Ajay Kumar Mittal, J.:— The Revenue has filed the present appeal under section 260A of the Income-tax Act, 1961 (for short, “the Act”), against the order of the Income-tax Appellate Tribunal, Delhi Bench “B”, New Delhi (for short “the Tribunal”), passed in I.T.A No. 1873 Delhi of 1999 dated January 30, 2004, for the assessment year 1993–94 claiming that the following substantial question of law arises in this appeal:
“Whether, on the facts and circumstances of the case, the hon'ble Income-tax Appellate Tribunal was right in law in dismissing the appeal of the Department and uphold the action of the Commissioner of Income-tax (Appeals) in cancelling the order of penalty under section 271E of the Income-tax Act, 1961, imposing a penalty of Rs. 1,71,800 by the Deputy Commissioner of Income-tax, Hisar?”
2. The facts leading to the filing of the present appeal are that the Income-tax Officer, Ward-2, Jind, vide his office letter No. 844 dated August 6, 1997, referred the matter for initiation of penalty proceedings under section 271E of the Act as the assessee had contravened the provisions of section 269T of the Act during the financial year 1992–93 relevant to the assessment year 1993–94 by making repayment of loan/deposits in cash to the following persons as per the details given below:
Sr. No.
Name of the person
Amount (Rs.)
Total (Rs.)
Date of repayment
(1)
(2)
(3)
(4)
(5)
1.
Shri Banwari Lal
10,000
10,000
26-11-1992
2.
Shri Puran Chand Saini
20,000
31-7-1992
11,800
31,800
3.
Shri Mohinder lal
10,000
26-11-1992
10,000
20,000
27-11-1992
4.
Smt. Shanti Devi
10,000
10-8-1992
10,000
11-8-1992
10,000
31-8-1992
10,000
12-9-1992
400
40,400
23-9-1992
5.
Shri Satbir Singh
10,000
12-9-1992
10,000
23-9-1992
10,000
25-9-1992
7,400
37,400
8-10-1992
6.
Shri Deva Singh
10,000
27-10-1992
10,000
29-10-1992
10,000
31-10-1992
10,000
5-11-1992
10,000
6-11-1992
1,600
51,600
7-11-1992
7.
Shri Sumer Singh
10,000
10-10-1992
10,000
12-10-1992
10,000
17-10-1992
9,200
39,200
20-10-1992
Total
2,30,400
3. A show-cause notice under section 274 read with section 271E of the Act was issued to the assessee. The then Deputy Commissioner of Income-tax, Hisar Range, Hisar (now “the JCIT”), vide order dated August 20, 1998, levied penalty of Rs. 1,71,800 which was equal to the amounts repaid in cash by the assessee-firm. The appeal filed by the assessee was allowed by the Commissioner of Income-tax (Appeals) (for short “the CIT(A)”) vide order dated January 18, 1999, whereby the order of penalty was cancelled. The Revenue did not accept the order of the Commissioner of Income-tax (Appeals), Rohtak, and carried the matter in appeal to the Tribunal, which was dismissed vide order dated January 30, 2004.
4. Shri Rajesh Bindal, learned counsel for the Revenue, submitted that the penalty had been rightly imposed by the Deputy Commissioner of Income-tax, Hisar Range, Hisar, and he supported the order imposing penalty. He argued that the orders of the Commissioner of Income-tax (Appeals) and the Tribunal cancelling the penalty are perverse and, therefore, substantial question of law as claimed by the Revenue arises in this appeal.
5. We have heard learned counsel for the Revenue and with his assistance have perused the record.
6. The relevant provisions of sections 269T, 271E and 273B of the Act for decision of the present appeal are reproduced as under:
“269T.(1) No company (including a banking company), co-operative society or firm shall repay to any person any deposit otherwise than by an account payee cheque or account payee bank draft where the amount of the deposit, or where the amount of the deposit is to be repaid together with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees or more:
Provided that where the repayment is by a banking company or co-operative bank, such repayment may also be made by crediting the amount of such deposit to the account (if any) with such company or bank of the person to whom such deposit has to be repaid:
Provided further that nothing in this sub-section shall apply to or in relation to the repayment of any deposit on or after the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President.
(2) No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit if—
(a) the amount of the deposit together with interest, if any, payable thereon, or
(b) the aggregate amount of the deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such deposits,
is twenty thousand rupees or more:
Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such deposit to the savings bank account or the current account (if any) with such branch of the person to whom such deposit has to be repaid:
Provided further that nothing in this sub-section shall apply to or in relation to the repayment of any deposit before the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President.
Explanation.—For the purposes of this section,—
(i) ‘banking company’ shall have the meaning assigned to it in clause (i) of the Explanation to section 269SS;
(ia) ‘co-operative bank’ shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);
(ii) ‘deposit’ means any deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes deposit of any nature.
271E. (1) If a person repays any deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the deposit so repaid.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Deputy Commissioner.
273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271B, section 271BB, section 271C, section 271D, section 271E, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or sub-section (1) of section 272BB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.”
7. Section 269T of the Act provides for mode of repayment of certain deposits. It stipulates that no company including a banking company, cooperative society or firm shall repay to any person any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the deposit if the amount of deposit together with interest is Rs. 20,000 or more.
8. Section 271E is included in Chapter XXI of the Act which deals with penalties imposable for failure to comply with the provisions of section 269T of the Act and it speaks of levy of penalty equal to the amount of the deposit so repaid in contravention of section 269T of the Act.
9. Section 273B of the Act provides that no penalty is imposable for any failure referred to in the said provisions, if the assessee proves that there was “reasonable cause” for the said failure.
10. Therefore, a combined reading of the provisions of sections 271E and 273B of the Act makes it clear that if the assessee shows “reasonable cause” for the failure to comply with any provision referred thereto, the penalty for its violation shall not be imposable on the assessee.
11. In the present case, the Commissioner of Income-tax (Appeals) while deleting the penalty in its order dated January 18, 1999, had accepted the explanation of the assessee that breach of the provisions of the Act was on account of bona fide belief of the assessee and the same was not with any intention to avoid or evade the tax. The observations of the Commissioner of Income-tax (Appeals) in paras. 6 and 6.1 are relevant and are reproduced as under:
“6. I have carefully considered the conspectus of this matter and facts on record. No loss of revenue has occurred in this case and the genuineness of the transaction has not been doubted. The apex court in Hindustan Steel Ltd. v. State Of Orissa†., [1972] 83 ITR 26 had long ago settled the law that penalty is not to be ordinarily imposed unless the party either acted deliberately in defiance of law and was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligations. Penalty will also not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. The authority competent to impose the penalty will be justified in refusing to do so, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
6.1 As pointed out earlier, there is no doubt about the genuineness of the transactions which have been fully accepted in the assessment made for the year under consideration. Even if, there is any ignorance, which resulted in the infraction of law, the default is technical or venial which did not prejudice the interests of the Revenue as no tax avoidance or tax evasion was involved. To my mind, bona fide belief coupled with the genuineness of the transactions would constitute reasonable cause under section 273B for not invoking the provisions of section 271E of the Act. The impugned order of penalty is cancelled.”
12. The findings of the Commissioner of Income-tax (Appeals) have been confirmed in appeal by the Tribunal. Therefore, the findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269T of the Act is a finding of fact based on appreciation of material on record. It does not give rise to any question of law, much less substantial question of law.
13. Accordingly, the appeal is dismissed.