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A.C.i.T. Vs. Vinman Finance and Leasing Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Vizag
Decided On
Judge
AppellantA.C.i.T.
RespondentVinman Finance and Leasing Ltd.
Excerpt:
1. penalty of rs. 3,80,000/- levied by the assessing officer under section 271e of the income tax act having been cancelled by the commissioner of income tax (appeals), the revenue preferred the appeal before the tribunal, whereas the assessee company filed cross-objections supporting the order of the first appellate authority.2. the members of the division bench, who originally heard the matter, differed in their views; the learned judicial member cancelled levy of penalty by observing that the initiation of penalty proceedings subsequent to the completion of assessment is bad in law apart from the fact that the transaction is genuine and the default was on account of ignorance of relevant provisions of law which constitutes a reasonable cause; on the other hand, the learned accountant.....
Judgment:
1. Penalty of Rs. 3,80,000/- levied by the Assessing Officer under Section 271E of the Income Tax Act having been cancelled by the Commissioner of Income Tax (Appeals), the Revenue preferred the appeal before the Tribunal, whereas the assessee company filed cross-objections supporting the order of the first appellate authority.

2. The Members of the Division Bench, who originally heard the matter, differed in their views; the learned Judicial Member cancelled levy of penalty by observing that the initiation of penalty proceedings subsequent to the completion of assessment is bad in law apart from the fact that the transaction is genuine and the default was on account of ignorance of relevant provisions of law which constitutes a reasonable cause; On the other hand, the learned Accountant Member was of the view that all the parties to whom repayments were made are residing in Srikakulam and have proper banking facilities and in the absence of any proof to the contrary, it cannot be considered that the company could not make payment by cheque. The assessee being a finance and leasing company, it is duty bound to abide by the provisions of the Act and thus merely on account of the fact that the transaction is genuine, it cannot be said penalty is not leviable. On account of difference of opinion, the following points of difference were placed before the Hon'ble President of the I.T.A.T. with a request to nominate a Third Member to resolve the issues.

(1) Whether the cancellation of the penalty imposed Under Section 271E is justified by the CIT(A) under the facts and circumstances of the case or not? (2) Whether the cross-objections filed by the assessee are to be allowed under the facts and circumstances of the case or not? Though the Hon'ble President nominated himself to hear the case as Third Member, it was later re-nominated by directing the Judicial Member of Visakhapatnam Bench to hear the case as a Third Member.

Accordingly, I have posted the case today.

3. I have heard the learned Departmental Representative as well as the learned Counsel for the assessee in this regard and carefully perused the record. The assessee, as the name suggests, is a finance and leasing company established during the previous year relevant to the assessment year 1994-95. The company accepted certain deposits in cash and also repaid certain amounts in cash in excess of Rs. 20,000/- in contravention of the provisions of Sections 269T and 269SS of the Act.

The assessee declared income of Rs. 55,740/- for the assessment year 1997-98 and the assessment was completed on 24.3.2000. In the 'Note not to the assessee' the Assessing Officer observed that there were certain deposits which were accepted in cash in contravention of provisions of Section 269SS of the Act. Similarly, repayments were also made in cash contravening the provisions of Section 269T of the Act. This information having been passed on to the Additional Commissioner of Income Tax, Visakhapatnam, penalty proceedings were initiated by the A.C.I.T., Visakhapatnam, and a show cause notice was issued to the assessee on 1.5.2000 fixing the date of hearing on 15.5.2000 calling upon the assessee company to show cause as to why penalty under Section 27 IE of the Act should not be levied for contravention of the provisions of Section 269T of the Act referable to the repayments of deposits aggregating to Rs. 15,10,934/-. In response thereto, the assessee contended that it had started business only in the financial year 1993-94 and accepted as well as repaid deposits in cash from/to persons living in rural areas on account of ignorance of the provisions of the Act. It was submitted that the offence was committed for the first time and most of the depositors are purely agriculturists living in rural areas where no banking facilities are available apart from the fact that the depositors insisted upon cash payment and thus there was a bona fide cause for making payments by cash. It was further contended that the company mainly concentrated on the development of business only in the initial stage and the management was not aware of the consequences of the I.T. Act. The depositors have made the deposits only on the condition that as and when they needed money, the same has to be repaid at the door step and thus cash payments were made on insistence of the depositors. Further, most of the depositors were old aged and sick persons and cannot move from the village to receive the deposits from the assessee company as and when the necessity arises for their medical care. With this intention, the depositors have made the deposits and withdrawn the same even before the due date of maturity and in such circumstances, repayment was made in cash. Therefore, it was prevented by a reasonable cause in not making payments by cheque.

