-:1:- IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL JURISDICTION ORIGINAL JURISDICTION ORIGINAL JURISDICTION INCOME INCOME INCOME TAX APPEAL NO. 31 OF 2008 TAX APPEAL NO. 31 OF 2008 TAX APPEAL NO. 31 OF 2008 The Commissioner of Income-tax-III, PMT. Building, "B" Wing, 3rd Floor, Swargate, Shankarsheth Road, Pune - 411 037. ... Appellant. V/s. Mr. Madhukar B. Pawar, Prop. Kanchan Construction, 203, Shaniwar Peth, Karad, District - Satara. ... Respondent. ... Mr. P.S. Sahadevan for the Appellant. None for the Respondents. ... CORAM CORAM CORAM : F.I. REBELLO & : F.I. REBELLO & : F.I. REBELLO & K.U. K.U. K.U. CHANDIWAL,JJ. CHANDIWAL,JJ. CHANDIWAL,JJ. DATE DATE DATE : 25TH JUNE, 2008. : 25TH JUNE, 2008. : 25TH JUNE, 2008. ORAL ORAL ORAL JUDGMENT : (PER F.I. REBELLO, J.) : JUDGMENT : (PER F.I. REBELLO, J.) : JUDGMENT : (PER F.I. REBELLO, J.) : . Revenue is in appeal against the order of ITAT. The assessee had taken from seven persons a loan of Rs.20,000/- each. This is a finding of fact and not in dispute. On behalf of the revenue, the learned Counsel draws ours attention to the statutory provisions of Section 269 SS of the Income Tax Act which uses the expression "is twenty thousand rupees or more". In other words, according to the learned Counsel, if a person takes any loan in excess of Rs.20,000/- other than by cheque that would result in breaching the provisions of Section 269 SS and -:2:- consequently, penalty could be levied under Section 271D of the Income Tax Act. 2. From this, the question of law as framed reads as under :- "whether on the facts and circumstances of the case in law, the penalty did not urge in holding that the provision of Section 269 SS would not apply to the loan or deposit taken in cash of Rs.20,000/- or more and, apply only to the loan what would have taken in cash in excess of Rs.20,000/-?" 3. The learned Counsel for the assessee has relied on a Circular issued by CBDT vide Circular 572 dated 3rd August 1990. The relevant portion of which reads as under :- "43. Secs. 271C, 271D and 271E, which were inserted in the IT Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provide for the levy of penalties for certain defaults. Penalty u/s. 271C is levied for failure to deduct tax at source. Penalty u/s. 271D may be levied for failure to comply with the provisions of Section 269 SS i.e. for taking or accepting any loan or for taking or accepting any loan or for taking or accepting any loan or deposit deposit deposit in excess of Rs.20,000/- in excess of Rs.20,000/- in excess of Rs.20,000/- otherwise than by an account payee cheque or bank draft. Penalty under Section 271E may be levied for failure to comply with the provisions of Section 269T relating to repayment by a company, including a banking company, a co-operative society or a firm, of deposits, including interest, exceeding Rs.10,000/- in the aggregate otherwise than by an account payee cheque or bank draft. (emphasis supplied by me)." (emphasis supplied). 4. It is now well settled that Circulars issued by CBDT are statutory in character and are binding on -:3:- the departmental authorities. The authorities including Assessing Officer and other consequently would be bound by that Circular. In the instant case, CBDT for the purpose of attracting Section 271D has set out that the loan of deposit should be in excess of Rs.20,000/-. It is true that what CBDT has stated may be contrary to the expression language of Section 269 SS which uses the expression "twenty thousand rupees or more". The law and the CBDT circulars can be spelled out from the following Judgments of the Supreme Court. In Navnit Lal C. Javeri V/s. K.K. Navnit Lal C. Javeri V/s. K.K. Navnit Lal C. Javeri V/s. K.K. Sen, Sen, Sen, Appellate Assistant Commissioner of Income Tax, Appellate Assistant Commissioner of Income Tax, Appellate Assistant Commissioner of Income Tax, Bombay 56 ITR 198, a Constitution Bench of the Supreme Court observed "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under Section 5(8) of the Act." Navnit Lal (Supra) was followed in Ellerman Lines Ltd. V/s. Ellerman Lines Ltd. V/s. Ellerman Lines Ltd. V/s. Commissioner Commissioner Commissioner of Income Tax of Income Tax of Income Tax 82 ITR 913. In UCO Bank UCO Bank UCO Bank V/s. V/s. V/s. Commissioner of Income Tax Commissioner of Income Tax Commissioner of Income Tax 237 ITR 890. The law was restated and it was held that circular of Board of Direct Taxes are legally binding on the Revenue and this binding character attaches to the circulars even if they be found not in accordance with the correct interpretation of the section and they depart or deviate from such construction, when they are issued in exercise of the statutory powers under Section 119. It was however clarified that the Board cannot -:4:- pre-empt a judicial interpretation of the scope and ambit of the provision and further could not impose a burden on the tax-payer higher than what the act itself, on a true interpretation, envisages. It was observed that a Board has the statutory power under Section 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute. In Commissioner Commissioner Commissioner of Sales Tax V/s. Indra Industries of Sales Tax V/s. Indra Industries of Sales Tax V/s. Indra Industries 248 ITR 338, the Court further observed that the taxing authority cannot be heard to advance an argument that it is contrary to that interpretation. 5 Considering the circular issued by the CBDT and the loan being not in excess of Rs.20,000/- from each person. the interpretation given by the Tribunal to the said circular, the question of law does not arise and consequently, the said appeal is dismissed. The Assessing Officer could not have acted contrary to the circular. (F.I. (F.I. (F.I. REBELLO, J.) REBELLO, J.) REBELLO, J.) (K.U. (K.U. (K.U. CHANDIWAL,J.) CHANDIWAL,J.) CHANDIWAL,J.)