Commissioner of Income Tax vs Kasi Credit Corporation and Kasi Finance and Investments Corporation

P.D. Dinakaran, J.—The above tax case appeals are directed against the order of the Income Tax Appellate Tribunal in ITA.Nos.1266 &

1268/Mds/2001, dated 21.5.2003.

The Revenue is the appellant. The assessment years involved are 1997-98 and 1996-97. The case of the appellant is that the

assessees/respondents herein was engaged in the business of accepting deposits from the public for the purpose of Real Estate and Property

Development business. The assessment order u/s 143(3) read with Section 158BD and 158BC of the Income Tax Act (hereinafter referred to as

''The Act'') for the block period was passed on 29.12.1998. The assessing officer found that there was contravention of the provisions of Section

269T of the Act by the firm in repaying deposits with interest to the public, for which, penalty proceedings u/s 271E of the Act were initiated. On

appeal at the instance of the assessee, the Commissioner of Income (Appeals)-VI, Chennai allowed the appeal and cancelled the penalty levied by

the assessing officer holding that the assessee had made reasonable cause for repayment of loan in cash, which was confirmed by the Appellate

Tribunal, on appeal by the Revenue.

Aggrieved by the same, the Revenue has preferred these appeals raising the following substantial question of law:

Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the order of the Commissioner of

Income Tax (Appeals) cancelling the penalties u/s 271E of the Act in spite of there being total lack of evidence to prove the existence of

reasonable cause in terms of Section 273B of the Income Tax Act?

According to the assessees, it is a group consisting of seven partnership firms floated by Shri Mathivathanan and his wife Smt. Annakalanjiyam.

They and some of their relations and friends are partners in the firms. The said firms had accepted deposits from the public for the purpose of

business in Real Estate & Property Development carried on by related concerns.

It is seen from the records that there was a search u/s 132 of the Act in the group of companies and block assessments were made under

Sections 143(3) read with 158BC and 158BD of the Act on 29.12.1998. The assessing officer found that there were instances of contravention of

Section 269T of the Act by the firms in repaying deposits with interest to the depositors. In the case of Kasi Consolidated Finance Corporation,

there was one such instance for the assessment year 1998-99; in the case of Kasi Consultant & Credit Corporation there were thirteen such

instances for the assessment year 1996-97 and six instances for the assessment year 1997-98; in the case of Kasi Credit & Consultant

Corporation, there was one instance of violation for the assessment year 1996-97 and two instances for the assessment year 1997-98 and in the

case of Kasi Credit Corporation, there were two instances of contravention of the provisions of Section 269T of the Act.

Penalty proceedings u/s 271E of the Act were initiated in respect of all the seven firms for all the assessment years by the Joint Commissioner of

Income Tax by issuing show cause notice. The assesses'' representatives appeared before him. After taking several adjournments, details were

furnished by the assessees on 26.6.2000 and 29.6.2000. According to the assessees, repayment of deposit in excess of the limit prescribed u/s

269T was ignorance on the part of the assessees about the provisions of law. As some depositors wanted cash, repayment was made in cash. The

Joint Commissioner found that the explanation was mostly of general in nature and no evidence was produced to support the explanation.

According to the Joint Commissioner, the decision relied on by assessees reported in Kumari A.B. Shanthi (alias) Vennira Adai Nirmala Vs.

Assistant Director of Inspection, Investigation, has been stayed by the Supreme Court vide Commissioner of Income Tax Vs. Shivsagar Estates

(Aop), and levied penalty u/s 271E of the Act equal to the amounts of the deposits repaid in cash.

On a reconsideration of the matter before the Commissioner of Income Tax (Appeals), it was contended that there was reasonable cause for

repayment of deposits by the assesses in cash and the application of Section 271E of the Act was not automatic, as the levy of penalty was

governed by the provisions of Section 273B also. Agreeing with the aforesaid contentions raised by the assessees, the Commissioner of Income

Tax (Appeals) cancelled the penalty levied by the assessing officer.

It is also seen from the copies of the bank statements furnished before the assessing officer that most of the repayments were effected through

cheques; some of the repayments are inter-company transfers for group housing and purchase of flats and some of the deposits were repaid after

the closure of the banking hours. In some of the cases, it is seen that depositors were lady members, who do not have bank accounts and on their

insistence, repayments had to be made in cash. The Income tax Appellate Tribunal has also reiterated the aforesaid facts and accepted these facts.

Therefore, on a reading of the above findings arrived at by the Commissioner of Income Tax (Appeals) as well as by the Tribunal, it is seen that

cash payments made by the assessees in certain cases were for justifiable cause and sufficient reasons and explanations have been offered. The

Commissioner of Income Tax (Appeals) as well as the Tribunal have accepted the aforesaid aspects and found the question in favour of the

assessee and that being the question of fact, we do not find any ground to interfere with the finding of the Income Tax Appellate Tribunal.

Hence, there is no question of law much less substantial question of law made out by the appellant in these appeals and the same are dismissed.