IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1175 of 2011 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question 4 of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= INCOME TAX OFFICER, WARD-5(3),BARODA - Appellant(s) Versus SHREE KRISHNA SAHAKARI BANK LTD - Opponent(s) ========================================================= Appearance :
MR KM PARIKH for Appellant(s) : 1, None for Opponent(s) : 1, =========================================================
CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI
and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 31/08/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) This Tax Appeal preferred by the Revenue under section 260A of the Income Tax Act, 1961, arises out of order dated 22.02.2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench `D' in ITA No.1270 of 2010.
1.1 The appellant has sought to raise the following questions proposing them as substantial questions of law:
“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty of Rs.19,44,314/- levied u/s. 271E of the Act for contravention of provisions of Sec. 269T of the Act?
2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that bonafide belief coupled with genuineness of transaction constitute a reasonable cause as provided u/s. 273B of the Act for repayment of FDRs in cash by assessee bank?”
2. We heard learned advocate Mr. K.M. Parikh for the appellant.
3. The issue is in respect of imposition of penalty by the Assessing Officer under section 271E of the Income Tax Act (hereinafter referred to as `the Act' for sake of brevity). The relevant facts in the background are that the assessee, which is a Co-operative Bank engaged in banking business, filed its return of income for the assessment year 2006-07 declaring nil income. During the course of the assessment, the Assessment Officer noticed that the assessee had repaid deposits in cash totalling to Rs.19,44,314/- and such repayment had exceeded the limit specified under section 269T of the Act. Therefore, notice under section 271E read with section 273B of the Act was issued.
3.1 The explanation of the assessee was that its employees had limited exposure to the Income-tax laws, which resulted into overlooking of provisions of section 269SS and 269T. It was also submitted that repayment of deposits in cash was during the period when there was overall economic failure of several co-operative banks in the State and the depositors were insisting on repayment of their fixed deposits in cash. The explanation of the assessee was not accepted and the Assessing Officer imposed penalty of Rs.19,44,340/- under section 271.
3.2 The assessee preferred appeal before the Commissioner of Income Tax (Appeals) who accepted the explanation and directed deletion of penalty by his order dated 15.02.2010. The CIT(A) observed that there was a security scam and number of co-operative societies were under liquidation. The depositors had become apprehensive. On account of a fraud committed by the staff members and the Director of the Bank, the situation of panic was created and there was a rush of depositors for withdrawal of their savings from the Bank. The CIT(A) held the view that in such a pressure situation it was not unlikely that the deposits were repaid in cash resulting into breach of section 269T.
4. Against the aforesaid order of the CIT(A) the Department went in appeal which culminated into the impugned order. The Tribunal dismissed the appeal by recording its findings as under:
“During the course of proceedings before the lower authorities, it was consistently contended that the identity of the depositors are not in doubt and the transactions are genuine one. It also not the case of the Revenue the depositors were benami. Accordingly, it can be safely said that the bona fide belief coupled with genuineness of the transactions constitute a reasonable cause as provided u/s 273B of the Act for repayment of FDRs in cash by bank. At the same time, we are of the view that ordinary a plea as to the ignorance of law cannot support the breach of a statutory provision, but the fact of such an innocent mistake due to ignorance of the relevant provisions of law coupled with the fact that the transactions in question were genuine and bona fide transactions and were undertaken during the regular course of the business, will constitute a reasonable cause.”
5. The reasoning of the Tribunal that the assessee had a reasonable cause and breach of section 269T was bonafide was correctly arrived at. Identity of depositors and veracity of transactions were not doubted and were genuine. No circumstance was shown wherefrom it could be deduced that the respondent acted deliberately or was guilty of contumacious conduct or acted dishonestly in any way. On the contrary the cause shown was satisfactory and constituted a sufficient cause under section 273B of the Act. The Tribunal drew support for its findings and conclusion from decision of the Apex Court in Motilal Sugar Mills Company Limited v. State of Uttar Pradesh (1979) 189 ITR 326 and Hindustan Steel Limited vs. State of Orissa (83 ITR 26).
6. In the aforesaid view no error was committed by the Tribunal in dismissing the appeal of the Department. The appeal raised no substantial question of law and it is devoid of merit.
7. Accordingly, the Tax Appeal is dismissed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.)
(SN DEVU PPS)