SRI NARAYAN CHANDRA GHOSH,HOOGHLY vs. JCIT, RG-I, HOOGHLY, HOOGHLY

This is an appeal preferred by the Assessee against the order of CIT(A)-XXXVI, Kolkata dated 10.12.2013 for A.Y 2008-09.

The sole ground raised by the assessee is against the penalty levied by Joint Commissioner of Income Tax which has been sustained by the ld. CIT(A) u/.s 271D of the Act of Rs.1,00,000/- imposed for contravention of section 269SS of the Act.

At the outset itself the ld. AR took our attention to the fact that undisputedly the loan amount has not exceeded Rs.20,000/- i.e. the assessee has taken loan from five persons of Rs.20,000/- each. According to the ld. Counsel as per the department’s circular No.572 dated 03.08.1990, the penalty u/s 271D of the Act would be attracted only if loan or deposit is in excess of Rs.20,000/-. Therefore since the department is bound by CBDT Circular, the penalty should not have been levied on the assessee. On the other hand, the ld. DR took our attention to section 269SS of the Act wherein the law stipulates loan or deposit of Rs.20,000/- or more. Therefore according to him the ld.

We have heard the parties and perused the records. We find that in a similar case wherein the assesee had taken loan of Rs.20,000/- from several persons and similar penalty u/s 271D was imposed by the Jt. Commissioner was before the Hon’ble Bombay High Court. The very same plea that the assessee has raised before us that is the circular of the CBDT (supra) which was relied upon by the Tribunal to cancell the penalty was upheld by the Hon’ble Bombay High Court as under :- “4. It is now well settled that circulars issued by CSDT are statutory in character and are binding on the Departmental authorities. The authorities including Aa and other consequently would be bound by that circular. In the instant case, CBDT for the purpose of attracting s. 271 D has set out that the loan or deposit should be in excess of Rs. 20,000. It is true that what CBDT has stated may be contrary to the express language of s. 269SS which uses the expression "twenty thousand rupees or more". The law and the CBDT circulars can be spelled out from the following judgments of the Supreme Court. In Navnit Lal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198 (SC), a Constitution Bench of the Supreme Court observed "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under s. 5(8) of the Act." Navnit Lal (supra) was followed in Ellennan Lines Ltd. vs. CIT 1972 CTR (SC) 71 : (1971) 82 lTR 913 (SC). In VC-O Bank vs. err (1999) 154 CTR (SC) 88 : (1999) 237 HR 889 (SC), the law was restated and it was held that circulars of CBDT are legally binding on the Revenue and this binding character attaches to the circulars even if they be found not in accordance with the correct interpretation of the section and they depart or deviate from such construction, when they are issued in exercise of the statutory powers under s. 119. It was however clarified that the Board cannot pre- empt a judicial interpretation of the scope and ambit of the provision and further could not impose a burden on the taxpayer higher than what the Act itself, on a true interpretation, envisages. It was observed that the Board has the statutory power under s. 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute. In CST vs. Indra Industries (200 I) 168 CTR (SC) 50 : (200 I) 248 TTR 338 (SC), the COUlt 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 to the said circular, the question of law does not arise and consequently, the said appeal is dismissed. The AO could not have acted contrary to the circular.”

In the result the appeal of the assessee is allowed.