THE COMMISSIONER OF INCOME TAX I NASHIK vs. ASHAPURI KURBAN CO OP CREDIT SOCIETY LTD SHINDKHEDA DIST DHULE

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TA/40/2010HC BombayHCBM03018265201015 February 2012Author: HON'BLE SHRI JUSTICE S.B.DESHMUKH,HON'BLE SHRI JUSTICE D. G. KARNIK4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the concurrent finding of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal that there was a reasonable cause within the meaning of Section 273B of the Income Tax Act is a finding of fact. The Court stated that such a finding does not give rise to a question of law, let alone a substantial question of law, which is a prerequisite for an appeal under Section 260A of the Income Tax Act. The Court acknowledged the revenue's submission that the audit report contained an observation about the Income Tax Act provisions, but considered this argument as merely suggesting an erroneous finding of fact. The Tribunal was affirmed as the final authority on facts, and the High Court reiterated that it cannot interfere with factual findings. Consequently, the appeal was dismissed.

What were the facts?

The assessee, Ashapuri Urban Cooperative Credit Society Ltd., accepted cash deposits exceeding Rs. 20,000/- from depositors. The Assessing Officer imposed a penalty under Section 271D of the Income Tax Act for violating Section 269-SS. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, holding that the assessee had a bona fide belief, albeit erroneous, that cash deposits above Rs. 20,000/- were permissible. This belief was considered a reasonable cause under Section 273B, leading to the setting aside of the penalty. The Income Tax Appellate Tribunal upheld the CIT(A)'s order, relying on the Supreme Court's decision in M/s. Motilal Padampat Sugar Mills Vs. State of Uttar Pradesh & others.

What were the issues?

1. Whether the finding of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal that the assessee had a reasonable cause within the meaning of Section 273B of the Income Tax Act, for accepting cash deposits in excess of Rs. 20,000/-, gives rise to a substantial question of law under Section 260A of the Income Tax Act? Assessee's contentions: Not recorded. Revenue's contentions: The revenue argued that the assessee was aware of the legal position as an observation regarding the provisions of the Income Tax Act was made in the audit report by the Chartered Accountant. Therefore, the assessee cannot claim ignorance of the law and should not be held to have a reasonable cause.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269-SS,Section 273B,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
(1) Tax Appeal No. 40 of 2010 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, AURANGABAD BENCH, AT AURANGABAD. Tax Appeal No. 40 of 2010 The Commissioner of Income Tax-I, Kendriya Rajaswa Bhavan, Gadkari Chowk, Old Agra Road, Nashik - 422 002. .. Appellant. versus Ashapuri Urban Cooperative Credit Society Ltd., A/P. Shindkheda, District : Dhule. .. Respondent. ....................... Mr. D.V. Soman, Advocate, for the appellant. ........................ CORAM : D.G. KARNIK & S.B. DESHMUKH, JJ. DATE : 15TH FEBRUARY 2012

ORAL JUDGMENT (Per D.G. Karnik, J.) :

1.

Heard learned Counsel for the appellant.

2.

The respondent, an assessee, is an Urban Cooperative

(2) Tax Appeal No. 40 of 2010 Credit Society. It accepts deposits from its members and others. In the relevant Assessment year it received deposits from depositors in cash, in excess of Rs. 20,000/- each. A penalty under Section 271D of the Income Tax Act was ordered to be recovered by the Assessing Officer for breach of provisions of Section 269-SS of the Income Tax Act, 1961. Aggrieved by the decision of imposition of penalty, the respondent filed an appeal before the Commissioner of Income Tax (Appeals). By an order dated 19th September 2008, the Commissioner of Income Tax (Appeals) allowed the appeal, holding that the appellant was under bona fide belief, though erroneous, that the deposits in excess of Rs. 20,000/- can be accepted in cash. He held that the bona fide belief of the appellant constituted a reasonable cause within the meaning of Section 273B of the Income Tax Act, in relation to the penalty under Section 271D of the Income Tax Act. He accordingly held that this was not a fit case to impose penalty under Section 271D of the Income Tax Act, and set aside the order of imposition of penalty.

3.

On further appeal, the Income Tax Appellate Tribunal confirmed the decision of the Commissioner of Income Tax (Appeals). Relying upon a decision of the Supreme Court, in the case of M/s. Motilal Padampat Sugar Mills Vs. State of Uttar Pradesh & others (1979 AIR 621 = 1979 SCR(2) 641), the (3) Tax Appeal No. 40 of 2010 Tribunal held that there is no maxim that everyone is presumed to know the law; the only maxim is 'ignorance of law is no excuse'. The Tribunal held that the assessee, which is a Credit Cooperative Society, was not aware of the legal provision that it cannot accept deposits in excess of Rs. 20,000/- in cash and that constituted reasonable cause within the meaning of Section 273B of the Income Tax Act. Consequently, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals).

4.

The finding concurrently recorded by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, that there was reasonable cause within the meaning of Section 273B of the Income Tax Act, is a finding of fact and, in our view, does not give rise to a question of law, much less, a substantial question of law.

5.

Learned Counsel for the appellant submitted that in the audit report, the Chartered Accountant had made an observation regarding the provisions of the Income Tax Act, and therefore, it must be held that the assessee was aware of the position in law, that the deposits in excess of Rs. 20,000/- cannot be accepted in cash. The submission, even if accepted, would mean that the finding recorded by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal is an (4) Tax Appeal No. 40 of 2010 erroneous finding of fact. In our view, the Income Tax Appellate Tribunal is a final authority of facts and no appeal lies to the High Court under Section 260A of the Income Tax Act, merely for correcting an error of fact.

6.

In the circumstances, there is no merit in the Appeal which is hereby dismissed.

( S.B. DESHMUKH ) ( D.G. KARNIK ) JUDGE JUDGE ......................... bgp/ta40

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