ORDER
T.R. Sood, A.M.
1. In these two appeals by assessee, order of CIT(A) has been challenged for imposition of penalty under Sections 271D and 271E. As both the appeals relate to same assessment year and penalty has been imposed emerging from same facts both were heard together and are being disposed of by this common order.
2. ITA No. 298/Ind/1995
In this appeal, assessee has raised 10 grounds but at the time of hearing the learned counsel for the assessee submitted that all the grounds relate to only one issue i.e., confirmation of imposition of penalty amounting to Rs. 48,500 under Section 271D of the Act. The brief facts of the case are during assessment proceedings, AO noticed that assessee has taken certain sums in cash and repayments were made in cash which were in violation of Section 269SS and 269T, therefore, penalty proceedings under Sections 271D and 271E were initiated. During penalty proceedings it was submitted that assessee was located in a small town and was not having any bank account. It was also submitted that assessee was not conversant with the amendments made in income-tax and that is why this default was committed. It was further submitted that there was no mens rea, therefore, penalty could not be imposed. AO found that though Bengumganj where assessee is located is small place but banking facilitates are easily available there. There were other assessees who were making their dealings through banking channels. He also opined that ignorance of law was not a justified reason for not following law. Keeping all the circumstances in view, a penalty of Rs. 48,500 in respect of two sums received in cash being Rs. 35,000 from Laxmichand Jain and Rs. 13,500 from Sitaram was imposed.
3. Before CIT(A), assessee could not improve upon his case, therefore, penalty was confirmed.
4. Before us, learned authorised representative submitted that genuineness of loans was not disputed. He further submitted that assessee was located in a small town where it may not be possible to keep updated about the latest legal provisions. He referred to p. 7 of the compilation which is copy of the reply submitted before Dy. CIT, Bhopal. He submitted that detailed reasons for not complying Section 269SS were submitted before Dy. CIT. He also invited our attention to p. 15 of the compilation where copy of account of Shri Laxmichand Jain and Shri Sitaram is given. He referred to the account of Shri Laxmichand Jain and pointed out that on 11th Sept., 1989, only a sum of Rs. 10,000 was taken from him and at this point there was no violation of provision of Section 269SS. He then pointed out that on 13th Sept., 1989, a further sum of Rs. 15,000 was taken, thus the aggregate became Rs. 25,000 and violation, if any, of Section 269SS was made to the extent of Rs. 5,000 only. Later on a further sum of Rs. 10,000 was taken from this party thus total violation is only to the extent of Rs. 15,000 only. In this regard, he referred to Section 269SS and pointed out that limit of Rs. 20,000 or more has been mentioned after items (a), (b) & (c) which means that violation would start only after the sum exceeds Rs. 20,000 because item (c) consider both the items (a) and (b) i.e. amount of loan or deposit taken and amount remaining unpaid on that date. He also relied on Vir Sales Coipn. v. Asstt. CIT (1994) 50 TTJ 130 (Ahd) and Dr. Deepak Muchala v. ITO (1997) 58 TTJ 524 (Mumbai).
5. On the other hand, learned Departmental Representative submitted that assessee was doing business of jewellers and money-lending for last 15 years. He further submitted that assessee was well-versed in income-tax matters and in this regard brought to our attention p. 3 of the assessment order where AO has recorded a direct finding by giving an example. Assessee had, according to AO, taken full benefits of income-tax provisions by way of gift giving cross gifts of Rs. 15,000 each to the children of partners, therefore, in this case it cannot be said that assessee was not aware of legal provisions because assessee was in business for last 15 years and wherever possible had taken advantage of various loopholes in the law and in any case provisions of Section 269SS and 269T were introduced from 1984. He also pointed out that during penalty proceedings, assessee was presented by two CAs and one advocate which clearly shows that assessee had lot of professional help available. In any case ignorance of law is not an excuse. Though he agreed that no penalty could have been imposed in case of sum received from Laxmichand Jain on 11th Sept., 1989, amounting to Rs. 10,000 but he submitted that later on after having further accepted Rs. 15,000 13th Sept., 1989 default would relate to Rs. 25,000 and not Rs. 5,000 as contended by learned authorised representative. He also referred to the provisions of Section 269SS and read out Clause (b) which, according to him, makes it clear that if 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 the amount or an aggregate amount remaining unpaid has been mentioned which means aggregate of amount accepted as well as amount remaining unpaid on that date has to be aggregated and then considered for the purpose of violation of Section 269SS. He contended that reliance by learned authorised representative on Veer Sales Corporation v. Asstt. CIT (supra) was not correct because in that case first of all it was pointed out that penalties could not be imposed for transactions entered before 1st April, 1989, because at that point of time provisions of Sections 271D and 271E were not on statute book. He submitted that earlier only prosecution was prescribed and it is only after 1989, that provisions regarding prosecution were omitted and provisions of Sections 271D and 271E were inserted for imposition of penalty. Moreover, in that case while discussing genuineness of loans it was found that loans were taken from sister concerns which is not a case before the Tribunal. Similarly, in case of Dr. Deepak Muchala (supra) the case related to a dentist who could not be expected to be well-versed with fast changing taxation laws. He also submitted that by now it is well settled legal principle that there was no requirement of mens Tea in case of default against statutory provisions. In this regard, he cited the judgment of Hon’ble Supreme Court in the case of Gujarat Travancore Agency v. CIT (1989) 177 ITR 455 (SC). He also referred to the decision of Karnataka Ginning & Pressing Factory v. Jt. CIT (2001) 72 TTJ (Mumbai) 307 : (2001) 77 ITD 478 (Mumbai) where even in case of sister concern, penalty under Section 271D imposed was held to be justified. He also relied on Balaji Traders v. Dy. CIT (2001) 73 TTJ (Pune) 246 : (2001) 78 ITD 368 (Pune).
