2002 (7) TMI 414 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271D of the Income-tax Act, 1961 for assessment year 1995-96.

Analysis:
1. Background and Facts:
- The Revenue filed an appeal against the cancellation of a penalty of Rs. 1,05,000 under section 271D of the Income-tax Act, 1961, for the assessment year 1995-96.
- The Assessing Officer observed that the assessee firm had repaid deposits in cash to individuals, contravening section 269T of the Act.

2. Arguments and Decision of CIT(A):
- The assessee firm explained that cash payments were necessary for its wood business and that deposits were accepted from illiterate agriculturists who lacked bank accounts.
- The CIT(A) cancelled the penalty, citing the decision in Hindustan Steel (P.) Ltd. v. State of Orissa [1972] 83 ITR 26.

3. Tribunal's Analysis and Decision:
- The Tribunal reviewed the lower authorities' orders and upheld the CIT(A)'s decision to cancel the penalty.
- It noted that the deposits were accepted from agriculturists without bank accounts, and the cash transactions were essential for the business.
- Referring to the decision in Asstt. Director of Inspection (Investigation) v. Kum A.B. Shanthi [2002] 255 ITR 258, the Tribunal emphasized preventing false explanations for unaccounted money.
- The Tribunal concluded that the penalty cancellation was appropriate as the default was technical and did not result in revenue loss.

4. Conclusion:
- The Tribunal dismissed the appeal, affirming the cancellation of the penalty under section 271D for the assessment year 1995-96.

This judgment highlights the importance of considering the circumstances and intent behind apparent violations of tax laws, emphasizing the need to prevent false explanations for financial transactions. The decision underscores the technical nature of certain defaults and the discretion available to authorities in imposing penalties based on the specific facts of each case.