Jagir Singh Balraj Kumar and Co. vs Commissioner of Income Tax

N.K. Agrawal, J.—This is an application by the assessee u/s 256(2) of the income tax Act, 1961 (''the Act'') seeking a direction to the

Tribunal to refer the following questions :

Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in not accepting the plea of reasonable cause and

bona fide belief and thereby confirming penalty of Rs. 40,000 in respect of S/Shri Raj Kumar and Darshan Singh (Rs. 20,000 each) u/s 271D of

the income tax Act, 1961?

Whether the learned Tribunal on the facts and in the circumstances of the case, was justified in not accepting the plea of the assessee that the

amounts were ''Amanat'' and not ''loan or deposit'' and, thus, not hit by provisions of section 269SS, of the income tax Act, 1961?

Whether, on the facts of the case, the learned Tribunal was justified in upholding penalty of Rs. 20,000 in the case of Sh. Darshan Singh,

particularly when the learned Deputy Commissioner, Bathinda, had himself excluded another amount of Rs. 15,000 in the same account appearing

on 31-10-1989 holding that it was not hit by provisions of section 269SS?

The assessee derived income mainly as commission agents. The ITO during the assessment proceedings for the assessment year 1990-91 noticed

that the assessee had accepted certain deposits in cash exceeding Rs. 20,000 in contravention of the provisions of section 269SS of the Act. He

referred the matter to the Deputy Commissioner who proceeded further and completed the assessment. The deposits found recorded in the books

of account of the assessee aggregated to Rs. 1,82,200. There were certain more deposits but the Deputy Commissioner rejected the six deposits

only and made addition to the assessee''s income. Section 269SS required any loan or deposit to be taken or accepted from any person after 30-

6-1984 by account payee cheque or account payee bank draft only, where the amount of such loan or deposit was Rs. 20,000 or more. In the

case of the assessee, the total amount of such loans and deposits in cash from different persons was Rs. 1,82,200. The Deputy Commissioner

proceeded to levy penalty u/s 271D of the Act.

The assessee took the plea in the penalty proceedings that the credits or the deposits were received from the agriculturists on the sale of their

produce. It was further explained by the assessee that the deposits were in the nature of ''Amanats''. The assessee also argued that he was under a

bona fide belief that section 269SS was not applicable to the loans and deposits taken or accepted from the agriculturists. The Deputy

Commissioner, however, did not agree and imposed penalty u/s 271D at Rs. 1,82,000, equivalent to the amount of deposits. The Deputy

Commissioner took the view that the deposits were not covered u/s 273B of the Act because the assessee had not been able to prove that there

was any reasonable cause for failure to accept deposits by account payee cheques or drafts.

The Commissioner confirmed the penalty but the Tribunal partly accepted the assessee''s appeal. A sum of Rs. 20,000 received from Raj

Kumar on 27-10-1989 and another deposit of the equal amount received from Darshan Singh on 5-2-1990 were held to be the deposits from

persons other than agriculturists. The penalty was, therefore, reduced from Rs. 1,82,200 to Rs. 40,000.

It has been explained by Shri Rakesh Garg, the counsel for the petitioner, that the Tribunal has already submitted a statement of the case while

referring a question of law to this Court u/s 256(1) at the instance of the revenue. That question of law specifically relates to the cancellation of

penalty of Rs. 1,42,200. Shri Garg has, therefore, argued that the assessee''s petition may also be allowed in respect of the balance amount of Rs.

40,000 so that the entire controversy may be examined by this Court. It is explained that the deposits made by Raj Kumar and Darshan Singh

were in the nature of ''Amanats'' and, therefore, these deposits also did not fall within the purview of section 269SS.

Keeping in view the nature of controversy and also the fact that the application filed by the department has been allowed by the Tribunal, it

appears appropriate to examine the question of law raised by the assessee.

Out of the 3 questions raised by the assessee, question No. 2, as modified hereunder, is required to be referred to this Court by the Tribunal :

Whether, on the facts and in the circumstances of the case, no penalty was leviable u/s 271D of the income tax Act, 1961 on the amount of Rs.

20,000 received by the assessee from Raj Kumar and Rs. 20,000 received from Darshan Singh on the ground that those amounts were in the

nature of ''amanat'' and not loan or deposit within the meaning of section 269SS of the said Act?

The Tribunal is directed to send a statement of the case and refer the aforesaid question to this Court.