joint cit rejected the plea of the assessee as he was of the view that assessee has without reasonable cause accepted cash loan in contravention of provisions of section 269ss, therefore the assessee is liable for penalty as provided under section 271d. accordingly he imposed a penalty amounting to rs. 2.5 lacs vide order dated 23.6.1999. on first appeal, the cit (a) also rejected the assessee's plea of reasonable cause and confirmed the penalty vide order dated 1.10.1999. the assessee went in appeal before the income tax appellate tribunal. 2. having heard the rival submissions of the parties the tribunal came to the conclusion that the assessee is an exporter and in the urgent needs of the time bound supplies, the assessee took a loan of rs. 2.50 lacs from his brother-in-law mukesh manwani. it was also observed that genuineness of the loan has not been doubted by the a.o. and the assessee immediately deposited a sum of rs. 2.45 lacs out of rs.2.50 lacs in the bank on the same day for making the payments to his suppliers which shows that there was no otherwise intention of the assessee to violate the provisions of law. it was also observed that since the assessee was not having sufficient time and funds, therefore, the cash loan was taken to avoid further delay in process of clearing the cheque and at the time of taking cash loan the assessee was not aware about the tt of 10000 us dollar otherwise he would not have taken the cash loan from his brother-in-law shri mukesh manwani. in view of these peculiar circumstances, the tribunal held that the cash loan was taken by the assessee in the exceptional circumstances and it is a case of reasonable cause which was proved by the assessee. consequently, the tribunal deleted the penalty imposed by the joint cit and confirmed by the cit (a). 3. the question referred are interconnected. we are required to adjudicate upon whether noncompliance of the provisions of section 269ss of the act of 1961 necessarily imposes liability on the assessee for payment of penalty by virtue of section 271d of the act of 1961 or the assessing authority has jurisdiction and authority to consider the facts and circumstances in which the assessee made default of non-complying the provisions of section 269ss of the act of 1961 and can waive the penalty. the relevant provisions, which are necessary for adjudication of the question referred, read thus- '269ss. no person shall, after the 30th day of june, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,- (a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or (b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is (twenty) thousand rupees or more :' '271d. (1) if a person takes or accepts any loan or deposit in contravention of the provisions of section 269ss, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted) (2) any penalty impossible under sub-section (1) shall be imposed by the (joint) commissioner.)' '273-b. notwithstanding anything contained in the provisions of (clause (b) of sub-section (1) of) (section 271, section 271-a, (section 271aa), section 271-b (section 271ba), (section 271-bb), section 271-c, section 271-d, section 271e, (section 271f, (section 271-g), clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 271-a, sub-section (1) of section 272aa) or (sub-section (1) of section 272a, sub-section (1) of section 272aa) or (sub-section (1) of section 272bb or) clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure).' 4. as per section 269ss of the act of 1961 after 30th day of june, 1984 no person is allowed to take of accept from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, of amount of twenty thousand rupees or more. section 271d of the act of 1961 speaks of levy of penalty of a sum equal to the amount of loan or deposit so taken or accepted in contravention of the provisions of section 269ss. a plain reading of section 271d gives an impression that if there is a contravention of the provisions of section 269ss, the assessee shall be liable to pay the penalty equal to the amount which has been taken as loan or deposit and there is no discretion left with the assessing authority to waive the penalty considering the facts and circumstances in which the loan or deposit was taken by the assessee. but when we read section 271d with section 273b of the act of 1961 which begins with non- obstinate clause 'notwithstanding anything contained in the provisions of section 271d', it is clear that in spite of the provision of section 271d, the enactment following, namely, 'no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.' will have its full operation. section 273-b permits the assessing authority not to impose a penalty provided under section 271d of a sum equal to the amount of loan or deposit taken or accepted in spite of the breach of provisions of section 269ss wherein the person has accept a loan or deposit or the aggregate amount of such loan or deposit by way of account payee cheque or account payee bank draft, if the assessee or the person proves before the assessing authority that there was a reasonable cause for not accepting the amount of loan or deposit by way of account payee cheque or account payee bank draft. under section 273b a judicial discretion is left with the assessing authority not to levy a penalty under section 271d if the authority is satisfied that there was a reasonable cause for not complying with the provisions of section 269ss of the act of 1961. 5. in the present case the tribunal has found that the assessee is an exporter and was in urgent need of the money for complying with the time bound supplies and,therefore, he took a loan of rs. 2,50,000/- (rs. two lac fifty thousand) from his brother-in- law mukesh manwani. out of the loan so taken, an amount of rs. 2,45,000/-(rs. two lac forty-five thousand) was immediately deposited in the bank, which indicates that the amount of loan, in fact, was received by him from mukesh manwani. it was only to meet the emergent need of time bound supplies; the loan was taken as he did not have sufficient time and funds and, that there was no intention to violate the provision of section 269ss of the act of 1961. the tribunal, in these circumstances, has arrived at a conclusion that the cash loan was taken by the assessee in the exceptional circumstances and that it is a case of reasonable cause, as a consequence thereof set aside the penalty imposed by the revenue authorities. as we have already held that on a reasonable cause being shown, the assessing authority has jurisdiction not to impose the penalty and, therefore, in our opinion, the tribunal has acted in accordance with the law in waiving the penalty imposed on the assessee by the revenue authorities. 6. in view of the aforesaid, the questions are answered in favour of the assessee. the appeal is dismissed.