INCOME TAX OFFICER, WARD-5(3),BARODA vs. SHREE KRISHNA SAHAKARI BANK LTD

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TAXAP/1175/2011HC GujaratGJHC24025640201131 August 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the assessee bank had a reasonable cause for the breach of Section 269T, and the breach was bonafide. The Tribunal found that the identity of the depositors and the veracity of the transactions were not doubted and were genuine. It was not demonstrated that the assessee acted deliberately, contumaciously, or dishonestly. The Tribunal concluded that the cause shown by the assessee was satisfactory and constituted a sufficient cause under Section 273B of the Act. The Tribunal drew support from the Apex Court's decisions 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). Consequently, the Tribunal dismissed the Revenue's appeal, finding no substantial question of law and deeming the appeal devoid of merit. The operative direction was the dismissal of the Revenue's appeal, upholding the deletion of the penalty.

What were the facts?

The Revenue has appealed an order of the Income Tax Appellate Tribunal (ITAT) dated February 22, 2011, which deleted a penalty of Rs. 19,44,314/- levied on the assessee, Shree Krishna Sahakari Bank Ltd. The penalty was imposed under Section 271E of the Income Tax Act, 1961, for contravention of Section 269T. The Assessing Officer (AO) found that the assessee bank had repaid deposits in cash exceeding the prescribed limit. The assessee contended that its employees had limited exposure to tax laws, leading to an oversight, and that the cash repayments were made under pressure from depositors due to an economic downturn affecting other cooperative banks. The Commissioner of Income Tax (Appeals) deleted the penalty, citing a security scam and panic among depositors. The ITAT upheld this deletion.

What were the issues?

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 under Section 271E of the Act for contravention of the provisions of Section 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 a bonafide belief coupled with the genuineness of the transaction constitutes a reasonable cause as provided under Section 273B of the Act for repayment of FDRs in cash by the assessee bank? Assessee's Contentions (as inferred from the Tribunal's findings): The assessee argued that the identity of the depositors was not in doubt and the transactions were genuine. They also contended that a bonafide belief, coupled with the genuineness of the transactions, constituted a reasonable cause under Section 273B for the cash repayments. The assessee's employees' limited exposure to Income-tax laws led to an oversight of Section 269T, and the cash repayments were made under pressure from depositors due to an economic crisis in the cooperative banking sector. Revenue's Contentions: The Revenue argued that the Tribunal erred in deleting the penalty and that the assessee's explanation did not constitute a reasonable cause for violating Section 269T.

Which sections of the Income-tax Act were involved?

Section 271E,Section 269T,Section 273B,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1175/2011 1/4 JUDGMENT 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 ? 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 ? 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. TAXAP/1175/2011 2/4 JUDGMENT

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 TAXAP/1175/2011 3/4 JUDGMENT 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.”

TAXAP/1175/2011 4/4 (SN DEVU PPS)

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