2005 (2) TMI 72 - HC - Income Tax

Penalty under section 271E findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of section 269T of the Act 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 - Tribunal was right in law in dismissing the appeal of the Department and uphold the action of the Commissioner of Income-tax (Appeals) in cancelling the order of penalty under section 271E

Summary

Issues:
- Interpretation of sections 269T, 271E, and 273B of the Income-tax Act, 1961.
- Validity of penalty imposed under section 271E for non-compliance with section 269T.
- Consideration of "reasonable cause" for failure to comply with statutory obligations.

Interpretation of sections 269T, 271E, and 273B:
The case involved a dispute regarding the repayment of deposits in cash by an assessee, which contravened section 269T of the Income-tax Act, 1961. Section 269T mandates that certain entities must only repay deposits through specific means, such as account payee cheques or bank drafts, under specified conditions. Section 271E imposes penalties for non-compliance with section 269T, requiring a penalty equal to the amount of the deposit repaid improperly. Additionally, section 273B provides an exception to penalties if the assessee can establish a "reasonable cause" for the failure to comply with statutory provisions.

Validity of Penalty Imposed under Section 271E:
The Revenue initiated penalty proceedings against the assessee for contravening section 269T by making cash repayments of deposits. The Deputy Commissioner imposed a penalty equal to the cash amounts repaid by the assessee. However, the Commissioner of Income-tax (Appeals) later canceled the penalty, citing the assessee's bona fide belief and lack of intent to evade taxes. The Tribunal upheld this decision, emphasizing that no tax avoidance or evasion was involved, and the breach was technical or venial. The authorities considered the genuineness of the transactions and the absence of revenue loss. The Tribunal affirmed that the penalty was rightfully canceled based on the reasonable cause shown by the assessee.

Consideration of "Reasonable Cause" for Failure to Comply:
The Commissioner of Income-tax (Appeals) and the Tribunal both found that the assessee demonstrated a reasonable cause for the non-compliance with section 269T. They concluded that the breach stemmed from a bona fide belief and technical ignorance, without prejudicing the Revenue's interests. The Tribunal upheld the cancellation of the penalty, emphasizing that the assessee's actions did not involve deliberate defiance of the law or tax evasion. The findings of fact by the authorities regarding the reasonable cause shown by the assessee were considered conclusive, not raising any legal questions, let alone substantial ones.

In conclusion, the High Court dismissed the Revenue's appeal, affirming the cancellation of the penalty under section 271E due to the assessee's demonstration of reasonable cause for the non-compliance with section 269T, as established by the Commissioner of Income-tax (Appeals) and the Tribunal.