Law:

Section:

Section 271E, read with section 269T [as it stood prior to its amendment by the Direct Tax Laws (Amendment) Act, 1987], of the Income-tax Act, 1961 - Penalty - For failure to comply with section 269T - Assessment year 1990-91 - Assessee-company received certain advances for supply of silk fabrics - However, it could not arrange for required silk fabrics and, therefore, said advances were returned in cash - Assessing Officer held that advances were 'deposits' and assessee was required to follow section 269T while returning those deposits - He, accordingly, imposed penalty under section 271E - On appeal, Commissioner (Appeals) held that as advances were not trade deposits, section 269T was not attracted and penalty could not be levied - However, Tribunal confirmed penalty under section 271E on ground that section 269T is applicable to every kind of deposit whether it is a 'trade deposit' or 'business deposit' or 'deposit' - Whether Tribunal had rightly interpreted section 269T and there was no error in its order - Held, yes Interpretation of Statute : Rule of ejusdem generis [Paras 16 to 18] FACTS The assessee-company, carrying on the business of silk fabrics, received certain amounts as advances for supply of silk fabrics by four parties, but it could not arrange for the required silk fabrics and, therefore, returned said advances in cash. The Assessing Officer held that the advances were deposits to which section 269T was applicable and, accordingly, imposed penalty upon the assessee under section 271E. On appeal, the Commissioner (Appeals) held that the provisions of section 269T were not attracted and the penalty could not be levied as the word 'deposits' stipulates that a person should keep his money for earning interest with a person or a bank and the 'deposits of any nature' does not cover up normal transactions of trade as in the case of the assessee. On the revenue's appeal, the Tribunal confirmed the penalty under section 271E, taking the view that section 269T is applicable to every kind of deposit whether it is a 'trade deposit' or 'business deposit' or 'deposit'. On appeal : HELD Assuming for a moment that the transaction in question was a trade…

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