Hence, the Assessing Officer was requested to exercise his discretionary power to drop the penalty proceedings.

4. The Assessing Officer observed that out of the total repayments of Rs. 15,10,934/-, a sum of Rs. 11,30,934/- can be said to have been paid due to exceptional circumstances. However, with regard to the balance amount of Rs. 3,80,000/-, the Assessing Officer was of the view that the depositors resided in urban area where banking facilities are available and therefore there is no reasonable cause for the violation of the provisions of Section 269T of the Act. The repayments, which were taken into consideration for the purpose of levy of penalty, are as follows.------------------------------------------------------S. No. Name of the Depositor Amount Repaid (Rs.)------------------------------------------------------ The Assessing Officer observed that the very contention of the assessee with regard to non-availability of banking facility would highlight that the assessee was conscious of the provisions of the Act, but did not follow due to circumstances best known to it. Further, all the Directors of the company are well-educated and having taken up a big venture they ought to have been aware of the provisions of the Income Tax Act. He thus concluded that ignorance of law cannot be considered as a reasonable cause in the above circumstances. He accordingly levied penalty of Rs. 3,80,000/- on the ground that the depositors are educated and residing in Srikakulam town where the banking facilities are available.

5. On an appeal filed by the assessee, the first appellate authority observed that the assessee had no intention to violate the provisions of law and the payments were made in cash due to bona fide circumstances which can be noticed from the fact that the Assessing Officer had not levied penalty with regard to several payments made in cash. He also observed that all the depositors are with village and agricultural background who lack banking facility and thus assessee could not forcibly repay the amount in cheques. Therefore, the payments made by cash are supported by reasonable cause. He accordingly cancelled penalty levied by the Assessing Officer.

6. On an appeal filed at the instance of the Revenue, learned Accountant Member noticed that the depositors were not from village background and a finance company is duty bound to abide by the provisions of law, whereas the learned Judicial Member observed that they were all from rural background where there is no banking facility and upon their insistence cash payments were made. Genuineness of the transaction coupled with ignorance of relevant provisions of law was held to constitute a reasonable cause.

7. Learned Counsel appearing on behalf of the assessee while supporting the order of the learned Judicial Member submitted that the four depositors to whom repayments were made by cash filed confirmation letters before the Assessing Officer wherein they have explained the reasons for insisting upon cash payments. Adverting my attention to the written submissions filed before the learned CIT(A), learned Counsel submitted that though the parties were residing in villages, for practical convenience, town address was mentioned by them and the learned Accountant Member has not properly appreciated the fact while observing that they all belong to Srikakulam wherein banking facility is available. In the case of Smt. V. Sujatha, she categorically stated that she was staying in a village called Dandu Gopalapuram in Srikakulam District and there was no banking facility in her village.

Though she looks after agricultural operations in her village, her husband was staying in Vijayawada and thus for all practical convenience his address was given while making the deposit. However, she was residing in a village where there was no banking facility and therefore she insisted upon repayment in cash. Similarly, Smt. V.Kanthamma and Shri C.D. Gupta were residing in a village, but for practical convenience town address was mentioned while making the deposit. Since they were residing in village, repayment by cash was insisted upon and accordingly amounts were received in cash. In the case of Shri K. Swamy Setty, confirmation letter was filed stating that he suddenly suffered heart-attack in his native place and on account of urgency his family members requested telephonically for repayment of the money by cash. The learned Counsel submitted that these factors were not properly appreciated by the learned Accountant Member, whereas, learned Judicial Member, while concluding that the depositors are from villages and have no banking facility and the repayments in cash were on account of a reasonable cause, appreciated the facts in a correct perspective and hence the order of the learned Judicial Member deserves to be upheld. In support of his contention that if the transactions are genuine and payments were made on account of insistence of the parties coupled with the fact that the innocent mistake of payment by cash was ignorance of relevant provisions of law - the plea of reasonable cause deserves to be accepted, in the absence any evidence to the contrary, reliance was placed upon the I.T.A.T., Ahmedabad Bench decision in the case of Shreenath Builders v. Dy. CIT (2000) 66 TTJ (Ahd.) 113.

