2011-VIL-907--DT
Income Tax Appellate Tribunal, MUMBAI
IT APPEAL NO. 1799 (MUM.) OF 2011
Date: 13.05.2011
SALGAON SANMITRA SAHAKARI PATHPEDHI LTD.
Vs
ADDITIONAL COMMISSIONER OF INCOME-TAX, WARD-17(3)
Haridas Bhat for the Appellant.
Songate for the Respondent.
BENCH
P.M. JAGTAP, VIJAY PAL RAO, JJ.
JUDGMENT
P.M. Jagtap, Accountant Member. –
This appeal filed by the assessee is directed against the order of the learned CIT(Appeals)-29, Mumbai dated 21-12-2010 whereby he confirmed the penalty of Rs. 23,29,081 imposed by the Assessing Officer under section 271E.
2. The relevant facts of the case giving rise to this appeal are that the assessee is a Cooperative Credit Society. As noted by the Assessing Officer from the audit report filed with the return of income, the assessee had repaid deposits in cash exceeding Rs. 20,000 to various depositors totalling to Rs. 23,29,081. According to him, the said repayment of deposits was made by the assessee in contravention of the provisions of section 269T and accordingly a notice was issued by him requiring the assessee to show cause as to why penalty under section 271E should not be imposed. In reply, the following submissions were made on behalf of the assessee vide letter dated 5-3-2009 :
"Co-operative credit societies are registered under the Maharashtra Cooperative Societies Act, 1960. The Credit Societies are like banking institutions. They can accept savings, daily recurring as well as fixed deposits from the public. They can have savings account of members. The loans can be given to members, i.e. they have to make the person as it's member before disbursement of loan. The societies normally open the savings account of it's depositors and on maturity of fixed deposit credit to the depositors saving bank account. The depositors withdraws the money from his savings account. As they are operating like banks, their transactions also come under the banking purview. The only difference between the banks and co-operative societies is the banks are having additional license from Reserve Bank which is not required in cooperative credit society. Hence the payment made to depositors of more than Rs. 20,000 in cash is not a payment but it is their withdrawal from savings account which is permitted.
Accordingly, as per information received from our clients, they have not repaid deposit in cash exceeding during 1-4-2005 to 31-3-2006 they have given a statement that showing the details of payments made in cash above Rs. 20,000 during the period 1-4-2005 to 31-3-2006 by transferring to the members Saving Account."
The above explanation offered by the assessee was not found satisfactory by the Assessing Officer. According to him, the assessee was neither a banking company nor a cooperative bank as per the meaning assigned to the said terms in the Banking Regulation Act, 1949 and it was, therefore, not covered within the exceptions given in proviso to section 269T. He, therefore, held that the repayment of deposits in cash exceeding Rs. 20,000 to various depositors totalling to Rs. 23,29,081 was made by the assessee in contravention of the provisions of section 269T and penalty equal to the amount of deposits so repaid in cash was imposed by him under section 271E.
3. The penalty imposed by the Assessing Officer under section 271E was challenged by the assessee in an appeal filed before the learned CIT(Appeals). During the course of appellate proceedings before the learned CIT(Appeals), a registration certificate issued by the Assistant Registrar, Cooperative Society, Mumbai was produced by the assessee stating that it was classified as a cooperative bank as per section 12(1) of the Maharashtra Cooperative Societies Act. Relying on the said certificate, the assessee contended that the provisions of section 269T were not applicable in its case as per the proviso to the said section. According to the learned CIT(Appeals), the assessee, however, was not a cooperative bank as per the meaning assigned to in Part V of the Banking Regulation Act, 1949 and it was only a cooperative credit society. He, therefore, held that it was not covered by the exceptions given in Second proviso to section 269T and the provisions of section 269T were clearly applicable in its case. He held that since there was a clear violation of the provisions of section 269T on the part of the assessee in making repayment of deposits in cash in the sums exceeding Rs. 20,000, penalty under section 271E was clearly attracted. Accordingly, the penalty imposed by the Assessing Officer under section 271E was confirmed by him. Aggrieved by the order of the learned CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
4. The learned counsel for the assessee at the outset invited our attention to second proviso to section 269T which provides that nothing contained in section 269T shall apply to repayment of any loan or deposit taken or accepted inter alia from a cooperative bank. He then invited our attention to a copy of registration certificate issued by the Assistant Registrar, Cooperative Society, Mumbai on 31-3-1969 placed at page 7 of the paper book along with English translated version thereof placed at page No. 6 to point out that the assessee society was classified as a cooperative bank as per section 12(1) of the Maharashtra Cooperative Society Act, 1960. He contended that the case of the assessee thus was covered by the second proviso to section 269T and the requirements of the said section were not applicable in its case. He then invited our attention to the details of repayment of deposits made in cash in the sums exceeding Rs. 20,000 placed at page Nos. 3 and 4 of his paper book to point out that the amounts repaid were initially deposited in the saving bank account of the depositors maintained with the assessee society and the depositors thereafter had withdrawn the amounts so deposited from their bank accounts. He contended that the case of the assessee thus was covered even in the exception provided in the first proviso to section 269T which stipulates that the repayment by a branch of cooperative bank can also be made by crediting the amount of deposit to the saving bank account of the depositors. He contended that keeping in view these exceptions provided in the statute coupled with the fact that all the repayments in question were made by the assessee on account of genuine deposits taken from its own members, the assessee entertained a bona fide belief that the provisions of section 269T were not applicable in its case. He contended that this bona fide belief constituted reasonable cause for the contravention of provisions of section 269T on the part of the assessee and penalty under section 271E, therefore, is not attracted.
