THE COMMISSIONER OF INCOME TAX. III, PUNE vs. SHRI MADHUKAR B. PAWAR

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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

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

Section 269 SS of the Income

Tax

Act

which

uses the expression "is twenty thousand

rupees

more".

In other words, according to the

learned

Counsel,

person takes any loan

excess

Rs.20,000/-

other than by cheque that would result in

breaching

the

provisions

Section

269

and CNR No : HCBM020152442007 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:53:54

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consequently, penalty could be levied under Section

271D of the Income Tax Act.

From this, the question of law as framed reads

as under :-

"whether on the facts and circumstances of the

case

law,

the penalty did

not

urge

holding

that the provision of Section 269

would

not apply to the loan or deposit

taken

in cash of Rs.20,000/- or more and, apply only

the loan what would have taken in cash

excess of Rs.20,000/-?"

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

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

levied

for

failure to deduct tax at

source.

Penalty

u/s.

271D may be levied for

failure

comply with the provisions of Section

269

i.e.

for taking or accepting any loan

or for taking or accepting any loan

or for taking or accepting any loan

deposit deposit deposit

excess of

Rs.20,000/-

excess of

Rs.20,000/-

excess of

Rs.20,000/-

otherwise

than by an account payee cheque or bank draft.

Penalty

under Section 271E may be levied

for

failure

comply

with

the

provisions

Section

269T

relating

repayment

company,

including

banking

company,

co-operative

society or a firm, of

deposits,

including

interest, exceeding Rs.10,000/-

the

aggregate

otherwise than by

account

payee

cheque

bank

draft.

(emphasis

supplied by me)." (emphasis supplied).

It is now well settled that Circulars issued

CBDT are statutory in character and are binding on Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:53:54

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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

Rs.20,000/-.

It is true that what CBDT has stated

may

be contrary to the expression language of Section

269

which

uses the expression

"twenty

thousand

rupees

or more".

The law and the CBDT circulars

can

spelled

out from the following Judgments

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

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

Income Tax

Income Tax

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

they

be found not in accordance with the

correct

interpretation

the

section and

they

depart

deviate

from such construction, when they are

issued

in exercise of the statutory powers under Section 119.

was

however

clarified

that

the

Board

cannot Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:53:54

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pre-empt

judicial interpretation of the scope

and

ambit

of the provision and further could not impose a

burden

the

tax-payer higher than

what

the

act

itself,

on a true interpretation, envisages.

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

proper

administration of the fiscal

statute.

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.

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

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.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:53:54 Powered by TCPDF (www.tcpdf.org)