8. On the other hand, learned Departmental Representative submitted that only genuine transactions would fall for consideration under Section 269SS/269T of the Act, as otherwise, they can be considered under Section 68 of the Act itself and thus merely on account of the fact that the transactions were genuine, it cannot be taken out of the sweep of Section 27 IE of the Act and such interpretation would make the provisions of Section 271D and 271E of the Act as otiose. He further submitted that penalty proceedings need not be initiated during the course of assessment proceedings and in this regard placed reliance upon the order of the I.T.A.T., SMC Bench, Visakhapatnam, in the case of Dr. D. Siva Sankara Rao - HUF v. I.T.O. ITA No. 7/Vizag/2000, dt.

16.3.2007. He thus supported the order passed by the learned Accountant Member.

9. Upon giving careful consideration to the facts and circumstances of the case, I am of the view that the learned Judicial Member was justified in cancelling the penalty on the ground of reasonableness of explanation tendered by the assessee.

10. However, cancellation of penalty on technical grounds is not justified. In my considered opinion, penalty proceedings under Section 271E of the Act need not be initiated during the course of assessment proceedings as could be seen from the plain language of the provisions of Section 275(1)(c) of the Act. Similar view taken in the case of Dr.

D. Siva Sankara Rao (supra). Similarly, by taking analogy from the observations of the Apex Court in the case of Attar Singh Gurmukh Singh v. I.T.O. , the provisions of Section 269SS and 269T of the Act having been intended to regulate business transactions and to prevent the use of unaccounted monies or to reduce chances of use of black-money for business transactions, even genuine transactions cannot be taken out of the sweep of the provisions of the Act if the payments are not routed through the specified channels unless and until exceptional circumstances are proved. While considering the provisions of Section 40A(3), the Court observed as under: ...The terms of Section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded.

Genuine and bona fide transactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the manner prescribed in Section 40A(3) was not practicable or would have caused genuine difficulty to the payee.

In the light of the principle laid down by the Apex Court supra, merely because the transaction is genuine, it cannot be taken out of the sweep of Section 269T/271EoftheAct.

11. However, the fact remains that the depositors have stated before the Assessing Officer that they insisted upon cash payment due to certain compelling circumstances and they have also explained as to the reasons for giving a separate address for the purpose of making a deposit though three out of the four were actually residing in a village where there were no banking facilities. The statement of the parties and the explanation of the assessee with regard to the compelling circumstances for making payment in cash was not found to be false. In other words, there is no evidence on the record of the Assessing Officer to disprove the claim of the assessee that the parties were not having banking facilities. The learned Counsel has also submitted that out of the four persons two persons have made the deposits in cash, but the Assessing Officer did not choose to levy any penalty under Section 27ID of the Act. It is also necessary to notice that in this very case for assessment year 1997-98, penalty levied by the Assessing Officer under Section 271D of the Act was considered by the I.T.A.T., Visakhapatnam Bench, wherein penalty levied by the Assessing Officer was cancelled on the ground that most of the depositors are from villages and not so educated to utilize banking facilities.

12. Even the plea of the assessee with regard to ignorance of provisions of law was rejected by the Assessing Officer on the limited ground that the Directors of the Company are well-educated and they ought to be aware of the provisions of the Act. Further, the plea of non-availability of the banking facility was in itself taken as the pointer to hold that the assessee was conscious of the provisions of the Act, ignoring the fact that though the assessee pleaded ignorance of the provisions of the Act, in response to the penalty proceedings he was advised to take the benefit of the factual matrix with regard to non-availability of the banking facility as a reasonable cause. It is evident from the order passed by the Assessing Officer as well as the order passed by the Accountant Member that the plea of non-availability of banking facility as well as ignorance of the provisions of the Act were brushed aside without any evidence to prove to the contrary.

13. The provisions of the Income Tax Act are amended so frequently that it is impossible not only for the tax payer, but also the tax experts to know all the provisions of the Act at any given point of time, which is aptly summarized in the following cases to hold that ignorance of law can be taken as an excuse and penalty should not be levied merely on the ground that the assessee ought to have known the correct provisions of law.

(i) Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (at pg.339) ...Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law. Over a hundred and thirty years ago, Maula J. pointed out in Martindale v. Falkner [1846] 2 CB 706: "There is no presumption in this country that every person knows the law: it would be contrary to common sense and reason if it were so".

