ITR/30/1997 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 30 of 1997 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA Sd/- HONOURABLE MR.JUSTICE Z.K.SAIYED Sd/- ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ========================================= = COMMISSIONER OF INCOME TAX - Applicant(s) Versus SHRI NATVARLAL PURSHOTTAMDAS PAREKH - Respondent(s) ========================================= = Appearance : MR BB NAIK for Applicant(s) : 1, MR VARUN PATEL FOR MR SN SOPARKAR for Respondent(s) : 1, ========================================= = CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 25/02/2008 ITR/30/1997 2/8 JUDGMENT ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1 The Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has referred the following two questions for the opinion of this Court u/s. 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the Commissioner of Income Tax, Rajkot. “1. Question in R.A.No. 461/Ahd/1996. Whether, the Appellate Tribunal has correctly appreciated the facts on record thereby deleting the penalty of Rs.2,61,193/- levied under sec. 271-D of the Income-tax Act? 2. Question in R.A. No.462/Ahd/1996. Whether, the Appellate Tribunal has correctly appreciated the facts on record thereby deleting the penalty of Rs.7,70,778/- levied u/s. 217-E of the Income- tax Act?” 2 The Assessment Year is 1991-92. During course of assessment proceedings the Assessing Officer noticed that the assessee, who carries on business of money lending and trades in jewellery, has accepted various loans/deposits from different parties and repaid such loans/deposits to different parties in contravention of provisions of Sections 269SS and 269T of the Act respectively. Accordingly the matter was referred to Deputy Commissioner of Income Tax, Bhavnagar for initiation of penalty proceedings under sections 271D and 271E of the Act for the two respective violations ITR/30/1997 3/8 JUDGMENT referred to earlier. The Deputy Commissioner of Income Tax, after issuing show cause notice and considering the explanation tendered by the assessee, did not find the explanation satisfactory and imposed penalty of Rs.2,61,193/- under section 271D of the Act and penalty of Rs.7,70,778/- under section 271E of the Act. The assessee did not succeed in Appeals filed before Commissioner (Appeals) and hence preferred Second Appeals before the Tribunal. 3 On behalf of the assessee the contentions raised were recorded by the Tribunal in the following words : “..... The assessee further submitted that there was no intention on his part to evade the tax and he gave the extract of circular No. 387 of 6.7.84 issued by CBDT to support his contention that provisions of section 269- SS were brought on statute against unacquainted cash found in the course of search which was being explained by tax payes as representing loans taken from or deposits made by various persons. The plea of the assessee was that all the amounts received by assessee was from family members and those amounts were on account of maturity of N.S.C. Etc. or gifts from one family member to other whose accounts were being maintained by the assessee which were seized during the course of search and with the department. The assessee further took up the plea that he was dealing in financial matters of all the family members ITR/30/1997 4/8 JUDGMENT and the payments which were alleged in violation of the provisions of Sec.269-T of the Act, were not the actual payments to those parties but these were payments towards PPF, LIC, I.T. And W.T. of all family. Another plea was that assessee was maintaining current accounts with him. Another plea was that assessee was physically handicaped and unable to move which was one of the factors for not getting the amount through bank draft or crossed account payee cheques etc.” 4 After hearing the parties the Tribunal has recorded the following findings after appreciating the evidence on record : “18 As discussed above, the annexure attached to the penalty order goes to show that each of the family members of the assessee and each one of them was having sufficient opening balance as on 1.4.90. After that we have to look into sources of the amounts received by assessee on behalf of his family members as the same is an important factor. Handsome amount has been received on account of maturity of NSCs and then most of the amounts have been credited on account of gifts received from one family member to other and that was through journal entry except Rs.32,000/- which was gift by one family member to other. These amounts were not received by assessee in cash as these were mere book entries. These amounts cannot be equated with any of the amounts involved in the cases relied by both the parties as in those cases, the amounts were received by assessee as deposits in cash and