The Commissioner of Income Tax and Income Tax Officer vs Sri G.D. Subraya Sheregar, P.W.D. Contractor

N.K. Patil, J.—The instant appeal is directed against the order dated 7.4.2006 passed in ITA. No. 91/Bang/2004 on the file of the Income Tax Appellate Tribunal, Bangalore, for considering the following substantial questions of law:

i) Whether the provisions of Section 269SS of Income Tax Act, 1961 is to be construed as mandatory or directory?

ii) Whether the Appellate Authority and Tribunal were correct in accepting the explanation given by the assessee for waving the provisions of Section 269SS?

The respondent herein filed the return of income for the assessment year 2000-01 on 31.10.2000. If was noticed from the auditor''s report that the respondent had taken loans/deposits in cash amounting to Rs. 14.33.000/-. As there was violation of provisions of Section 269SS of Income Tax Act, 1961, a notice u/s 271D was issued calling for explanation from the respondent. In turn he submitted his reply. Without considering the reply filed by the respondent-assessee the Assessing Officer passed an order on 29.4.2002 imposing penalty of Rs. 14.33.000/- in proceedings No. 271D/ADDL.CIT/UR/2002-03. Assailing the correctness of the order passed by the Assessing Officer, the respondent herein filed an appeal on the file of Commissioner of Income Tax (Appeals) in appeal No. 35/UDP/CIT(A)/MNG/2002-03. The said matter came up for consideration before the Commissioner of Income Tax on 1.10.2003. The Appellate Authority in turn on perusing the oral and documentary evidence allowed the appeal in part and modified the order of the Assessing Officer, holding that the assessee is liable to pay penalty of Rs. 11,03,000/- u/s 271D of the Act and gave deduction of Rs. 3,30,000/-. Not being satisfied with the order of the Commissioner of Income Tax (Appeals), the respondent-assessee filed an appeal in I.T.A. No. 91/Bang/2004 for the assessment year 2000-01 on the file of Income Tax Appellate Tribunal. The said matter came up before the tribunal and the tribunal in turn allowed the appeal filed by the respondent-assessee without assigning any valid reasons and the same is contrary to the relevant provisions of the statute and the relevant material available on the file. Being aggrieved by the order impugned, the present appeal is filed seeking appropriate relief.

Learned Counsel for the appellants submitted that, the order passed by the Income Tax Appellate Tribunal. Bangalore cannot, be sustained and is liable to be set aside. To substantiate his submission, lie has taken us through the provisions of the statute and the material which are available on record. There is no finding as such recorded for considering the material available on record or as to how a sum of Rs. 11,03,000/- had been deposited in the account of the assessee. Therefore, he submitted that the order impugned cannot be sustained and is liable to be set aside.

As against the said submission, learned Counsel for the respondent contended that, the impugned order is just and reasonable and is passed after careful perusal of records. It is further submitted that as a matter of fact, the respondent has produced all the material before the authority with a direction to reconsider the matter in accordance with law.

Having heard the learned Counsel for the parties, the only point that arises for our consideration in this appeal is.

whether the order impugned is sustainable in law?

After careful perusal of the order impugned passed by the Tribunal, it emerges that committed an error much less irregularity, resulting in miscarriage of justice, in passing the impugned order which is contrary to Section 269SS of the Act. Any amount more than Rs. 20,000/-, has to be deposited by way of cheque. In the instant case, it is not in dispute that a sum of Rs. 11,03,000/- is deposited by cash. That is the glaring error that, is noticed from the records. The Tribunal without assigning any valid reasons has held that the temporary borrowals by the assessee, to tide over the immediate financial commitments have been held to be reasonable cause for accepting cash deposit. Further it is specifically opined that even otherwise this is only a technical breach of law and not a contumacious conduct requiring levy of penalty of more than Rs. 11 lakhs and the purpose of Section 269SS of the Act is to trace the movement of cash and restrict loan operations only through banking channels, hi that view of the matter, the Tribunal ought to have passed appropriate order in accordance with the relevant provisions of the Act and Rules. The order impugned, which to passed without assigning valid reasons and without recording finding of fact, cannot be sustained and hence, it is liable to be set aside in view of not deciding the said case in consonance with the relevant provisions of the Act.

In the light of the facts and circumstances of the case, we are of the considered view that the order impugned cannot be sustained and is liable to be set aside.

For the foregoing reasons, the appeal is allowed and the order impugned elated 7.4.2006 passed in I.T.A. No. 91/Bang/2004 by the Income Tax Appellate Tribunal is hereby set aside and the matter stands remitted back to the Tribunal for reconsideration afresh and pass appropriate order in accordance with law after affording reasonable opportunity to the parties and dispose of the same expeditiously.

Since the matter is remanded to the Tribunal, there is no need to answer the aforesaid substantial questions of law.