Natu Ram, A.M. - (1.) THE appeal preferred by the assessee is directed against the order, dt. 1st November, 1994, passed by the learned CIT(A)-1, Rajkot confirming penalty levied under s. 271D at Rs. 2,60,000.
(2.) The facts as stated are that the AO during the course of assessment proceedings noticed that the assessee-firm accepted loans/deposits of Rs. 20,000 each from 13 parties as per the details given in the order during the year. Since aggregate deposit amount in each case was received by cash it was in contravention of the provisions of s. 269SS of the Act. The AO, therefore, reported the matter to the Dy. CIT for initiation of proceedings under s. 271D. The Dy. CIT having jurisdiction over the case issued a show-cause notice, dt. 1st June, 1994. There being change in the incumbent, the successor Dy. CIT further gave a show-cause notice to the assessee against the default committed. The assessee in response made a submission that since the Department has treated the said credit amount as genuine and looking to the nature of the business of construction where large amount of labour charges and payments for raw materials purchased from unorganised trading sectors such as cement, bricks, etc. are required to be made after the banking hours in particulars on the days of their festival, if their demand of cash payments are not met instantly they cancel works contract and refuse to complete work and prevent other contractors from undertaking the work till their dues are settled. The amount taken was for business expediency. It was also claimed that the AO did not invoke the provisions of s. 269SS and accepted the expenses claimed as genuine and deposits as bona fide. It was also submitted that general impression given by the press advertisement about the provision is that it prohibits accepting deposits above Rs. 20,000 by cash and such deposit is required to be made by account-payee cheques. Such advertisements created an understanding that if the loans deposits are upto Rs. 20,000 it should be made in cash and if it is more than Rs. 20,000 it is to be made by account-payee cheques. The Department should, therefore, not take advantage of its misleading advertisement and punish honest taxpayers who relied upon the advertisement. The marginal difference in interpretation is of Rs. 1 as against Rs. 20,000 and with wide powers to condone such defaults no action should be taken. The AO was not satisfied with the explanations so given. He observed that the nature of business is not relevant as the assessee has to manage its business affairs looking to its requirements and while doing so the provisions of the Act were required to be followed. He further mentioned that s. 269SS clearly prohibits accepting/receiving of loans/deposits in cash aggregating Rs. 20,000 or more and this is evident from the plain reading of the section. He further pointed out that the provisions of s. 269SS r/w s. 271D are mandatory in nature and if default is committed nothing further is to be proved and the default committed by itself attract the penalty. He also noted that all these deposits were repaid by the assessee by account-payee cheques only and that shows that the assessee was fully aware of the provisions. He also noted that there being no ambiguity in the language of section, the assessee was not to go by any advertisement. He also noted that the acceptance of deposits as genuine is not relevant so far as the provisions of s. 269SS are concerned. He also noted that the assessee had not brought on record any material to prove necessity of borrowing deposits in cash. On these facts the Dy. CIT treated the assessee in default and levied the impugned penalty of Rs. 2,60,000 under s. 271D of the Act. On appeal apart from the submissions made before the AO it was claimed that the provisions of s. 269SS has since been held as ultra vires of the Constitution by the Hon'ble Madras High Court in the case of Kumari A. B. Shanti vs. CIT (1992) 197 ITR 330 (Mad). The assessee also sought support from the decision of the Tribunal, Ahmedabad 'C' Bench in the case of Vir Sales Corporation vs. Asstt. CIT - ITA Nos. 463 & 464/Ahd/1993, decided on 19th August, 1993 [since reported at (1994) 50 TTJ (Ahd) 130]. It was further submitted that the show-cause notice given by the Dy. CIT was vague and general in so far as it did not give details of the transactions offending s. 269SS. The assessee, therefore, also gave general reply giving reasonable ground with reference to the nature of business. The Dy. CIT passed the order without giving personal hearing. The AO also while completing the assessment did not ask for any explanation about the said loans taken in contravention of provisions of s. 269SS. Rather there is no mention made about the issue in the assessment order. The assessee also sought permission to produce the books of account in support of the submission that the loans were taken because of business requirements as stated in the reply to the show-cause notice. The first appellate authority noted that there was a search in the case of the assessee during which certain incriminating documents were seized. It was noticed from such papers that no cash balance was drawn from 13th May, 1990, onwards. The aggregate amount of loan in each case was Rs. 20,000. He also noted that the decision of the Madras High Court has since been stayed by the Hon'ble Supreme Court and accordingly the claim of the assessee that the provisions of s. 269SS are ultra vires cannot be held as tenable. He further noted that it is well settled position of law that in a taxing statute one has to look merely at what is clearly said and there is no room for any intendment. He further noted that the language of s. 269SS does not leave any ambiguity that the reference to the amount of Rs. 20,000 is to the aggregate amount or more and thus violation of the statutory provisions made by the assessee-firm was clear without any reasonable cause and, therefore, the conclusion of the Dy. CIT to levy penalty cannot be said to be unjustified. With such observations the CIT(A) confirmed the penalty levied. The assessee is now in appeal before us against the findings so given by the CIT(A).
(3.) THE assessee has raised as many as seven grounds while challenging the order of the CIT(A) which are as under : (1) THE learned CIT(A) has erred in confirming the order of Dy. CIT levying penalty and issuing show-cause notice without there being finding of the violation of provisions of s. 269SS by AO in the assessment order and initiating penalty proceedings for violation thereof. (2) THE learned CIT(A) has erred in confirming the order of Dy. CIT passed without giving personal hearing on written submissions made before him. (3) THE learned CIT(A) has erred in confirming order of Dy. CIT passed without giving any opportunity of producing evidence in support of written submissions made before passing the penalty order. (4) THE learned CIT(A) has erred in not making suo motu inquiries in misleading advertisement issued by the Department giving general impression that loan exceeding Rs. 20,000 is required to be made by account-payee cheque before putting onus on the appellant. (5) THE learned CIT(A) has erred is not taking into consideration the above referred explanatory note contained in Public Circular No. 572 issued by the Directorate of Income-tax New Delhi. (6) THE learned CIT(A) has erred in not taking into consideration the evidence in support of the claim of the appellant that he relied upon advertisement which is public notice to the taxpayers. Thus Department cannot take advantage of its own mistake. (7) THE learned CIT(A) has erred in not appreciating any of the argument, circular, advertisement by the Department and the judgment cited only on the ground of his interpretation of word "aggregate" in the section. 4.1 THE learned counsel for the assessee has reiterated the submission made before the lower authorities. He has further made a submission that the assessee raised the said loan amounts to meet urgent requirements of its business and further the Board Circular No. 572 gave the impression that the taxpayers are not to accept any loans/deposits in excess of Rs. 20,000 otherwise than by an account-payee cheque or bankdraft. This constituted a reasonable cause and as such the penalty was not leviable. He also made a submission that the case cited by the assessee before the CIT(A) of Vir Sales Corporation vs. Asstt. CIT (supra) which has identical facts was not considered by the CIT(A) and had the facts of the assessee's case were appreciated in light of the said decision, the penalty could not be sustained. He further submitted that the Dy. CIT before levying penalty neither asked for any material in support of the submissions made in writing nor he gave personal hearing and that was against the principles of natural justice. THE learned counsel for the assessee, therefore, prayed that the penalty levied and confirmed by the CIT(A) is totally unjustified and the same is required to be cancelled.;