G.SANTHANAM, A. M. : - (1.) THESE appeals are by the assessee against the levy of penalty respectively under Ss. 271D and 271E of the IT Act, 1961.
(2.) The appellant is a registered firm of nine partners engaged in money-lending business. The previous year relevant to the asst. yr. 1989-90 is the financial year ending on 31st March, 1989. According to the learned Dy. CIT, Central Range, Ernakulam, the appellant had, during the relevant previous year, accepted in cash deposits or loans on various dates from different firms such as, Muthoot M. George Chits, Bangalore, Muthoot Bankers, New Delhi, Muthoot Bankers, Bangalore and Muthoot M. George Chitty, Faridabad, amounting in all Rs. 57,95,000 in violation of the provisions of S. 269SS of the IT Act and, therefore, levied penalty under S. 271D of the Act in a sum equal to the amount of such loans or deposits. Similarly, the learned Dy. CIT noticed that the appellant had, during the relevant previous year, made repayments in cash of deposits amounting to Rs. 58,50,000 on various dates between 17th Feb., 1989 and 31st March, 1989 to different parties such as Muthoot M. George Chitty, Bangalore, Muthoot Bankers, Bangalore, Muthoot Bankers, New Delhi and Muthoot M. George Chitty, Faridabad, in violation of provisions of S. 269T of the IT Act, 1961 and, therefore, levied penalty under S. 271E of the said Act in a sum equal to the amount of Rs. 58,50,000. The appellant carried the matter in appeal against the levy of penalty respectively under Ss. 271D and 271E of the Act. It was contended before the learned CIT(A) that the transactions involved transfer of funds from one sister concern to another sister concern and such transactions could not be termed as loans or deposits within the meaning of S. 269SS or as deposits within the meaning of S. 269T. Further, it was contended that the interest paid to the sister concerns was all accounted for and offered for income-tax assessment and no concealment of income was involved. Reliance was placed by the appellant on the Circular of the Board of Direct Taxes No. 387 dt. 6th July, 1984 (paras 32.1 to 32.7) [(1984) 43 CTR (TLT) 3 at 17] explaining the provisions of Ss. 269SS and 269T inserted by the Finance Act, 1984 for the proposition that the impugned provisions were intended only to curb black money transactions and on this basis it was contended that once the transactions are found to be genuine and no change of concealment was levelled in respect of such transactions, levy of penalty under S. 271D or under S. 271E for venial violation, if any, of S. 269SS or 269T would be draconian in nature and effect and was no justified. It was also contended before the first appellate authority that the Madras High Court in the case of Kum. A. B. Shanthi vs. Asstt. Director of Inspection (1992) 197 ITR 330 (Mad) had struck down the provisions of S. 269SS as ultra vires the Constitution of India and as the provisions of S. 269T and 271E are parallel provisions and represent the other side of the same coin, they should be also construed as ultra vires the Constitution. Further, it was contended that the expression "loan or deposit" found in S. 269SS or the expression "deposit" found in S. 269T would not apply to transaction of funds inter se among the firms managed by the same group of individuals with a slight alteration in the respective constitution. Moreso, when the same individual is the managing partner of all such firms and the central office is located under the same roof. Lastly, it was contended that several transactions comprised in the sum of Rs. 57,95,000 which were considered by the learned Dy. CIT as coming under the purview of S. 269SS are outside the provisions of S. 269SS. Likewise, it was also contended that several transactions comprised in a sum of Rs. 58,50,000 which were considered by the learned Dy. CIT as coming within the purview of S. 269T are outside the provisions of the said section. Thus, the appellant questioned the quantum of penalty also, levied in this case under Ss. 271D and 271E respectively of the IT Act, 1961. The learned CIT(A) accepted the contention of the appellant that the many transactions considered by the learned Dy. CIT as falling within the purview of S. 269SS or S. 269T did not really attract the provisions of either S. 269SS or S. 269T and in this view of the matter, he excluded a sum of Rs. 28,00,000 from the ambit of S. 269SS and a sum of Rs. 34,60,000 from the mischief of S. 269T and sustained penalty in respect of acceptance of deposits or loans in cash in a sum of Rs. 29,95,000 and in a sum of Rs. 23,90,000 in respect of repayment of deposits in cash. The Revenue is not in appeal against the exclusions made by the learned CIT(A) and the reliefs thus granted. The assessee is on appeal against the levy of penalty in a sum of Rs. 29,95,000 under the provisions of S. 271D and also the levy of penalty in a sum of Rs. 23,90,000 under the provisions of S. 271E of the IT Act.
(3.) THE learned CIT(A) did not accept the other contentions of the appellant. According to him for the impugned provisions to be attracted, it is immaterial whether the transfer of funds between the firms were found to be genuine or not. Once the appellant accepted the deposits or loans in cash in violation of S. 269SS or made repayments of deposits in cash, in contravention of the provisions of S. 269T, penal provisions of S. 271D and 271E are attracted. THE argument that S. 269SS is ultra vires the Constitution as declared by the Madras High Court did not find favour with the first appellate authority for the reason that the same High Court in the case of K. R. M. V. Ponnuswamy Nadar & Sons & Ors. vs. Union of India & Ors. (1992) 196 ITR 431 (Mad) had upheld the validity of the provisions of S. 269SS. As between the two decisions of the Madras High Court, the learned CIT(A) preferred to follow the Division Bench decision upholding the constitutional validity of the provisions of S. 269SS. Alternatively, he held that even if one were to be guided by the decision of the same High Court in the case of Kum. A. B. Shanthi vs. Asst. Director of Inspection (supra), striking down the provisions of S. 269SS, inasmuch as, it was not a decision of the jurisdictional High Court he was not bound to follow the same in the light of the decision of the Punjab & Haryana High Court in the case of CIT vs. Ved Prakash (1989) 178 ITR 332 (P&H). He did not accept the contention of the appellant that because the transactions were between the sister concerns, the provisions of S. 269SS and 269T would not be attracted as according to him the expression "person" included in S. 2(31) of the IT Act a firm also and there may be as many persons as there are firms : nor did he accept the argument of the appellant that in the very nature of the transactions it cannot be said that the appellant had accepted the deposits or loans or made repayments of deposits as according to him the definition of "deposit" would cover the transactions of the nature reported between the firms as contained in the account of the appellant. Thus, the CIT(A) sustained the levy of penalty on principle, but gave part relief to the appellant on an examination of the transactions as found in the books of accounts of the appellant. Not satisfied, the appellant is on second appeal.;