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TAXAP/549/2009 8/ 8 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 549 of 2009
===================================
COMMISSIONER
OF INCOME TAX-I - Appellant
Versus
M/S
CHANDAN RICE & PULSE MILLS - Opponent
===================================
Appearance
:
MRS
MAUNA M BHATT for Appellant.
None for
Opponent.
===================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 18/01/2010
ORAL ORDER
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
The
Commissioner of Income Tax-I has filed this appeal under Section
260A of the Income-tax Act, 1961 for Assessment Year 2002 03
proposing to formulate the following substantial question of law for
the determination and consideration of this Court:-
Whether,
on the facts and in the circumstances of the case, the Appellate
Tribunal was right in law and on facts upholding the order of the CIT
(A) in cancelling the penalty levied under Section 271E irrespective
of the fact that the Circular 8 of 2002 is clear that a curative
amendment to re-clarify the true intention of the legislature was
brought in and the same should be given retrospective operation ?
Heard
Mrs. Mauna M. Bhatt, learned Standing Counsel appearing for the
revenue and perused the orders passed by the authorities below.
It
is the case of the Revenue that the Assessing Officer has discovered
during the course of assessment proceedings that the assessee has
repaid some of the deposits by cheque in contravention of Section
269T of the Income-tax Act, 1961 and thereby the assessee was liable
for penalty under Section 271E of the Act. In response to the
notice issued under Section 271E, the assessee has submitted that
the amounts in question do not constitute the deposits but they are
loans and on similar set of facts and circumstances for A.Y. 1999
00, the then Joint Commissioner of Income-Tax dropped the
proceedings. The submissions of the assessee were not found
favourable with the Assessing Officer and he levied penalty under
Section 271E of the Act. Being aggrieved by the said order, the
assessee preferred an appeal before the CIT (Appeal) and the CIT
(Appeal) vide his order dated 29.09.2006 deleted the penalty of
Rs.7,27,047/- levied by the Assessing Officer under Section 271E of
the Act.
Being
aggrieved by the said order, the revenue challenged the order of CIT
(Appeal) before the Tribunal and the Tribunal vide its order dated
04.12.2007 dismissed the said appeal and confirmed the order passed
by the CIT (Appeal).
Being
aggrieved by the order of the Tribunal, the Revenue has preferred
the present Tax Appeal.
Mrs.
Mauna Bhatt, learned Standing Counsel appearing for the appellant
has submitted that by virtue of the amendment brought to the
Income-tax Act by the Finance Act, 2002 with effect from 01.06.2002
which is merely clarificatory in nature, the loan is also included
and any repayment of loan in cash would make the assessee liable to
penalty under Section 271E of the Act. She has further submitted
that the Explanation to Section 269T makes it clear that for the
purposes of Section 269T, loan or deposit means any loan or deposit
of money which is repayable after notice or repayable after a period
and, in the case of a person other than a Company, includes loan or
deposit of any nature. She has, therefore, submitted that the
amount repaid by the assessee in cash, even if it is considered to
be the loan, the assessee is liable to penalty under Section 271E of
the Act.
We
have considered the submissions made by Mrs. Bhatt and perused the
orders passed by the authorities below. The learned CIT (Appeal)
has observed that the assessee had not issued any deposit receipts
since the transactions were in the nature of a loan. It was further
pointed out on behalf of the assessee that the accounts of the
Company are audited under Section 44AB of the Act and in the said
audit report, the Chartered Accountant at Annexure D has given the
particulars of loans repaid by the appellant during the previous
year. In the balance-sheet also, Schedule 3 shows the unsecured
loans. It was also argued on behalf of the assessee before the CIT
(Appeal) that the intention of the Legislature at the time of
bringing the amendment is evident from the Notes and clauses forming
part of Finance Bill, 2002, Clause 95 whereof seeks to substitute a
new section for the existing Section 269T. The CIT (Appeal) has
reproduced the relevant portion from the said Circular which makes
it clear that it has been noticed that the provisions of sections
are being circumvented by terming deposits as loans and contending
that the Section applies only to deposits and not to loans.
Referring to the judgment of Rajasthan High Court in the case of CIT
V/s. Govindkumar, 119 Taxman 110, the said Circular further states
that in a judgment of a High Court, it was held that the meaning of
word ‘deposit’ occurring in Section 269T cannot be stretched to
include loans. In order to clarify the intention of the
Legislature, the Finance Act, 2002 has substituted the existing
section by a new section so as to extend its scope to loans also,
and delete the provisions contained therein which have become
obsolete. On the basis of this amendment, it was contended that the
said amended provisions cannot be applied retrospectively. All
these contentions were weighed with the CIT (Appeal) and he held
that the transactions noted by the Assessing Officer were in the
nature of loans as claimed by the assessee and, therefore, the
repayments in cash were not covered under the provisions of Section
269T of the Act. Accordingly, he held that no penalty is exigible
under Section 271E of the I.T. Act, 1961 and therefore, the order of
the Assessing Officer under Section 271E was cancelled.
The
Tribunal has confirmed the said order of the learned CIT (Appeal)
and it was held that the amendment being specific, has to be held as
prospective in nature and same cannot be held to be clarificatory on
assumptions so as to apply penalty proceedings under Section 271E
retrospectively. While taking this view, the Tribunal has referred
to the decision of the Punjab & Haryana High Court in the case
of Som Nath Khem Chand and others V/s. ITO and another, 250 ITR 785
(P&H) wherein while dismissing the petition, the Court held that
the complaint was lodged prior to the amendment / substitution of
Section 276DD. The amendment/deletion was brought about in Section
276DD with effect from 01.04.1989, substituting the same with
Section 271D, wherein only penalty had been provided. Such
amendment / substitution could not operate retrospectively unless
the substitution was made specifically retrospective or could be so
inferred by an implied intendment. Thus, the order of the Sessions
Judge could not be set aside.
Since
the amendment in Section 269T by the Finance
Act, 2002 which has come into effect from 01.06.2002 and all
repayments made by the assessee were prior to that date, we are of
the view that the assessee has not committed any default under
Section 269T of the Act and hence, no penalty could be levied under
Section 271E of the Act. Since we are in agreement with the views
taken by the learned CIT (Appeal) as well as the Tribunal and this
being a concurrent finding of fact, we are of the view that no
substantial question of law arises out of the order of the Tribunal.
The appeal is,
therefore, dismissed.
Sd/-
[K. A. PUJ, J.]
Sd/-
[RAJESH H. SHUKLA,
J.]
Savariya
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