The Hissaria brothers vs. CIT case has taken another twist. Recently another judgement was passed by the Rajasthan stated that the penalty proceeding for default is not having transactions through the bank or equivalent sources which had to be fulfilled under 269SS and 269T. These are not related to the evaluation proceeding but will have to be independent of it.
The final verdict by the Supreme Court that it held dismissing the appeal.
Hissaria brothers vs. CIT case background-
Facts stated by the assessee- Hissaria brothers vs. CIT case
1. (a) The assessee here is a locally renowned firm which is involved in Kachha Arhatiya (or commission agent) business. The assessee was acting as an agent for the local farmers. He used to sell their crops and keep the sale proceeds by him. It was later used by the farmers to but raw material and goods. The assessed helped the farmers to meet their needs from time to time. He used to provide them fertiliser, pesticide, insecticide, raw material, goods etc. In return he kept the sale proceed and things continued.
The deals conducted between the assessee were frequent, quick and current nature. The local farmers were frightened to get money from the bank and equivalent resources as those methods were slow and time-consuming. The regular deals in between the assessee and the farmers were in form of cash. They used to give and take cash from each other.
2. The year of assessment 1993-94:
Violation of 269SS and liable for penalty under 271E
It was found that the assessee appeals involved, ITA Nos 434/Apr/2000 and 433/Jdpr/2000. On the other hand revenues, appeals were ITA Nos 499/Ju/2000 and 500/Ju/2000. According to the assessing officer, the Joint Commissioner found that according to the Annexure A and Annexure B in the nature of the deposit, violation of 269SS and that the assessee was liable for the penalty under 271E.
Violation of 269T and liable for penalty 271E
Later when the repayment method was analysed it was under violation according to 269T and liable for the penalty under 271E. later it was found by the Joint commissioner in charge that the assessee has made cash credit according to Annexure A, of INR 1,89,000 to three person- Shri Prem Prakash, Shri Ganga Ram and Shri Shivraj as a deposit. It violated section 269SS and the return cash was a violation of 269T. Hence the Joint Commissioner in charge imposed two penalties on him which were 271D and 271 E (for repayment).
3. In the assessment year 1994-95:
Assessees appeals involved Nos 432/Jdr/200 and 431/Jdr/2000 and revenue appeals involved Nos 502. The Joint Commissioner in charge imposed Annexure A, Annexure B and Annexure C in the imposed penalty orders. Later the learned Commissioner declined the penalty on the basis of reasonable cause and authentic belief. But he had strong views for the receipts of instances which were not in the tallying to the Annexure A of not being the nature of the deposit. According to the reports of Annexure B, the amount found did not tally the credit entry and the seized notebook.
Verdict of 1992-93-94-95-96:
The assessee’s plea regarding his penalty which was under 27D and 27E were for all the years 1992-93-94-95-96 was overruled by the authorities.
After a lot of verdicts, it was found that the assessee is a Kacha Arhatiya (Commission agent) to the local farmers. The profit that farmers earn, they forward it to the K.A and don’t take it to their homes. As they fear of wasteful expenditure, theft and neighbourhood problems. They later use this money for their basic expenses like buying raw material, goods, agricultural products, medicine etc. It also finds that this is a long ago practice which was practised even before 269SS and 269T existed.
Agriculturist stated that they deal directly with the K.A and not with the bank. They can get the cash whenever they need without any hurdle or paperwork. The villagers who are part of this practice are orthodox and illiterate. If same was to be conducted in a bank one had to be educated and smart enough to handle the long procedures.
In defence of the assessed, the agriculturists bring their cash from different sources like vegetable selling, cattle breeding, poultry farm and give it straight away to K.A without any paperwork.
Also read: https://www.itrtoday.com/archives4162/
Final Verdict of supreme court in the Hissaria brothers vs. CIT case-
On pursuing judgement of the High Court, it is found that the penalty imposed on the respondent herein was also set aside on the ground that the provision of section 271-D and 271-E of the Income Tax were invoked after six months of limitation and, therefore, such penalty could not have been imposed. Since the outcome of the judgement of the High Court can be sustained on this aspect alone, it is not even necessary to go into other aspects. Leaving the other questions of law open the appeal is dismissed.
There shall be no order as to costs.
Pending application, if any, stands disposed of.