M.R. Shah, J. - By way of this petition under Article 226 of the Constitution of India, the petitioner has challenged the impugned Show Cause Notices dated 28/3/2002 (Annexure-F) and dated 20/9/2002 (Annexure-H), by which the petitioner - assessee is called upon to show cause as to why penalty under section 271(D)/271(E) of the Income Tax Act, should not be imposed in case of society for the quantum of amount accepted or repaid in contravention of Sections 269-SS and 269-T of the Income Tax Act.
2. It is the case on behalf of the petitioner and so stated in the petition, more particularly in paragraph Nos.3 and 4 that, as such there is no breach of Sections 269-SS and 269-T of the Income Tax Act, as alleged. It is also the case on behalf of the petitioner that with respect to the activities and for the transaction in question, Sections 269-SS and 269-T of the Income Tax Act would not be applicable at all. In paragraph Nos.3 and 4 of the petition, the petitioner has stated as under :—
"3. The issue involved in the petition relates to the transactions with the members in respect of the cotton pooling activity undertaken by the petitioner. Under this head, the members of the society are divided into four or five large groups for administrative convenience. The members bring the cotton grown by them in their fields to the petitioner for sale in lots by it. Individual current accounts are maintained by the petitioner where the quantity of cotton brought in by the member is recorded. Such member is paid upto 75% of the estimated market value of the cotton brought in by him from time to time. At the end of the season i.e. by October each year the accounts are settled group-wise and after deducting actual expenses from the total receipts, the average price of cotton per quintal is computed and is proportionately credited in the accounts of the members for payment. A copy of annual report and accounts for the year 1998-99 indicating the aforesaid facts is at Annexure-A hereto.
4. In the event a member does not require immediate payment (upto 75% of the estimated market value referred to above), such amount is transferred from his current account to his savings account which carries interest at the rate of 6% per annum and this can be withdrawn at member's convenience. As a matter of procedure, a receipt is issued to such member evidencing transfer of the amount from the current account to the savings account though in fact actual cash is neither paid nor received and the amount is transferred by entries and vouchers alone. A copy of one such set of documents in respect of a member Piyushbhai Naranbhai is collectively annexed herewith and marked at Annexure-B."
2.1 It is also the case on behalf of the petitioner that the transaction enumerated at Sr.Nos.1 to 32 of the list with the notice dated 20/9/2002 are in respect of the amount of the sale proceeds of the cotton deposited by the respective member and withdrawal thereof at the member's convenience and cannot be treated as loans at all and the transactions listed at Sr.Nos.33 to 47 of the said list are in respect of renewal of deposits which had matured on 19/8/1998 and cannot be treated as loan and do not involve receipt or payment of cash in any case warranting penalty proceedings.
Therefore, it is requested to quash and set aside the impugned show cause notices.
3. Present petition is opposed by Mr. K.M. Parikh, learned advocate appearing on behalf of the respondent No.2. It is submitted that as such present petition is at the Show Cause Notice stage and and as the petitioner has been called upon to make submissions and the petitioner has been called upon to show cause as to why penalty under section 271(D)/271(E) of the Income Tax Act may not be imposed in the case of the society for the quantum of amount accepted or repaid in contravention of Sections 269-SS and 269-T of the Income Tax Act. It is submitted that therefore, the petitioner is required to appear before appropriate authority and submit his defence before the authority and thereafter the appropriate authority is required to take an appropriate decision after holding necessary enquiry with respect to transactions in question. It is submitted that therefore unless and until a detailed inquiry is held by appropriate authority, it will not be appropriate at this stage to make observations one way or the other. It is submitted that the appropriate authority shall consider the defence and the contentions which may be raised by the petitioner before him and thereafter is bound to pass appropriate order in accordance with law and on merits. Therefore, it is requested not to enter into the merits of the case and the transactions and it is requested to relegate the petitioner to appear before the appropriate authority and file detailed reply.
4. Heard the learned advocates appearing on behalf of the respective parties at length.
4.1 At the outset, it is required to be noted that present petition is against Show Cause Notices issued by the appropriate authority - Joint Commissioner of Income Tax, Bharuch Range, Bharuch by which the petitioner has been called upon to show cause as to why penalty under section 271(D)/271(E) of the Income Tax Act, should not be imposed in case of assessee society for the quantum of amount accepted or repaid in contravention of Sections 269-SS and 269-T of the Income Tax Act. Therefore, as such ample opportunity will be given to the petitioner to submit its case. Whatever is stated in paragraph Nos. 3 and 4 of the petition are all defences which are required to be considered by the appropriate authority, after holding necessary enquiry and in accordance with law. In the facts and circumstances, whether with respect to the transactions in question, provisions of Sections 269-SS and 269-T of the Income Tax Act would be applicable or not can be considered only after thorough enquiry and considering the activities of the petitioner as well as respective transaction even while conducting enquiry, relevant documents and other facts are required to be considered. Therefore, we are of the opinion that let the petitioner appear before the appropriate authority who has issued the Show Cause Notice and make its submissions, which shall be considered by the appropriate authority in accordance with law and on merits.
5. In view of the above and for the reasons stated above and without expressing anything on merits in favour of either of the parties, the petitioner is relegated to file detailed reply before the appropriate authority who has issued the Show Cause Notices and submit its case before the authority who has issued the Show Cause Notices. The said reply shall be filed within a period of three weeks from today. As and when the petitioner appears before the appropriate authority and reply is filed, the same shall be considered in accordance with law and on merits. It goes without saying that the appropriate authority shall consider the case in accordance with law and on merits and pass appropriate speaking order after giving fullest opportunity to the petitioner. With this present Special Civil Application is disposed of. Rule is discharged. Interim relief granted earlier, if any, stands vacated forthwith