CIT Vs. SAHARA INDIA MUTUAL BENEFIT CO LTD

JUDGEMENT

(1.) These are four appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 ("Act?, for short). They are directed against the common order passed by the Income Tax Appellate Tribunal, New Delhi Bench-G ON 17.09.2010 in ITA No. 3222-3225/Del/2009 confirming the orders passed by the CIT (Appeals) cancelling the penalty imposed on the assessee under Section 271D of the Act. The following common questions of law are sought to be raised in the appeals by the Revenue: -

(2.) The brief facts giving rise to the filing of the present appeals may now be noticed. The assessee, which is the respondent in all the appeals is engaged in the business of accepting deposits and is a "Residuary NonBanking Finance Company" (RNBFC). Its principal business is the mobilisation of deposits through its sister concern and agent M/s. Sahara India Firm. We may take up the assessment year 2000-01 as the lead matter (ITA 637/2011). In the course of the proceedings the Assessing Officer noticed that the assessee had collected huge amounts of deposits through its network of more than 1300 branches all over the country with more than 3 crores depositors and that these deposits were collected in cash in violation of Section 269SS of the Act. Under this section, a person is prohibited from taking a loan or deposit in cash if it exceeds the amount of Rs 20,000/-. In case of violation of this provision, Section 271D empowers the Assessing Officer to impose a penalty equivalent to the amount collected as loan or deposit in cash. However, Section 273B provides for reasonable cause to be proved by an assessee against whom action for penalty is taken. If reasonable cause is established, no penalty is attracted. In the background of these provisions the Assessing Officer referred the matter to the Additional Commissioner of Income Tax, Central Range, Lucknow to deal with the penalty proceedings as contemplated by Section 271D.

(3.) Before the Additional Commissioner of Income Tax the assessee submitted a detailed reply in an attempt to show the existence of reasonable cause for collection of deposits in cash. The gist of the reply is this: -