Allahabad High Court
M/S Khairati Lal Fakir Chand, ... vs The Addl. C.I.T., Range ... on 22 November, 2017
Bench: Bharati Sapru, Saumitra Dayal Singh
HIGH COURT OF JUDICATURE AT ALLAHABAD
A.F.R.
Court No. - 35
Case :- INCOME TAX APPEAL No. - 244 of 2011
Appellant :- M/S Khairati Lal Fakir Chand, Ansari Road, Bulandshahar
Respondent :- The Addl. C.I.T., Range Bulandshahar & Another
Counsel for Appellant :- Anoop Trivedi,Nishant Mishra
Counsel for Respondent :- C.S.C.,Gaurav Mahajan,S.S.C. I.T.
Hon'ble Bharati Sapru,J.
Hon'ble Saumitra Dayal Singh,J.
Heard learned counsel for the appellant and Sri Gaurav Mahajan, learned counsel for the respondents.
This appeal has been filed by the assessee against the order of the Income Tax Appellate Tribunal, Delhi Bench 'H' dated 4.8.2006 passed in ITA No. 131 & 133 (Del)/2005 for the assessment year 1999-2000, on the following question of law:-
"(a) Whether in view of the division bench judgment of the Hon'ble Rajasthan High Court in the case of C.I.T. vs. M/s Ajanta Dyeing and Printing Mills (supra), the Tribunal was legally justified in disallowing the adjustment of Rs. 40,000/- in the amount of penalty imposed."
Briefly, it is undisputed fact that the appellant had taken cash loan for its business purpose on five different dates being 2.5.1998, 28.5.1998, 2.6.1998, 7.11.1998 and 30.1.1999 for Rs. 50,000/-, Rs. 1,00,000/-, Rs. 70,000/-, Rs. 50,000/- and Rs. 2,00,000/- respectively. All the loans having been taken in cash, the Assessing Officer invoking the provision of Section 271-D read with Section 269 SS of the Income Tax Act (hereinafter referred to as the Act) and imposed 100% penalty on the assessee for having taken those cash loans, in excess of statutory limit of Rs. 20,000/-.
Upon appeal, Commissioner of Income Tax partly allowed the assessee's appeal. In the first place he found that the cash loan taken by the assessee on 2.5.1998, 7.11.1998 and 30.1.1999 for Rs. 50,000/-, Rs. 50,000/- and Rs. 2,00,000/- each had been taken on Saturday and Sunday when either the banking hours were short or bank was closed. On that reasoning, the Commissioner of Income Tax Appeals accepted the explanation of the assessee that the cash loans of Rs. 3,00,000/- had been taken due to exceptional circumstances being lack of banking facility. Accordingly, he deleted the penalty to that extent.
However, in respect of two other cash loans being for Rs. 1,00,000/- and Rs. 70,000/- that were transacted on week days, the CIT appeals restricted the penalty to Rs. 80,000/- and Rs. 50,000/- respectively apparently on the reasoning that the penalty could be imposed only in respect of cash loans taken in excess of Rs. 20,000/-.
Against the order of CIT (Appeals), the revenue as also the assessee filed individual appeals before the Tribunal. The Tribunal has affirmed the order of CIT (Appeals) in so far the said appeal authority deleted the penalty of Rs. 3,00,000/- against cash loans taken by the assessee on Saturday and Sunday. However, the departmental appeal restricting the penalty to Rs. 80,000/- and Rs. 50,000/- for the other two loans has been allowed and those penalties have been restored.
Learned counsel for the assessee submitted that in view of the statutory limit of Rs. 20,000/-, penalty could have been imposed only in respect of cash loans taken by the assessee in excess of that amount.
Learned counsel for the respondent, on the other hand submits that the language of Section 269 SS read with Section 271-D of the Act is mandatory and the penalty is automatic for violation of this provisions. In this regard, the provision of Section 269 SS read with Section 271-D are quoted below:-
"269SS. Mode of taking or accepting certain loans, deposits and specified sum.
No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,-
(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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:
Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,-
(a) the Government;
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);
(e) 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"-
Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.
" 271D. Penalty for failure to comply with the provisions of Section 269SS:-
(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."
From a plain reading of the aforesaid provisions, it is clear that Section 271-D of the Act are in the nature of compliance provisions that seek to impose penalty for non-compliance of the statutory scheme contained in Section 269 SS being that no loan in excess of Rs. 20,000/- be taken from any person, through cash mode.
A plain reading of Section 269 SS indicates that the bar has been created against taking loans in cash, in excess of Rs. 20,000/-.
In fact the legislature clearly appears to contemplate that loan in excess of Rs. 20,000/- should be taken only through banking channel and not through cash mode. There is no room for allowing the benefit of the loan taken up to Rs. 20,000/ on the reasoning adopted by the CIT (Appeals).
The bar operates in three contingencies. First, if the total loan amount, by way of a single transaction exceeds Rs. 20,000/-. Second, it operates where unpaid amount of an earlier loan exceeds Rs. 20,000/-. Third, it operates where the aggregate amount of first and second contingencies taken together exceeds Rs. 20,000/-.
Thus, the bar operates whether the single amount of loan or multiple amount of loans or unpaid amount of loan taken together with fresh amount of loan exceeds Rs. 20,000/-.
At any rate, it is not the case of the assessee that the loan had been taken by it in parts such that one part of the cash loan was for Rs. 20,000/- and the other in excess thereof. In fact the aggregate amount of loan taken by the assessee from Vikas Motor Finance Company was Rs. 1,00,000/- and that from Singh Traders was in excess of Rs. 70,000/-. Thus, the bar created by Section 269SS of the Act is clearly attracted.
Reliance has been placed by learned counsel for the assessee on the judgment of the Rajasthan High Court in the case of Commissioner of Income Tax Vs. Ajanta Dyeing and Printing Mills reported in (2003) 264 ITR 505.
It is true in that Rajasthan High Court has made an interpretation in favour of the assessee and granted adjustment of Rs, 20,000/-.
However, with due respect, we disagree with the view taken by the Rajasthan High Court inasmuch as the language of the Act is clear and unambiguous. It does not contemplate granting of any such adjustment or benefit to the assessee to the extent of Rs. 20,000/- in respect of loan taken in cash is exceeds of Rs. 20,000/-. In fact the language only suggests, in case the aggregate amount of loan exceeds Rs. 20,000/- or where loan may have been taken in parts, or where fresh loan and outstanding loan taken together exceed Rs. 20,000/-, no penalty would be leviable, to any extent, if the loan in excess of Rs. 20,000/- is taken through banking channel. However, otherwise, penalty is mandatory and no adjustment in penalty is contemplated.
In view of the above, the question of law is answered in favour of the revenue and against the assessee.
The appeal lacks merit and is dismissed. No order as to costs.
Order Date :- 22.11.2017
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