2002 (7) TMI 413 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271D of the Income-tax Act, 1961 for assessment year 1995-96.
- Contravention of provisions of section 269SS by accepting cash deposits.
- Explanation provided by the assessee regarding the acceptance of cash deposits.
- Application of penalty provisions under section 271D.
- Decision of the CIT(A) and its alignment with the Supreme Court's ruling in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26.
- Analysis of the case in light of the decision in Asstt. Director of Inspection (Investigation) v. Kum. A.B. Shanti [2002] 255 ITR 258 (SC).

Detailed Analysis:

1. Contravention of Provisions of Section 269SS: The Assessing Officer noted that the assessee firm accepted cash deposits from various individuals, contravening section 269SS of the Income-tax Act, 1961, which led to the imposition of a penalty under section 271D.

2. Explanation by the Assessee: The assessee firm explained that the cash deposits were accepted in the course of its wood business, where cash payments were necessary for purchases. Additionally, the deposits were received from agriculturists without bank accounts, based on commercial considerations and a belief that amounts under Rs. 20,000 were exempt from section 269SS.

3. Application of Penalty Provisions: The Assessing Officer levied a penalty of Rs. 1,75,000 under section 271D due to the contravention of section 269SS by accepting cash deposits.

4. Decision of CIT(A) and Supreme Court Rulings: The CIT(A) canceled the penalty, citing the decision in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26. The tribunal concurred with this decision, emphasizing that the deposits were accepted from agriculturists without bank accounts, and the nature of the default was technical, not resulting in revenue loss.

5. Analysis of Supreme Court Ruling: Referring to Asstt. Director of Inspection (Investigation) v. Kum. A.B. Shanti [2002] 255 ITR 258 (SC), the tribunal highlighted the objective of section 269SS to prevent false explanations for unaccounted money. In this case, the deposits from agriculturists without bank accounts were considered technical and venial, not warranting a penalty.

6. Final Decision: The tribunal dismissed the appeal, upholding the CIT(A)'s decision to cancel the penalty under section 271D, emphasizing the technical nature of the default and the absence of loss to government revenue due to the cash deposits accepted from agriculturists without bank accounts.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case, the arguments presented, and the reasoning behind the decision to cancel the penalty under section 271D of the Income-tax Act, 1961.