Scrutton L.J. also once said: "It is impossible to know all the statutory law, and not very possible to know all the common law." But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam [1937] AC 473: "...the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application." It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25^th June, 1970.

That the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specializing in this field, is a well known fact. It is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specializing in this filed, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making reference to the history of the enactments. In such circumstances, it would be a travesty of truth and justice to hold that the assessee knew or ought to have known the correct law and comply therewith, even though, in fact, he was not aware of the provisions.

It is well established by the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 UR 26 that the liability to pay penalty does not arise merely upon proof of default in complying with the statutory requirements and an order imposing penalty for failure to carry out a statutory obligation being the result of a quasi-criminal proceeding, 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, and penalty will also not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform the statutory obligation, it is stated, is a matter of discretion of the authority concerned to be exercised judicially on a consideration of all relevant circumstances and even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose it 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.

(iii) Kaushal Diwan v. I.T.O. [1983] 3 ITD 432 (Delhi) (at pp 435 - 438) ...It was, thus, admittedly a petty case. It cannot be considered that each assessee, whether small or big, must rush to an income-tax specialist, practicing as a lawyer or a chartered accountant, for his income-tax assessment especially when the income earned or being earned by him was too low. It cannot indeed be such a policy of the Government. In fact, on the other hand, an effort was being made to simplify the law so that the people could pursue their assessments before the department in a simple manner and that they do not have to necessarily depend on the professionals.... Again, it is not each default that must be punished and in this respect, support can be had on the observations of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa ...The old theory that ignorance of law is no excuse does not hold good in view of the complexity of laws in modern days. It is impossible for any one let alone well informed people to know all the technicalities of law. A mere breach of law which is venial in character will not lead to the inference that the assessee wantonly committed the default thereby making himself liable for the penal consequences. One has to judge the matter by taking into account the totality of circumstances. The case was rightly called as petty and I am of the firm opinion that the facts of the case do not justify levy of fine. Accordingly, I agree with the learned Accountant Member.

14. Here is a case where the assessed income is Rs. 59,210/- only. It is difficult to presume that assessee had received deposits and repaid them in cash, totaling to Rs. 25 lakhs (approximately), with the knowledge and threat of exposing itself to levy of penalty equivalent to the amount transacted, which works out to more than 40 times of the assessed income, 15. Under the circumstances, I agree with the conclusions of the learned Judicial Member that in view of the claim of ignorance of provisions of law coupled with the bonafide reasons for making payment in cash, no case was made out for levy of penalty since the explanation constitutes a reasonable cause within the meaning of Section 273B of the Act. In other words, the penalty imposed under Section 271E is not justified and the cross-objections filed by the assessee deserve to be allowed.

The matter now be placed before the Regular Bench for giving affect to this order in accordance with the majority opinion.

In the Income Tax Appeal No. 03/Vizag/2002, for the assessment year 1997-98, in the case of ACIT v. Vinman Finance & Leasing Limited, Srikakulam, the Accountant Member has proposed the order, which was placed before the ld. Judicial member and the ld. Judicial Member has dissented the same, by passing a separate order. Both the orders are placed before your Honour. Your Honour is requested to refer the following questions of difference to the Third Member: (i) Whether the cancellation of the penalty imposed Under Section 271-E is justified by the CTT(A) under the facts and circumstances of the case or not? (2) Whether the cross objections tiled by the assessee are to be allowed under the facts and circumstances of the case or not? 1. The appeal of the Revenue as well as the cross objection filed by the assessee arise out off the common order of the CIT (A) dated 5th October 2001.

2. The brief facts off the case are that the assessee is a Finance Company and the main nature of business is to collect deposits from various deposit holders and the deposits received were given to various parties on loan. Thee Assessing Officer noted during the course of assessment proceedings that the assessee has repaid the deposits in sums of Rs. 20,000/- and above to different persons to the extent of Rs. 15,10,934/- violating the provisions of Section 269T of the Income Tax Act. Therefore after asking for the explanation of the assessee in respect of four parties where by the total deposit of payment was to the extent of Rs. 3,80,000/-, levied penalty Under Section 271E and noted that the assessee is from Srikakulam Town therefore the assessee could have been repaid the deposits by way of cheque as per the provisions of Section 269T.3. The assessee went in appeal before the CIT (A), before the CIT (A) it was contended that all the deposit holders are from the rural areas and some (sic) them were residing in the outskirts of Srikakulam Town who do not have any bank accounts and they happen to be with agricultural background. These deposits holders do not have any banking facilities therefore insisted for the repayment in cash, the assessee was compelled to return the said deposits in cash. The assessee being new in the business, in order to gain confidence from the deposit holders he paid the deposits without the knowledge of penalty provisions of the Income Tax Act. Thus the assessee has committed a bonafide mistake in returning deposits in cash; there was no intention to violate the provisions of the Act.

