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Commissioner of Income Tax v. M/s. Kasi Credit Corporation - Tax Case (A) No.925 of 2005  RD-TN 748 (26 October 2005)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HON'BLE MR. JUSTICE P.D.DINAKARAN
THE HON'BLE MR. JUSTICE N.KANNADASAN
Tax Case (A) No.925 of 2005
Tax Case (A) No.926 of 2005
Commissioner of Income Tax,
Chennai - VI .. Appellant in both the appeals -Vs-
M/s. Kasi Credit Corporation
No.91-92, Jawaharlal Nehru Salai,
Ashok Nagar, Chennai - 600 083. .. Respondent in T.C.(A) No.925/05 M/s. Kasi Finance & Investments Corporation
No.91-92, Jawaharlal Nehru Salai,
Ashok Nagar, Chennai - 600 083.
.. Respondent in T.C.(A) No.926/05 Tax Case Appeals under Section 260A of the Income Tax Act 1961 against the order of the Income Tax Appellate Tribunal, Chennai `D' Bench dated 21.05.2003 in ITA Nos.1266/Mds/2001 for the assessment year 199 7-98 and 1268/Mds/2001 for the assessment yer 1996-97.
For appellant : Mr.K.Subramaniam
For Respondent : ---
:J U D G M E N T
( Judgment of the Court was delivered by P.D.DINAKARAN,J.) The above tax case appeals are directed against the order of the Income-tax Appellate Tribunal in ITA.Nos.1266 & 1268/Mds/2001, dated 21.5.2003.
2. The Revenue is the appellant. The assessment years involved are 1997-98 and 1996-97. The case of the appellant is that the assessees/respondents herein was engaged in the business of accepting deposits from the public for the purpose of Real Estate and Property Development business. The assessment order under Section 143(3) read with Section 158 BD and 158 BC of the Income Tax Act (hereinafter referred to as 'The Act') for the block period was passed on 29.12.1998. The assessing officer found that there was contravention of the provisions of Section 269T of the Act by the firm in repaying deposits with interest to the public, for which, penalty proceedings under Section 271 E of the Act were initiated. On appeal at the instance of the assessee, the Commissioner of Income (Appeals)-VI, Chennai allowed the appeal and cancelled the penalty levied by the assessing officer holding that the assessee had made reasonable cause for repayment of loan in cash, which was confirmed by the Appellate Tribunal, on appeal by the Revenue.
3. Aggrieved by the same, the Revenue has preferred these appeals raising the following substantial question of law: "Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in confirming the order of the Commissioner of Income Tax (Appeals) cancelling the penalties under Section 27 1E of the Act in spite of there being total lack of evidence to prove the existence of reasonable cause in terms of Section 273 B of the Income Tax Act?"
4. According to the assessees, it is a group consisting of seven partnership firms floated by Shri Mathivathanan and his wife Smt. Annakalanjiyam. They and some of their relations and friends are partners in the firms. The said firms had accepted deposits from the public for the purpose of business in Real Estate & Property Development carried on by related concerns.
5. It is seen from the records that there was a search under Section 132 of the Act in the group of companies and block assessments were made under Sections 143(3) read with 158 BC and 158 BD of the Act on 29.12.1998. The assessing officer found that there were instances of contravention of Section 269T of the Act by the firms in repaying deposits with interest to the depositors. In the case of Kasi Consolidated Finance Corporation, there was one such instance for the assessment year 1998-99; in the case of Kasi Consultant & Credit Corporation there were thirteen such instances for the assessment year 1996-97 and six instances for the assessment year 1997-98; in the case of Kasi Credit & Consultant Corporation, there was one instance of violation for the assessment year 1996-97 and two instances for the assessment year 1997-98 and in the case of Kasi Credit Corporation, there were two instances of contravention of the provisions of Section 269T of the Act.
6. Penalty proceedings under Section 271E of the Act were initiated in respect of all the seven firms for all the assessment years by the Joint Commissioner of Income Tax by issuing show cause notice. The assesses' representatives appeared before him. After taking several adjournments, details were furnished by the assessees on 26.6.2000 and 29.6.2000. According to the assessees, repayment of deposit in excess of the limit prescribed under Section 269T was ignorance on the part of the assessees about the provisions of law. As some depositors wanted cash, repayment was made in cash. The Joint Commissioner found that the explanation was mostly of general in nature and no evidence was produced to support the explanation. According to the Joint Commissioner, the decision relied on by assessees reported in 197 ITR 330 (Kum. A.B.Shanthi V. ADI) has been stayed by the Supreme Court vide 204 ITR St.1 and levied penalty under Section 271E of the Act equal to the amounts of the deposits repaid in cash.
7. On a reconsideration of the matter before the Commissioner of Income Tax (Appeals), it was contended that there was reasonable cause for repayment of deposits by the assesses in cash and the application of Section 271E of the Act was not automatic, as the levy of penalty was governed by the provisions of Section 273 B also. Agreeing with the aforesaid contentions raised by the assessees, the Commissioner of Income Tax (Appeals) cancelled the penalty levied by the assessing officer.
8. It is also seen from the copies of the bank statements furnished before the assessing officer that most of the repayments were effected through cheques; some of the repayments are inter-company transfers for group housing and purchase of flats and some of the deposits were repaid after the closure of the banking hours. In some of the cases, it is seen that depositors were lady members, who do not have bank accounts and on their insistence, repayments had to be made in cash. The Income tax Appellate Tribunal has also reiterated the aforesaid facts and accepted these facts.
9. Therefore, on a reading of the above findings arrived at by the Commissioner of Income Tax (Appeals) as well as by the Tribunal, it is seen that cash payments made by the assessees in certain cases were for justifiable cause and sufficient reasons and explanations have been offered. The Commissioner of Income-tax (Appeals) as well as the Tribunal have accepted the aforesaid aspects and found the question in favour of the assessee and that being the question of fact, we do not find any ground to interfere with the finding of the Income Tax Appellate Tribunal.
Hence, there is no question of law much less substantial question of law made out by the appellant in these appeals and the same are dismissed. Index: Yes
1. The Assistant Registrar,
Income-tax Appellate Tribunal,
Rajaji Bhavan, Besant Nagar,
Chennai 600 090 (five copies with records)
2. The Secretary,
Central Board of Direct Taxes, New Delhi (3 copies) 3. The Commissioner of Income-tax (Appeals),
4. The Joint Commissioner of Income-tax,
Spl.Range VIII, Madras.
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