6. We have considered the rival submissions carefully. We have gone through orders of authorities below and documents placed on record. We have also gone through the judgments relied on by the parties. We find no merit in the contention of learned authorised representative because genuineness of loan has nothing to do with provisions of Section 269SS and 269T. These provisions simply put a restriction that loans and deposits cannot be accepted in cash beyond a particular limit or repaid in cash beyond a particular limit. It is a well settled principle that ignorance of law is not an excuse. We also find that assessee does not seem to be that ignorant because he has taken advantage of certain provisions as found by AO by giving cross-gifts to the minor children of the partners. From the penalty order, it is seen that assessee has been represented by two CAs and one advocate which clearly shows that assessee was using help of tax experts and can be presumed to be aware of legal provisions. It is also well settled legal position that mens rea is not required for imposing penalty for default in complying with the statute. This position has been clearly upheld by Hon’ble Supreme Court in Gujaiat Travancore Agencies v. CIT (supra). The decisions cited by learned authorised representative are also not of any help because in Vir Sales Corpn. (supra) levy of penalty was held to be unjustified because provisions of Section 271D and 271E were not on statute and at that point of time provisions were held unconstitutional by the Madras High Court. Genuineness of loan was considered in this case in the background that loans were taken from sister concern to meet urgent business necessity. No such urgent business necessity has been brought before us. It has also not been pointed out by learned authorised representative that loans were taken from sister concerns. Similarly, in case of Dr. Deepak Muchala v. ITO (supra), it was held that assessee was a Dentist by profession and may be not aware of fast changing taxation laws. But in the instant case, it is seen that assessee had professional help available to him and from other facts recorded by AO assessee seems to be well conversant with the taxation laws. However, we agree with learned authorised representative that no penalty is imposable unless and until the limit of Rs. 20,000 is crossed. This becomes clear from Section 269SS where limit of Rs. 20,000 has been mentioned after Clauses (a), (b) and (c). As it is well settled that penal provisions have to be construed strictly, therefore, we hold that penalty can be imposed only after assessee violates the limit. Keeping this position in view, we are of the considered opinion that in case of Shri Laxmichand Jain, there is violation only to the extent of Rs. 15,000 because it is clear from p. 15 of the compilation that on 11th Sept., 1989, when deposit of Rs. 10,000 was accepted there was no violation and again on 13th Sept., 1989, when Rs. 15,000 was accepted, there was violation only to the extent of Rs. 5,000. Similarly in case of Shri Sitaram (p. 15 of the compilation), there was an unpaid amount of Rs. 10,000 on 23rd Oct., 1989, when a further sum of Rs. 13,500 was accepted from him. Thus, in this case there was a violation of Rs. 3,500, therefore, we set aside the order of CIT(A) and uphold the imposition of penalty only to the extent of Rs. 18,500 (Rs. 15,000 for Laxmi Chand Jain and Rs. 3,500 for Sitaram).
7. In the result, appeal is partly allowed.
8. ITA No. 299/Ind/95
In this case, through various grounds, assessee had challenged the order of CIT(A) for confirming the imposition of penalty amounting to Rs. 35,000 under Section 271E. In addition to the contentions raised in above appeal, our attention was invited to p. 5 of the compilation which is copy of the show-cause notice. It was contended that in this notice, nowhere an allegation was made that penalty is sought to be imposed for returning the deposits in excess of Rs. 20,000. Even in penalty order, no such finding has been given. In the absence of such finding, the imposition of penalty cannot be justified. In this regard, he relied on Motilal & Co. v. ITO (1999) 102 Taxman 106 (Mag).
9. On the other hand, learned Departmental Representative submitted that learned authorised representative is trying to make a new case before Tribunal because no such contention was over raised before lower authorities. He referred to p. 6 to 11 of the compilation which is a reply of the assessee before Dy. CIT whera no such contention has been raised. He also referred to p, 5, which is copy of the show-cause notice, where the facts have been very clearly narrated and the term ‘nakad jama’ which means accepted in cash has been mentioned. After narrating the fact, it has been clearly mentioned that from above facts it is clear that assessee has violated provisions of Section 269SS and 269T. It makes very clear that authorities were referring to deposit only, In any case, lower authorities had at no point of time have mentioned that assessee had returned the loan. He also referred to p. 14 which is copy of the statement of Shri Laxmichand Jain where in an answer to question whether he had deposited some money with the assessee, the answer was ‘yes’. This also makes clear that it was a case of deposit which has been returned by assessee in violation of Section 269T. He also referred to the case of K.P. Madhusudhanan v. CIT (2001) 251 ITR 99 (SC) where it was held that when the AO or the AAC issues a notice under Section 271, he makes the assessee aware that provisions thereof are to be used against him and these provisions includes the Explanation. Thus, in instant case also when Section 269T was mentioned, it was made clear to the assessee that this provision is to be used against him and he could have easily objected before the lower authorities.
10. We have considered the rival submissions carefully and find force in the contention of learned Departmental Representative we do not think that imposition of penalty would become invalid just because the word ‘deposit’ has not been mentioned by the lower authorities. If assessee wanted to take this plea and prove that it was not a deposit but a loan, he was at liberty to bring the fact of returning loan before lower authorities. Even before us learned authorised representative never tried to prove that what was returned was loan and not deposit. Even from the statement of Shri Laxmichand Jain it becomes clear that what was deposited by him was only a deposit and not a loan. Therefore, we hold that assessee has violated the provisions of Section 269T and levy of penalty under Section 271E is justified and we uphold the order of learned CIT(A).
11. In the result, appeal is dismissed.