Vildirect: IncomeTax-caselaws-2000-VIL-307-ITAT-JAI

2000-VIL-307-ITAT-JAI

Equivalent Citation: ITD 078, 378, TTJ 068, 044,

Income Tax Appellate Tribunal JAIPUR

Date: 25.05.2000

ASSISTANT COMMISIONER OF INCOME-TAX.

JAG VIJAY AUTO FINANCE (P.) LTD.

BENCH

Member(s) : C. L. BOKOLIA., DINESH K. AGARWAL.

JUDGMENT

Per Shri Dinesh K. Agarwal, Judicial Member--This appeal is directed by the revenue against the order passed by the CIT(A) dated 5-8-1993. The revenue has taken the following ground of appeal:--

"On the facts and in the circumstances of the case the CIT(A) has erred in deleting the penalty of Rs. 1,53,200 out of Rs. 1,94,200 levied under section 269SS of the Income-tax Act."

2. The brief facts of the case are that during the course of assessment proceedings for the assessment year 1990-91, it was found by the Assessing Officer that assessee-company has accepted deposits/loans in cash from the following persons:--

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  (1) Smt. Laxmi Devi                             Rs. 1,01,750

  (2) Sh. Ravindra Kumar                          Rs.   51,450

  (3) Sh. Sunil Kumar Agarwal                     Rs.   41,000

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                                                  Rs. 1,94,200

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3. The matter was referred to the Dy. CIT, Alwar Range, Alwar, who allowed opportunity to the assessee. It was explained by the assessee that Smt. Laxmi Devi and Shri Ravindra Kumar were having their Savings Bank Account with The Bank of Rajasthan Ltd., Alwar from where they have transferred the above amounts in the bank account of the assessee-company by transfer vouchers, as the assessee-company was also having its account with the same bank, i.e., The Bank of Rajasthan Ltd., Alwar. It was also submitted that the above persons do not have cheque facilties for operating their Savings Bank Account with The Bank of Rajasthan Ltd. It was further explained that the above persons are assessed to tax and the deposits are genuine and, therefore there is no violation of the provisions of section 269SS. The assessee has also filed its explanation with regard to the loan of Rs. 41,000 taken from Shri Sunil Kumar Agarwal. The Dy. CIT, Alwar Range, Alwar did not accept the assessee's explanation and held that the assessee has violated the provisions of section 269SS and, therefore, he imposed the penalty amounting to Rs. 1,94,200 under section 271D vide order dated 16-3-1993.

4. On first appeal, the ld. CIT(A) has deleted the penalty in respect of first two deposits in the names of Smt. Laxmi Devi and Shri Ravindra Kumar amounting to Rs. 1,01,750 and Rs. 51,450 respectively. However, he confirmed the penalty in respect of third deposit of Rs. 4 1,000 in the name of Shri Sunil Kumar Agarwal. The assessee filed appeal against the confirmation of penalty of Rs. 41,000 before the ITAT, Jaipur, which was allowed by the Tribunal vide IT Appeal No. 1332/JP/93 dated 5-12-1994.

5. Now, the revenue is in appeal before us against the deletion of penalty in respect of two deposits of Rs. 1,01,750 and Rs. 51,450. It was submitted by the ld. D.R. that as per section 269SS, the amount of loan for deposit can be taken only by account-payee cheque or account-payee draft and not otherwise. Therefore, the assessee has violated the provisions of section 269SS and the penalty has rightly been imposed by the Dy. CIT, Alwar Range, Alwar. He urged that order passed by the CIT(A) on this account should be reversed and the order passed by the Dy. CIT(A), Alwar Range, Alwar should be confirmed.

6. On the other hand, the ld. A/R submits that Smt. Laxmi Devi and Shri Ravindra Kumar were having their Savings Bank Accounts with the same Bank of Rajasthan Ltd. in which the assessee-company is also having its bank account; since both these persons do not have cheque facilities for operating their Savings Bank Account with the bank; therefore, they have transferred their money by signing transfer vouchers into the bank account of the assessee-company; both persons are assessed to tax; the deposits have been accepted as genuine; the transfer of money by transfer vouchers may be treated as compliance of section 269SS and, therefore, there is no violation of the provisions of section 269SS. The reliance was also placed towards certain decisions of the ITAT and it was urged by the ld. A.R. that the CIT(A) has rightly deleted the penalty and his order should be upheld.

7. We have carefully considered the rival submissions of the parties. At the out-set, we would like to mention the scope and effect of section 269SS, which was elaborated in the following portion of the Departmental Circular No. 387, dated 6-7-1984 as under:--

"32.1 Prohibition against taking or accepting certain loans and deposits in cash.--Unaccounted cash found in the course of searches carried out by the Income-tax Department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation.

32.2 With a view to countering this device. which enables taxpayers to explain away unaccounted cash or unaccounted, deposits, the Finance Act has inserted a new section 269SS in the Income-tax Act debarring persons from taking or accepting, after 30th June, 1984, from any other person any loan or deposit otherwise than by an account-payee cheque or account-payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. 10,000 or more. This prohibition will also apply in cases where 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), and the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken is Rs. 10,000 or more."

8. After careful reading of the above Departmental Circular, we find that the main object of the section is to counter the device of taking unaccounted cash or unaccounted deposits otherwise by an account-payee cheque or account-payee draft. We also find that the 'payee' has been defined in section 7 of the Negotiable Instruments Act, 1881 as under:--

"'Payee'--The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the 'payee'."

Since in this case it is an admitted fact that the amount was transferred by the depositors through transfer vouchers, therefore, the amount was credited in the company's bank account through proper banking channels as per spirit of section 269SS and thus the assessee-company has not violated the provisions of section 269SS in any manner. We, therefore, uphold the order passed by the CIT(A) in this regard and delete the penalty imposed by the Dy. CIT(A), Alwar Range, Alwar.

9. In the result, the appeal filed by the revenue is dismissed.

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