2007 (4) TMI 218 - HC - Income Tax

Summary

Issues involved: Contravention of section 269SS of the Income-tax Act, 1961 by accepting cash loan, imposition of penalty under section 271D, reasonable cause for failure to comply with legal provisions.

Contravention of Section 269SS:
The assessee accepted a cash loan of Rs. 90,000 from his brother on various dates, which was in violation of section 269SS of the Income-tax Act.

Imposition of Penalty under Section 271D:
The Assessing Officer imposed a penalty of Rs. 90,000 on the assessee under section 271D for contravening section 269SS.

Reasonable Cause for Failure to Comply:
The Tribunal set aside the penalty, finding that the assessee had a reasonable cause for accepting cash deposits below Rs. 20,000, as he believed it was permissible and necessary for immediate business needs.

The Tribunal noted that the genuineness of the deposits from the brother was not in doubt, but the reason for accepting cash was not sufficiently proven by the assessee. However, the Tribunal found that the assessee's belief that cash transactions below Rs. 20,000 were allowed constituted a reasonable cause under section 273B, overriding the penalty provision of section 271D.

The High Court held that while ignorance of the law is not an excuse, the assessee's belief and explanation constituted a reasonable cause under section 273B. The Tribunal's decision was deemed valid as the transactions were below Rs. 20,000 and the assessee genuinely believed they were permissible. Therefore, the appeal by the Revenue was dismissed as it did not raise any substantial question of law.