ORDER
Singhal, Judicial Member
1. Since the issues involved in these appeals
are inter-connected, these appeals were heard together and are being
disposed of by the common order for the sake of convenience. The issues
involved in these appeals relate to the levy of penalty under section 271D
and section 271E.
2. The brief facts of the case are these. The assessee is engaged in wholesale trading of country liquor. It was noticed by the Assessing
Officer that assessee had received certain loans/deposits in cash from two persons and repaid the same in cash, details of which are as under:–
(Amt. in Rs.)
Sr. No.
Name
Loan taken
Re-paid
Date
Amount
Date
Amount
1.
Shri Ganesh
8-7-1991
20,000
20-11-1991
10,000
L. Jongaonkar
27-12-1991
8,000
28-11-1991
9,000
20-1-1992
15,000
12-12-1991
9,000
43,000
24-3-1992
15,000
43,000
2.
Shri Shriram
8-7-1991
10,000
20-11-1991
10.000
L. Jongaonkar
9-7-1991
9,000
28-11-1991
10,000
15-10-1991
10,000
12-12-1991
7,000
20-1-1992
10,000
27-12-1991
2,000
24-3-1992
10.000
39,000
39,000
It is also to be noted that there were outstanding opening balance to the credit of these two persons i.e., Rs. 19,500 in the case of Shri Shriram and Rs. 16,500 in the case of Shri Ganesh. The Assessing Officer was of the view that the provisions of Section 269SS and Section 269T were violated by the assessee. Accordingly, the penalty notices under sections 271D and 271E were issued. In response to notice under section 271-D, the following explanation was tendered by the assessee before the Assessing Officer.
(i) that the assessee has taken handloan in cash during the year from Shri G.L. Jongaonkar and Shri S.L. Jongaonkar for Rs. 20,000 and Rs. 29,000 respectively. The opening balance of the above two persons was for Rs. 16,500 and Rs. 19,500 respectively and this balance was unpaid and shown in the Balance-sheet.
(ii) that Shri G.L. and S.L. Jongaonkar are the farmers and they are living in a village and not maintaining any bank account.
(iii) that for the sudden need of money for business, assessee had taken handloan totalling of Rs. 49,000 (Rs. 20,000 + 29,000) for this year only in emergency circumstances.
(iv) that Shri L.R. Jongaonkar which is a partnership firm and a customer of the assessee firm has given Rs. 29,394 against the purchases of country liquor from assessee firm and transaction of M/s. L.R. Jongaonkar for Rs. 29,394 is a business transaction and the same does not come under the provisions of section 269SS of the IT Act.
On the above submission it is prayed that considering sudden need of money the penalty proceedings initiated be dropped.
The explanation of assessee in pursuance to notice under section 271-E was as under :–
“(i) that the assessee has repaid the loan in cash during the year for Rs. 49,000 (Shri G.L. Rs. 20,000 & S.L. Rs. 29,000), and the amount as shown in the notice is not correct.
(ii) that both the depositors are farmers and they are residing in a village and they came to the assessee in evening time after bank hours as they were in need of money as such the assessee has repaid Rs. 49,000 to them in cash.
Considering the sudden need of money, it is requested to drop the
panalty proceedings.”
The DCIT was not satisfied with the explanation of the assessee and accordingly, the penalty was held to be leviable under both the sections by observing (1) that there was no dispute that assessee had accepted the loan/deposit in cash and also repaid the same in cash, (2) that every person is obliged to act not only in accordance with the law of land, but also in such manner that no provisions of law are violated, (3) when the lenders had no Bank A/c., the assessee itself would have taken due care and efforts to ensure that Account Payee Drafts were got prepared, (4) the assessee has failed to substantiate the business exigency for accepting/ paying the amounts in cash. Accordingly, the penalty of Rs. 82,000 each was levied under sections 271D and 271E.
