Income-tax---

----Reference---Question of law---Loans and deposits---ITO finding that assessee accepting deposits in cash exceeding Rs.20,000 in contravention of S.269-SS ---Assessee contending that deposits received from agriculturists on sale of their produce and two deposits were in the nature of "Amanat"-- Deputy CIT imposing penalty---Tribunal reducing penalty---Tribunal submitting, Statement of case while referring question of law to High Court relating to cancellation of penalty under 5,.2560) at instance of Revenue-- Question whether no penalty was leviable: on two deposits on ground that those deposits were "Amanat" and not loan arose for reference---Indian Income Tax Act, 1961, Ss.256(2), 269-SS & 271-D.

The Income-tax Officer during the assessment proceedings for the assessment year 1990-91 found that the assessee which derived income mainly as commission agents, had accepted certain deposits in cash exceeding Rs.20,000 (the deposits aggregated to Rs.1,82,200) in contravention of the provisions of section 269-SS of the Income Tax Act, 1961. The Income-tax Officer referred the matter to the Deputy Commissioner of Income-tax who completed the assessment and made additions to the assessee's income. The Deputy Commissioner of Income-tax, thereafter initiated penalty proceedings under section 271-D of the Income Tax Act, 1961. In the penalty proceedings the assessee contended that the credits or the deposits were received from agriculturists on the sale of their produce, that the deposits were -in the nature of "Amanat", that he was under a bona fide belief that Section 269-SS was not applicable to loans or deposits taken or accepted from agriculturists. The Deputy Commissioner of Income-tax rejected the contentions of the assessee and imposed penalty under section 271-D at Rs.1,82,200 equivalent to the amount of deposits on the ground that the deposits were not covered under section 273-B of the Act because the assessee had not been able to prove that there was any reasonable cause for failure to accept deposits by account payee cheques or drafts. The Commissioner of Income-tax (Appeals) confirmed the levy of penalty. The Tribunal accepted in part the assessee's appeal and held that a sum of Rs.20,000 received from R and another deposit of Rs.20,000 from D were deposits from persons who were not agriculturists. The Tribunal, therefore, reduced the penalty from Rs.1,82,200 to Rs.40,000. On an application to direct a reference under section 256(2) of the Act, the assessee contended that the Tribunal had already submitted a statement of case while referring a question of law to the High Court under section 256(1) at the instance of the Revenue, that the question of law specifically related to the cancellation of penalty of Rs.1,82,200, that, therefore, the assessee's petition might also be allowed in respect of the balance amount of Rs.40,000 so that the entire controversy might be examined by the High Court and that the deposits made by R and D were in the nature of "Amanats" and, therefore, these deposits did not fall within the purview of section 269-SS of the Act:

Held, that since the application under section 256(1) filed by the Department had been allowed by the Tribunal, the following question of lave arose for reference: "whether no penalty was leviable under section 271-D on the amount of Rs.20,000 received by the assessee from R and Rs.20,000 from D on the ground that those amounts were in the nature of "Amanat" and not loan or deposit within the meaning of section 269-SS of the Act.

Rakesh Garg for Appellant.

B.S. Gupta, Senior Advocate and Sanjay Bansal for Respondent.

JUDGMENT

N.K. AGRAWAL, J.---This is an application by the assessee under section 256(2) of the Income: Tax Act, 1961 (for shore, "the Act"), seeking a direction to the Income-tax appellate Tribunal (for short, "the Tribunal"), to refer the following questions:

"(1) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was justified in not accepting the plea of reasonable cause and bona fide belief and thereby confirming penalty of Rs.40,000 in respect of S/Shri Raj Kumar and Darshan Singh (R8.20,000 each), under section 271-D of the Income Tax Act, 1961?

(2) Whether, the learned Income-tax Appellate Tribunal on the facts and in the circumstances of the case, was justified in not accepting the plea of the assessee that the amounts were 'Amanat' and not 'loan' or 'deposit' and, thus, not hit by the provisions of section 269-SS of the Income Tax Act, 1961?

(3) Whether, on the facts of the case, the learned Income-tax Appellate Tribunal was justified in upholding penalty of Rs.20,000 in the case of Sh. Darshan Singh particularly when the learned Deputy Commissioner of Income-tax, Bathinda, had himself excluded another amount of Rs.15,000 in the same account appearing on October 31, 1989, holding that it was not hit by the provisions of section 269-SS?"

The assessee derived income mainly as commission agents. The Income-tax Officer, during the assessment proceedings for the assessment year 1990-91 noticed that the assessee had accepted certain deposits in cash exceeding Rs.20,000 in contravention of the provisions of section 269-SS of the Act. He referred the matter to the Deputy Commissioner, who proceeded further and completed the assessment. The deposits found recorded in. the books of account of the assessee aggregated to Rs.1,82,200. There were certain more deposits but the Deputy Commissioner rejected the six deposits only and made addition to the assessee's income. Section 269-SS of the Act required any loan or deposit to be taken or accepted from any person after June 30, 1984, by account payee cheque or account payee bank draft only, where the amount of such loan or deposit was Rs.20,000 or more. In the case of the assessee, the total amount of such loans and deposits in cash from different persons was Rs.1,82,200. The Deputy Commissioner proceeded to levy penalty under section 271-D of the Act.

The assessee took the plea in the penalty proceedings that the credits or the deposits were received from the agriculturists on the sale of their produce. It was further explained by the assessee that the deposits were in the nature of "Amanats". The assessee also argued that he was under a bona fide belief that section 269-SS was not applicable to the loans and deposits taken or accepted from the agriculturists. The Deputy Commissioner, however, did not agree and imposed penalty under section 271-D of the Act of Rs.1,82,000, equivalent to the amount of deposits. The Deputy Commis sioner took the view that the: deposits were; not covered under section 273-B of the Act because the assessee had not been able to prove that there was any reasonable cause for failure to accept deposits by amount payee cheques or drafts.

The Commissioner of Income-tax confirmed the penalty but the Tribunal partly accepted the assessee's appeal. A sum of Rs.20,000 received from Raj Kumar on October 27, 1989, and another deposit of an equal amount received from Darshan Singh on February 5, 1990, were held to be the deposits from persons other than agriculturists. The penalty was; therefore, reduced from Rs.1,82,200 to Rs.40,000.

It has been explained by Shri Rakesh Garg, counsel for the petitioner, that the Tribunal has already submitted a statement of the case while referring a question of law to this Court under section 256(1) of the Act at the instance of the Revenue. The question of law specifically relates to the cancellation of penalty of Rs.1,42,200. Shri Garg has, therefore, argued that the assessee's petition may also be allowed in respect of the balance amount of Rs.40,000, so that the entire controversy may be examined by this Court. It is explained that the deposits made by Raj Kumar and Darshan Singh were in the nature of ' Amanats" and, therefore, these deposits also did not fall within the purview of section 269-SS of the Act.

Keeping in view the nature of controversy and also the fact that the application filed by the Department has been allowed by the Tribunal, it appears appropriate to examine the question of law raised by the assessee.

Out of the three questions raised by the assessee, question No.2, as modified hereunder, is required to be referred to this Court by the Tribunal;

"Whether, on the facts and in the circumstances of the case, no penalty was leviable under section 271-D of the Income Tax Act, 1961, on the amount of Rs,20,000 received by the assessee from Raj Kumar and Rs.20,000 received from Darshan Singh on the ground that those amounts were in the nature of 'Amanat' and not loan or deposit within the meaning of section 269-SS of the said Act?"

The Tribunal is directed to send a statement of the case and refer the aforesaid question to this Court.

M.B.A./4061/FCOrder accordingly.