5. The learned DR, on the other hand, strongly relied on the orders of the authorities below in support of the Revenue's case that there being repayment of deposits in cash in the sums exceeding Rs. 20,000 by the assessee in clear contravention of the provisions of section 269T, penalty under section 271E is attracted.
6. We have considered the rival submissions and also perused relevant material on record. It is observed that the penalty has been imposed by the Assessing Officer and confirmed by the learned CIT(Appeals) in the present case under section 271E for the repayment of deposits made by the assessee in contravention of the provisions of section 269T which reads as under :
"269T. No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if –
(a) The amount of the loan or deposit together with the interest, if any, payable thereon, or
(b) The aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits.
Is twenty thousand rupees or more :
Provided that where the repayment is by a branch of a banking company or cooperative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid:
[Provided further that nothing contained in this section shall apply to repayment of any loan or deposit taken or accepted from-
(i) Government;
(ii) any banking company, post office savings bank or co-operative bank;
(iii) any corporation established by a Central, State or Provincial Act;
(iv) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(v) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.]"
7. As held by Hon'ble Supreme Court in the case of Asstt. Director of Inspection v. Kum. A.B. Shanti [2002] 255 ITR 258/122 Taxman 574, the undue hardship of the provisions of section 271D/271E is substantially mitigated by the inclusion of section 273B providing that if there is a genuine and bona fide transaction and the tax payer could not get loan or deposit by account payee Cheque or DD for some bona fide reason, the authority vested with the power to impose the penalty has a discretion not to levy the penalty. The said decision of Hon'ble Apex Court in the case of Kum. A.B. Shanti (supra) thus makes it quite clear that the provisions of sections 269T and 271E are to be read with the provisions of section 273B and an authority vested with the power to impose penalty has to use its discretion to impose or not to impose the same after taking into consideration the reasonable cause put forth by the assessee for his failure to comply with the requirements of section 269T coupled with the genuineness and bona fide of the transactions in order to avoid any undue hardship to the assessee arising out of the provisions of section 271E. It is well settled that reasonableness of cause will depend upon the facts and circumstances of each case. In the present case, the assessee has pleaded the bona fide belief entertained by it that the deposits repaid by it were not covered by the provisions of section 269T as a reasonable cause for its failure to comply with the requirements of the said provision. In this regard, it is observed that facts and circumstances of the case were such that the assessee entertained such bona fide on various counts.
8. First of all, the assessee society was classified as 'cooperative bank' under section 12(1) of the Maharashtra Cooperative Society Act, 1960 as per the registration certificate issued by the Assistant Registrar, Cooperative Society, Mumbai and the said classification, in our opinion, was sufficient for the assessee to entertain a belief that the provisions of section 269T were not applicable in its case as per the second proviso and in any case, the repayment of deposits having been made by it by crediting the amount of deposits to the saving bank account of the concerned depositors, there was sufficient compliance of the provisions of section 269T as per the first proviso. Although this belief entertained by the assessee turned out to be a mistaken belief going by the meaning assigned to "cooperative bank" in Part V of the Banking Regulation Act, 1940 as provided in Explanation (ii) to section 269T, we are of the view that there is sufficient basis to show that the said belief was a bona fide belief. Secondly, all the deposits in question in the present case were repaid by the assessee society to its own members and considering that there is a complete mutuality between the society and its members, the society was of the belief that the said depositors which were its own members could not be considered as "any other person" which connotes a different or a distinct person to attract the provisions of section 269T. A useful reference in this regard can be made to the decision of Hyderabad Bench of ITAT in the case of Dillu Cine Enterprises (P.) Ltd. v. Addl. CIT [2002] 80 ITD 484 wherein the contention of the assessee in the context of section 269SS that the words "any other person" did not denote the director of the company was found to be acceptable by the Tribunal in view of the legislative intention explained in Board's Circular No. 387, dated 6-9-1994 and relying on the same, the Tribunal proceeded further to observe that the term "any other person" in the context of introduction of section 269SS means persons who are not very intimately or very closely connected to the assessee. According to us, these observations of the Tribunal are good enough to show that the view of the assessee society that its members being not any separate/distinct persons as contemplated in section 269T, the deposits repaid to them were not covered by the said provisions was a possible or conceivable view and the belief entertained by it on the basis of such view was a bona fide belief. As such, considering all the facts and circumstances of the case, we are of the view the assessee society had entertained bona fide belief that the deposits repaid by it to its members were not covered by the provisions of section 269T and this bona fide belief coupled with the fact that the deposits were genuine and were also accepted and repaid in the regular course of business constitutes a reasonable cause for it's failure to comply with the requirements of section 269T. In that view of the matter, we find no justification in the action of the learned CIT(A) confirming the penalty imposed under section 271E and reversing his impugned order, we direct the Assessing Officer to cancel the said penalty.
9. In the result, the appeal of the assessee is allowed.
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