3. The matter was carried before the CIT(A). Various statements were raised before him by the assessee namely (1) that in view of CBDT circular No. 387 dated 6-7-1984, the intention of the Legislature was to counter the tax evasion and therefore, genuine transactions are outside the ambit of these sections, (2) section 271E is applicable where re-payment is against deposits and not against loans. Since these payments were against the amounts received as loans, no penalty could be levied under section 271E, (3) the assessee was not aware of such drastic provision and, therefore, in view of the Supreme Court decision in the case of Motilal Padampat Sugar Mills Co. Ltd v. State of Uttar Pradesh [1979] 118 ITR 326, no penalty could be levied, (4) fault, if any, was technical and therefore, no penalty could be levied in view of Supreme Court decision in the case of Hindustan Steel Ltd v. State of Orissa [1972] 83 ITR 26, (5) that assessee was required to pay the money to its vendor M/s. Nagpur Distillery Ltd., immediately by Draft on receipt of the consignment of the material sold by distillery and the assessee had to arrange hand loans on account of business urgency. Further, since the lenders were agriculturists, having no Bank A/c. had to give the money in cash which constituted a reasonable cause. Affidavits of lenders were furnished before him, (6) that the money was given by the lendors to Shri Radhey Shyam, partner of the firm and not to the firm. The CIT(A) has confirmed the penalty under section 271D by observing that
(1) that entries in the books of account are the direct evidence which show that amount was received by the firm. The submission of the assessee is an after-thought, (2) the business exigency was not proved by the assessee for raising the loan in cash. The CIT(A) considered the entries in the books of account of the assessee and found that two Drafts were purchased of Rs. 1,00,000 and Rs. 40,000 on 8-7-1991 in favour of Nagpur Distillery.
The Draft of Rs. 1,00,000 was purchased out of own money of the assessee, but the second amount of Rs. 40,000 appeared to have been out of loans raised from Shri Ganesh and Shri Shriram on the same day. According to her, there was no need for purchasing the second Draft. Similarly, she noticed the purchase of Demand Draft of Rs. 88,000 on 15-10-1991, but, according to her, the balance in the Bank A/c. was not indicated anywhere. Accordingly, she confirmed the penalty under section 271D. However, she deleted the penalty levied under section 271E by holding that re-payment was against loans and therefore, there was no contravention under section 269T. Aggrieved by the aforesaid order, both the parties are in appeal before the Tribunal.
4. The Ld. counsel for the assessee has reiterated the submissions before us which were taken before the CIT(A) and therefore, need not be repeated. However, he has drawn our attention to the extracts from the cash book to point out that all the loans were taken when there was urgent business need for making the payment to M/s. Nagpur Distillery. The assessee had to approach the lenders as it was short of funds and since the lenders were agriculturists having no Bank A/c., the loans had to be taken in cash. On the other hand, the Id. D.R. has relied on the reasonings given by the Assessing Officer.
5. Rival submissions have been considered carefully. As far as penalty under section 271E is concerned, we do not find any merit in the appeal of the Revenue. The penalty under section 271E can be levied if a person re-pays any deposit referred to in section 269T otherwise than Account Payee cheque or draft. Section 269T refers to the re-payment on deposits and the word ‘deposit’ has been defined in the Explanation to Section 269T as any deposit of money which is re-payable after notice or re-payable after a period and includes the deposit of any nature. The Legislature has made distinction between loan and deposit as is apparent from the provision of Sections 269-SS and 269T. Admittedly, the notice issued under section 271D appearing at page 141 of the paper-book, refers to the charge of re-payment of loan without reasonable cause otherwise than an Account Payee Cheque or Draft. Since Section 269T does not apply to re-payment of loan, the question of levying penalty under section 271E does not arise. Therefore, in our considered opinion, the CIT(A) was justified in deleting the penalty under section 271E. The order of CIT(A) to that extent, is therefore, upheld.
6. Regarding penalty under section 271D, the first contention on behalf of assessee is that provisions of Section 269SS were brought on statute
to counter the tax evasion and therefore, the genuine transaction do not fall within the ambit of Section 269SS. We are unable to accept such proposition of law. It is the cardinal rule of interpretation that where the language of a statute is plain and unambiguous, the intention of the Legislature is to be gathered from the language of the statute itself and aids to the interpretation cannot be resorted to. The reference can be made to the following observations of the Supreme Court in the case of Anandji Haridas & Co. P. Ltd. 592 (sic) at page 595 :–
“As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the intention of the Legislature is to be gathered from the language of the statute itself and no external evidence such as Parliamentary Debates, Reports of the Committees of the Legislatureor even the statement made by theMinister on the introduction of a measure or by the farmers of the Act is admissible to construe these words. It is only where a statute is not exhaustive or where its language is ambiguous, uncertain, clouded or susceptible of more than one meaning or shades of meaning, that external evidence as to the evils, if any, which the statute was intended to remedy, or of the circumstances which led to the passingof the statute may be looked into for the purpose of ascertaining the object which the Legislature had in view in using the words in question.”
In our opinion, the language of section 269SS is unambiguous and therefore, the genuine transaction cannot be taken out of the ambit of this section. Accordingly, this contention of assessee is rejected.