that is not the position here because ITR/30/1997 5/8 JUDGMENT these were book entries except the amounts of NSCs and other cash loan of Rs.11,910/-. In the same breath, the amount of Rs.1,920/- credited on account of rent and Rs.24,360/- credit in account of Harendrakumar and Hiteshkumar cannot be treated as deposits or loan because these were credit entires on account of salary and bonus. Accordingly, the crux of the matter is that most of the amounts as referred to above was based on mere book entries and not received in cash by assessee from family members except the amount of NSCs and other cash loan and that cannot be treated as deposits or loan because these were credit entires on account of salary and bonus. Accordingly, the crux of the matter is that most of the amounts as referred to above was based on mere book entries and not received in cash by assessee from family members except the amount of NSCs and other cash loan and that cannot be treated as loan or deposits for the purpose of Sec.269-SS. 19. Coming to the nature of payments, most of the amounts viz. Rs.5,41,450/- has been repaid by assessee by depositing the different sums on behalf of his family members in PPF. Rs.25,523/- has been paid towards LIC premium. The amounts of advance tax, I.T. as well as W.T. will be around Rs.80,000/- and again gift from one family member to other family member comes to Rs.1.09 lacs and Rs.16,000/- is again journal entry for allocation of share for household expenses. This again shows that no amount was paid by assessee in cash to any of the family member. These facts as mentioned above, have not been challenged by the Revenue as ITR/30/1997 6/8 JUDGMENT genuineness of these transactions viz. receipts of amount of NSC, book entries relating to gift from one family member to other and credit entries in respect of salary and bonus and rent etc., the genuineness of investment in PPF, LIC premium made towards different types of taxes and different book entries, transaction relating to gifts are not doubted by the Revenue. Apart from it, the assessee has filed documents from PP. 1 to 14 and PP.17 to 163 of the paper book in support of these entreis and the ld. D.R. was not able to point out that facts as narrated above and relied by the assessee are in any manner not true. If these are the facts, then the amounts of alleged receipts except the amounts of cash loan taken by assessee and amount received by assessee on maturity of NSCs of different family members cannot be treated as loan and deposits nor amounts of repayments can be brought for violation of provisions of Sec.269-T as amounts were not received in cash by assessee nor he paid the amounts in cash to different family members.” 5 The Tribunal has also found that the assessee was prevented by a reasonable cause in light of the affidavit of one Mr. J.B. Shah, Advocate and Income Tax Practitioner having standing of 33 years as the gentleman had opined that the assessee would not violate provisions of sections 269SS & 269T of the Act if the assessee receives amounts from the family members and repays to different family members. ITR/30/1997 7/8 JUDGMENT 6 Heard Mr. B.B. Naik, learned Standing Counsel for the applicant-revenue and Mr. Varun Patel for Mr.S.N.Soparkar, learned Senior Advocate for the respondent-assessee. 7 As can be seen from the findings reproduced hereinbefore the Tribunal has appreciated the evidence on record and arrived at certain findings based on such appreciation of evidence. The position in law is well settled that whether evidence is correctly appreciated or not cannot give rise to a question of law unless and until such findings are challenged as being contrary to the evidence on record or recorded after omitting to consider relevant evidence and taking into consideration irrelevant evidence. In the present case , that is not the position and in fact that is not even alleged. Furthermore, the Tribunal has also found that the assessee had been able to establish existence of a reasonable cause, even if the finding of the Tribunal that there was no violation is not accepted. 8 In the circumstances, there is no reason to take a different view of the matter. The Tribunal has found that on facts and in light of the evidence on record there was no violation of either provisions of section 269SS or section 269T ITR/30/1997 8/8 JUDGMENT of the Act. The Tribunal has further found that there was a reasonable cause, assuming that there was any violation by the assessee. Hence, the Tribunal has rightly deleted the penalties levied under sections 271D and 271E of the Act. 9 Hence both the questions are answered in the affirmative i.e. in favour of the assessee and against the revenue. Reference stands disposed of accordingly with no order as to costs. Sd/- (D.A. Mehta, J.) Sd/- (Z.K. Saiyed, J.) M.M.BHATT