5. Before us the learned DR submitted that there was no reasonable cause for the assessee for making payment of these deposits in cash.

The parties are putting nearby Srikakulam, as per the provision of Section 269T it was mandatory on the part of the assessee to repay the loan or the deposit by an account payee cheque or account payee draft if it is Rs. 20000/- or more. The provision of Section 271E makes it mandatory to levy the penalty on the assessee in case the party made no compliance under Section 269T. The assessee has not given any reasonable cause for the same, therefore the provisions of Section 273 B are not applicable and the penalty is livable.

6. The learned AR on the other hand relied on the order of the CIT(A) and stated that the parties demanded payment in cash, therefore the deposits were to be paid in cash. Further it was submitted that the management was not aware about the provisions of Income Tax Act and thus it was prevented by sufficient cause to make the payment through cheque, the genuineity of the transaction was not denied therefore no penalty can be imposed.

7. We have considered the rival submissions, perused the material on record. We find that the assessee made default Under Section 269T by not paying the deposits through cheques or bank drafts as is required Under Section 269T, as in each case the amount of deposit repaid was more than Rs. 20,000/- and the total repayment was Rs. 3,80,000/-.

Therefore in our opinion, the CIT (A) was not correct in Law in deleting the penalty imposed on the assessee. The assessee has made repayment to the deposit contrary to the Section 269T for a sum of Rs. 15,10,934/-, and since the Assessing officer found that the parties to whom repayment to the extent of Rs. 11,30,934/- were residing in, the remote area where banking facilities were not available but a in the case of lour parties for which penalty have been imposed these parties were residing in urban area and the banking facilities were available.

In our opinion, the plea that the assessee was not aware of about the provisions of Law cannot toe reasonable ground for not complying with the provisions of Section 269 (sic). The assessee has committed a default. No reasonable cause was explained; all the four parties were putting up in Srikakulam where proper banking facilities were available. Even no evidence was filed either before the tan authorities or before us which may prove that no banking facilities were available where the parties were putting up. The Assessing Officer in our opinion was fair enough not to impose penalty in respect of the sum of Rs. 11,30,934/- where he found that the repayment of deposit related to the depositors putting up in remote area. The assessee is a Finance and Leasing Public Limited Company, and therefore it is duty bound to abide by the provisions of the Income Tan Act. We therefore, set aside the order of the CIT(A) and restore the order of the Assessing officer imposing penalty on the assessee in respect of cash repayment of the deposit for a sum of Rs. 3,80,000/- Penalty is deterrent so that a person may (sic) by the Law of the country.

10. We have considered the rival submissions, perused the material on record.

11. Ground Nos. 1 & 4 are general in nature and does not require any adjudication.

12. Ground No. 2 the objection raised by the assessee were merely to support the order of the CIT(A). We have already reversed the finding of the CIT(A). The assessee was not prevented by reasonable cause for repaying the loans and deposits in cash as held by us in I.T.A. No.03/Vizag/2002 herein above therefore we dismiss the cross objection No.13. The ground No. 3 in the cross objection the assessee has taken the plea that as long as the transaction is a genuine one and when the assessee is able to substantiate that there was a reasonable cause, penalty Under Section 271E is not justified. We have already held that the assessee has not substantiated that the default was made due to reasonable cause. The genuinety of the transaction can be proved only when the addition are to be made Under Section 68 of the Act when the repayment is being made as A.O., cannot make any addition deeming to be the income of the assessee. Although in the cross objection the assessee in ground No. 3 stated that in the recent judgement the Hon'ble Hyderabad Bench Tribunal has held in this regard, but no copy of such judgement was filed before us. We therefore do not find any merit in the Cross Objection of the assessee, we accordingly dismiss the same.

14. In the result, the appeal of the Revenue stand allowed, while the Cross objection of the assessee stand dismissed.

1. The ITA No. 03/V/02 is filed at the instance of Revenue against Sic order of learned CIT(A) and the assessee is also in Cross Objection in CO No. 12/V/2004.