6.1 It would be useful to refer to the provisions of Section 40A(3) which were also brought on statute to counter the evasion of tax. This subsection provided that assessee would not make any payment exceeding the prescribed amount otherwise than by way of crossed cheque or draft and in case pf failure, it was provided that such expenditure would be disallowable. This provision was considered by Supreme Court in the case of Attar Singh Gurmukh Singh v. ITO [1991] 191 ITR 667, wherein it was held that genuine and bona fide transactions are not taken out of the sweep of the section though it was open to the assessee to furnish to the satisfaction of the Assessing Officer the circumstances under which the payment in the prescribed manner was not practicable or would have caused genuine difficulty to the payee. In our opinion, the similar logic can be applied while interpreting the provision of section 269SS read with section 273B for the purpose of levy of penalty under section 271D.
7. The second contention of the assessee is that no penalty should be levied in view of the Supreme Court decision in the case of Motilal Padampat Sugar Mills Co. Ltd. (supra), inasmuch as the assessee was not aware of the drastic provisions of sections 269SS and 271D. We are also unable to accept this contention. Such contention cannot be heard from an assessee who is regularly assessed to tax and assisted by the tax
experts. Moreover, whether a person is unaware of the provision of any Act is a question of fact which can be decided only on the basis of material placed on the record. No material has been brought on record to justify such contention of the assessee.
8. The third contention of the assessee is that no penalty should be levied in view of the Supreme Court decision in the case of Hindustan Steel Ltd. (supra) inasmuch as the default committed by the assessee is technical or venial. We are unable to accept this contention also. If such contention is accepted, then provision of section 269SS read with section 271D would become redundant. It is the settled position of law that the interpretation which makes the section workable should be preferred rather than the interpretation which makes the section redundant.
9. However, we find force in the last submission of the assessee regarding the reasonable cause. In our view, the business exigency has to be seen from the point of view of a business man and not from the point of view of tax gatherer. We have gone through the extract of the cash book and the affidavits of the lenders which are placed in the paper book. On
8-7-1991, the assessee had to make the payment of Rs. 1,40,000 against the supply of liquor to M/s. Nagpur Distilleries. The assessee had its own funds to the extent of Rs. 1,00,000 for which draft was purchased and subsequently another draft was purchased for Rs. 40,000 out of the loans raised from Shri Ganesh and Shri Shriram. The only objection of the CIT(A) was that there was no evidence that these two drafts had to be paid to M/s. Nagpur Distillery for securing consignment of liquor. This observation is contrary to the facts on record. We find from cash extract of 9-7-1991 that assessee had received the consignment of liquor on
9-7-1991 and relevant entries were passed on that day. The transport expenses were also paid to the extent of Rs. 2,450. This clearly shows that Drafts were purchased for securing the consignment. Therefore, finding of the CIT(A) in this regard is vacated. We have also gone through the extract of cash book dated 15-10-1991 where the assessee had to make the payment of Rs. 88,000 by Demand Draft. Since the assessee was short of funds. It had to raise the loans and deposit the same in Sangli Urban Co-op. Bank, Parbhani, so that the Draft for the sum of Rs. 88,000 could be purchased. However, we find that there was no urgency for raising the loan of Rs, 8,000 from Shri Ganesh on 27-12-1991 as is apparent from the Extract of Cash book that there was enough cash balance at the beginning of the day as well as at the end of the day, After considering the relevant extract of cash books, we find that there were business exigencies for raising loans on various dates except the sum of Rs. 8,000 from Shri Ganesh as mentioned above. We have also gone through the affidavits of the creditors and find that these two creditors are agriculturists and residents of Pimpalgaon Hajam, Distt, Parbhani. Such persons do not have any Bank account which did compel the assessee to raise the loan in cash. Had the assessee not made payments immediately, its business Interest might have suffered in future. Considering the totality of the
circumstances, we are of the view that assessee was prevented by reasonable cause. Accordingly, no penalty could be levied in respect of the cash loans except the sum of Rs. 8,000.
10. The only question that remains is whether penalty can be levied with reference to the sum of Rs. 8,000 raised on 27-12-1991. The copy of the account of Shri Ganesh shows that as on 27-12-1991, the balance in the account of Shri Ganesh was to the extent of Rs. 8,500 only. After raising the loan of Rs. 8,000, the aggregate amount came to Rs. 16,500 which was below the prescribed limit under section 269SS. Accordingly, no penalty could be levied with reference to the sum of Rs. 8,000 also.
11. In view of the above, it is held that there was reasonable cause for raising the loan in cash and on this account, the penalty could not be levied under section 271D read with section 273B except for the amount of Rs. 8,000. For the reasons mentioned above, no penalty could also be imposed with reference to the sum of Rs. 8,000. Accordingly, the order of CIT(A) is set aside and the penalty of Rs, 82,000 sustained by him is hereby deleted.
12. In the result, appeal of the Revenue is dismissed while the appeal of the assessee is allowed.