2005 (3) TMI 66 - HC - Income Tax

Penalty proceedings u/s 271D as the respondent-assessee had contravened the provisions of section 269SS - Whether Tribunal was right in dismissing the appeal of the Revenue and confirmed the action of the Commissioner of Income-tax (Appeals) in cancelling the penalty of Rs. 50,000 under section 271D? - Violation of the provisions of the Act was under a bona fide belief of the assessee and the same was not with any intention to avoid or evade the tax - Findings recorded by the CIT (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269SS is a finding of fact based on appreciation of material on record. It does not give rise to any question of law, much less substantial question of law Revenue appeal dismissed

Summary

Issues:
- Appeal against cancellation of penalty under section 271D of the Income-tax Act, 1961.

Analysis:
The case involves an appeal filed by the Revenue against the cancellation of a penalty under section 271D of the Income-tax Act, 1961. The penalty was imposed on the respondent-assessee for contravening the provisions of section 269SS by accepting cash loans during the financial year 1992-93. The Deputy Commissioner of Income-tax imposed a penalty of Rs. 50,000, equivalent to the amount of the cash loan accepted by the assessee. The Commissioner of Income-tax (Appeals) later canceled the penalty, a decision upheld by the Tribunal. The key question raised in the appeal was whether the Tribunal was right in dismissing the Revenue's appeal and confirming the cancellation of the penalty.

The relevant provisions of sections 269SS, 271D, and 273B of the Act were crucial for deciding the appeal. Section 269SS prohibits the acceptance of loans or deposits in cash above a specified limit, mandating payments through account payee cheques or bank drafts. Section 271D imposes penalties for contraventions of section 269SS, requiring the payment of a penalty equal to the amount of the cash loan accepted. Section 273B provides an exception to penalty imposition if the assessee proves a "reasonable cause" for the failure to comply with the provisions.

The Commissioner of Income-tax (Appeals) and the Tribunal found that the assessee had shown a reasonable cause for the violation of section 269SS. They accepted the assessee's explanation that the contravention was due to a bona fide belief and not an attempt to evade taxes. These findings were based on an evaluation of the material on record and were deemed factual, not raising any substantial question of law. Therefore, the appeal was dismissed as there was no merit in challenging the cancellation of the penalty.

In conclusion, the judgment upheld the cancellation of the penalty under section 271D, emphasizing the importance of proving a reasonable cause for non-compliance with the provisions of section 269SS. The decision highlighted the significance of factual findings by the Commissioner of Income-tax (Appeals) and the Tribunal in determining the existence of a reasonable cause, ultimately leading to the dismissal of the appeal filed by the Revenue.