2. The Assessing Officer while passing the Assessment Order Under Section 143(3) of the Act for the Assessment Year 1998-99 after multiple hearing of the assesses vide order dated 24-3-2000 has arrived at total taxable income fcrRs.59,210/-. The Assessing Officer has put up a note along with Assessment Order.

3. In the order dated 30-10-2000 the Assessing Officer has levied the penalty of Rs. 3,30,000/- being equal amount of repayment of deposits in cash violating the provisions of Section 271E of the Act.

4. The Assessing Officer has brought on record h the order dated 30-10-2000 that during the scrutiny proceeding in case of assessee for the Assessment Year 1997-98 it was noticed that the assessee company has repaid the deposit in cash for Rs. 15,10,934/- violating Section 269T of the Act. Further, the Assessing Officer found except Rs. 3.8 lakhs paid by the assessee to the persons who are residing in urban area where banking facilities are available without any reasonable cause for violation of provisions of Sec269T, tie Assessing Officer while rely fig on the order 83 ITR 26 provisions of Section 273B.5. In the appeal before the learned CIT(A), the learned CIT(A) allowed the appeal of the assessee while canceling the penalty levied by the Assessing Officer.

7. The learned Sr. DR submitted before the Hon'ble Bench that the assessee during the Assessment Year 1997-98 has accepted deposits and repaid the deposits Rs. 15,10,934/- violating the provisions of Section 269SS and 269T. The Assessing Officer while testing the penalty proceeding has considered the facts on record circumstances and reasonable cause while arriving at penalty for Rs. 3.8 lakhs and therefore the penalty may please be sustained.

7.1. The learned Sr. Counsel of the assessee submitted before us and brought to our notice the order of learned Bench of the Tribunal in ITA No. 18/V/02 wherein the appeal of the Revenue was dismissed relates to the acceptance of deposits Under Section 269SS and thereby penalty Under Section 27ID in the case of assessee and further submitted that this is the first year of the assessee and assessee was not having a complete knowledge of the various law, the transactions of accepting the deposits and payments were not doubted by the Revenue during the regular assessment and no addition was made Under Section 68 of the Act Most of the persons to whom the payments or deposits made were mostly agriculturists Irving in rural areas but there Is lack of banking facilities. The payment was made with the bonafide intention in need of the depositors as per Bier request and relied on the decisions 255 ITR 258 (SC), 80 ITD 388, 263 ITR 487, 66 TTJ 113, 185 ITR 575 and 83 ITR 26 (SC) and submitted that the mistake on the part of assessee for payment of deposits as per the request of depositors is out of ignorance of the law being first year and such innocent mistakes may be treated as bonafide and reasonable and no penalty is called for.

9. The teamed Sr. DR has not brought to our notice that in the assessment Under Section 143(3) the addition was made Under Section 68 of the Act therefore deposits were termed as genuine one and the some was paid at the request of the depositor by the assessee in their need and request since most of the depositors were from rural areas being agriculturalists and does not have proper approach to the banking and therefore we find there is a reasonable cause Under Section 273B for the assessee. Since the assessee admitted that this is first year of the business and payment of deposits were made en the request of the depositors hailing from rural areas therefore the penalty for technical reason cannot holds good.

10. The Assessing Officer has not initiated the penalty proceeding Under Section 271E of the Act while finalizing the assessment therefore it is beyond the jurisdiction of the Assessing Officer to initiate penality proceedings.

11. The assessee has re led on foe decision i.e. 66 TTJ 113 (Ahd.) and 263 ITR 487 which are in favour of the assessee. The learned Bench of the Ahmedabad Tribunal in 66 TTJ 113 has opined "genuineness of transaction is not doubted by the Department in such circumstances ignorance of relevant provisions of the law constituted a reasonable cause within foe meaning of Section 273B the penalty provisions of Section 271D and 271E r.w.s. 273D confirm discretion on authorities to levy or not to levy the penalty". Transactions in question where bonafide made in the course of die business penalty cancelled. The views get support from the order of jurisdictional High Court 185 ITR 595 (AP).

12. In the result, we dismiss me appeal of the Revenue while allowing the appeal of the assessee.

Since the appeal of the Revenue is dismissed, the C.O. filed by the assessee on the same ground supporting the order of teamed CIT(A), the CO is allowed.


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