HIGH COURT OF MADRAS
Commissioner
of Income-tax
v.
Balaji
Traders
P.
D. Dinakaran and P. P. S. Janarthana Raja, JJ.
T.
C. No. 49 of 2004
December
18, 2006
Section 271D of the Income-tax
Act, 1961- Penalty - For failure to comply with section 269SS - Assessment year
1993-94 - Assessing Officer found that assessee had availed cash borrowings
exceeding Rs.20,000 for about 36 times during year - Considering assessee’s act
to be in violation of section 269SS, Assessing Officer imposed penalty upon
assessee under section 271D - Tribunal recorded a finding that there was
business exigency forcing assessee to take cash loans for purpose of honouring
its cheque commitments ; that creditors were genuine persons and transactions
were satisfactorily explained by assessee as to reasonable cause; and that
there was no revenue loss to State exchequer and thus, set aside penalty
imposed by Assessing Officer - Whether finding recorded by Tribunal as to
reasonable cause was finding of fact and thus, no question of law much less
substantial question of law would arise from Tribunal’s order - Held, yes
For the assessment year 1993-94, the assessee filed return showing its total income. During the course of scrutiny of the assessee’s case, the Assessing Officer found that the assessee had availed cash borrowings exceeding Rs.20,000 for about 36 times in the course of the year. Considering it to be in violation of section 269SS, the Assessing Officer issued notice under section 271D for imposing penalty. The assessee submitted that all the transactions were made out of business exigency and were bona fide and reasonable as the cash borrowings were for urgent necessity to pay to master weavers, most of whom were living in rural and sub-urban areas where banking facility was very much less and that most of the loans had been utilized for making payments to bank accounts to honour its cheque commitment to various parties. However, the Assessing officer rejected the said explanation and levied penalty. The Commissioner (Appeals) although noticed that the loans were taken to meet the immediate business need and, hence, there existed reasonable cause, yet, sustained the levy of penalty on certain transactions. The Tribunal cancelled the penalty sustained by the Commissioner (Appeals).
On appeal :
The Madras High Court in CIT v. Kundrathur Finance and Chit Co. (2006) 283 ITR 329, following the decision of the Apex Court in Asstt. Director of Inspection (Investigation) v. Kum. A.B. Shanthi (2002) 255 ITR 258/122 Taxman 514 held that if there was genuine and bona fide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. (PARA 6)
In the instant case, the Commissioner (Appeals) and the Tribunal found that (i) there was business exigency forcing the assessee to take cash loans for the purpose of honouring the commitment, viz., issuance of cheque on a particular date; (ii) the creditors were genuine persons and the transactions were never doubted by the authorities below; and (iii) there was no revenue loss to the State exchequer, and satisfied that the assessee had shown reasonable cause for the above transactions. (PARA 7)
The authorities had also noticed that all the transactions were brought into account of the assessee and there were corresponding entries in the books of account of respective parties/creditors which satisfied the test of business exigency. (PARA 8)
The finding arrived at by the Tribunal as to reasonable cause was essentially a finding of fact and, hence, no question of law much less substantial question of law would arise, and it might not be proper for the High Court to interfere with same. (PARA 9)
Therefore, the appeal was liable to be dismissed.