2003 (4) TMI 31 - HC - Income Tax

Penalty under section 271D - From the statement given by the assessee, during the course of search operation to the raiding party, it clearly appears that he had unequivocally accepted the veracity of these documents along with their contents - On a perusal of these documents one has no hesitation that the authorities below have not committed any error in appreciating these documents, as the basis for a show cause notice under section 269SS r.w.s. 271D - transactions of disbursement of the respective amounts as reflected in these documents are clear and they have not been disputed by the assessee penalty is justified

Issues Involved:
1. Legality of the penalty imposed under section 271D for violating section 269SS of the Income-tax Act.
2. Adequacy of the evidence and documents used to issue the show cause notice.
3. Interpretation of "books of account" in relation to section 269SS.
4. Validity of the transactions and the modus operandi of the appellant.

Detailed Analysis:

1. Legality of the penalty imposed under section 271D for violating section 269SS of the Income-tax Act:
The appellant was penalized under section 271D for accepting loans and deposits in cash exceeding Rs. 20,000, violating section 269SS. The Assistant Commissioner passed a block assessment order on August 24, 1996, assessing the appellant's taxable income and noting the violation of sections 269SS and 269T. The appellant's appeal to the Income-tax Appellate Tribunal was partly allowed, but the penalty issue remained. The Tribunal later ruled that penalty under section 271E was not applicable as the repayments were for loans, not deposits. However, the penalty under section 271D was confirmed by the Deputy Commissioner and the Commissioner (Appeals), with the Tribunal dismissing the appellant's subsequent appeal.

2. Adequacy of the evidence and documents used to issue the show cause notice:
The appellant contended that the documents forming the basis of the show cause notice were not made available promptly and were not verified properly. However, the court noted that the documents, including files, diaries, and registers seized during the raid, were produced and verified, and the appellant had accepted their veracity. The documents clearly indicated cash transactions, and the authorities did not err in using them as the basis for the show cause notice.

3. Interpretation of "books of account" in relation to section 269SS:
The appellant argued that the seized documents could not be termed as "books of account" and thus should not trigger section 269SS violations. The court referred to the Division Bench's interpretation in Sheraton Apparels v. Asst. CIT, which defined "books of account" as those providing credible data for tax returns and financial statements. The court found that the documents seized met this definition and were rightly used to establish violations of section 269SS.

4. Validity of the transactions and the modus operandi of the appellant:
The appellant claimed that the transactions were loans to compensation claimants, not typical loans or deposits, and were necessary for his specialized practice in land acquisition cases. The court noted the appellant's unique modus operandi, where significant amounts were deducted from compensation awards under various heads, and many transactions were in cash. The court found the appellant's defense unconvincing, especially given the incriminating documents and the appellant's own admissions during the search operation.

Conclusion:
The court dismissed the appeals, confirming the penalties imposed under section 271D for violating section 269SS. The court found no merit in the appellant's arguments and upheld the concurrent findings of the lower authorities. The penalties for the respective years were confirmed, and the appellant's unique modus operandi and cash transactions were deemed to have rightly attracted the penalties under the Income-tax Act.

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