GYARSI LAL VIJAY vs. C I T and ORS

Instant income tax appeal u/s.260A of the Income Tax Act, 1961 is directed against the order dt.26.9.2001 passed by Income Tax Appellate Tribunal, Jaipur Bench, Jaipur. It relates to the assessment year 1991-92. Following question of law was admitted by this Court :- “Whether on the facts and in the circumstances of the case the tribunal was justified in sustaining the penalty of Rs. 20000/- u/s.271 (D) of the Income Tax Act 1961 ?”

The brief facts noticed are that during the course of search and seizure operation u/s.132 on the basis of certain loose papers, it transpired that there was a narration of an amount of Rs. 20000/- having been received from Smt. Rukmani Devi, wife of the assessee by cash and since the said amount was received in cash, it was held to be not only in violation of provision of section 269-SS but also in the assessment order, it was 2 mentioned that the said amount of Rs. 20000/- is treated as un-explained deposit and the AO made a separate addition of Rs. 20000/- by invoking provisions of section 68. The said addition u/s.68 was confirmed by the CIT (A) as also by the Tribunal.

Proceedings for initiation of penalty u/s.271-D was initiated on the premise that the said amount of Rs. 20,000/- having been received in cash from Smt. Rukmani Devi, wife of the appellant is in violation on provisions of section 269-SS, penalty as such u/s.271-D was imposable. A show cause notice was issued and it was contended that no amount was borrowed from Smt. Rukmani Devi and the said amount was never credited in the books and as an alternative, it was pleaded that the amount having been received from wife is a bona fide transaction and reasonable cause was also pleaded. However the AO was not satisfied and imposed a penalty of equal amount i.e. 20,000/- u/S 271-D.

Before the CIT (A), the contention was reiterated and it was also contended that the said amount of Rs. 20,000/- has been held as a cash credit u/s.68 and separate addition of Rs. 20,000/- was made u/s.68 and once it has been held to be deemed income of the assessee it cannot be treated for the purposes of section 269-SS as a loan or deposit and thus this found favour with the CIT (A), who deleted the penalty.

The revenue assailed the said deletion before the 3 Tribunal however the Tribunal upheld the penalty by holding that violation of section 269-SS and section 68 are two separate cause of action and even if it has been held to be deemed income u/s.68 still penalty can be imposed, if there is violation of provisions of section 269-SS and upheld the penalty.

Learned Counsel for the appellant vehemently contended that there was no loan or deposit from Smt. Rukmani Devi and on the basis of some notings in some incriminating document, the addition was made in the regular assessment proceedings but it does not mean that the said amount was received from Smt. Rukmani Devi as loan or a deposit. Alternatively he contended that there is a reasonable cause as the transaction is in between husband and wife and there can always be inter se transaction between husband and wife on account of a bonafide belief that either spouse can deposit certain amount taking into consideration the close relationship. He further contended that once it has been held to be deemed income of the assessee u/s.68, it becomes real income of the assessee, then the character of the said amount does not remain as a loan or deposit, and contended that the finding of the Tribunal is unjust and the finding of the CIT (A) is more appropriate. And thus contended that the penalty deserves to be quashed and set aside.

Per contra learned counsel for the Revenue contended that section 269-SS as also section 68 are 4 entirely distinct and different provisions. Addition was made u/s.68 as the assessee was unable to prove the genuineness and creditworthiness of deposit of Rs. 20,000/- found shown in the incriminating documents and therefore addition of Rs. 20,000/- was made. Since the said amount was shown as amount having been received in cash, therefore, there was violation of section 269-SS as well and admittedly the amount has been received from wife and it could not be anything except loan or deposit and the amount being in excess of the prescribed limit u/s.269-SS, penalty has been rightly sustained by the Tribunal.

We have considered the arguments advanced by the counsel for the parties, in our view the penalty is not sustainable u/s.269-SS. Admittedly, the amount of Rs. 20,000/- was not found credited in any books of account but on account of some noting on some incriminating document, the AO held it to be not explained and the AO found that the assessee was unable to explain the creditworthiness or genuineness of the deposit and accordingly made an addition of Rs. 20,000/- by invoking provisions of section 68. It would be appropriate to quote section 68 :- “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount

Perusal of the above section envisage that, if any sum is found credited in the books of account and the assessee fails to offer satisfactory explanation regarding the nature and source so offered by him or fails to tender satisfactory explanation, the said amount can be treated as deemed income of the assessee, in our view once it has been held as deemed income of the assessee or an addition u/s.68, has been made the character of the said amount/addition will not remain as a loan or deposit and section 269-SS will not be applicable. Although addition u/s.68 or provisions of sec.269-SS are independent provisions but if the alleged income is held to be deemed income of the assessee, the penalty u/s.271-D could not be invoked.

The question is accordingly answered in favour of the assessee and against the revenue, with no order as to cost. (JAINENDRA KUMAR RANKA),J. (AJAY RASTOGI),J. Savita