2011 (6) TMI 758 - AT - Income Tax

Summary

Issues Involved:
1. Whether the penalty u/s 271D for contravention of section 269SS was justified.
2. Whether the penalty u/s 271E for contravention of section 269T was justified.

Summary:

Issue 1: Penalty u/s 271D for Contravention of Section 269SS
The Revenue appealed against the cancellation of a penalty of Rs. 24,52,740/- levied u/s 271D of the Income-tax Act, 1961, for contravention of section 269SS. The Addl. CIT noticed that the assessee accepted loans/deposits in cash, which was reported in the statutory audit report. The assessee argued that the transactions were not loans but were related to fee collections and reimbursements between the hostel and the school managed by the same trustee. The CIT(A) found that the transactions were in the nature of current accounts and not loans or deposits, thus not violating section 269SS. The Tribunal upheld the CIT(A)'s decision, noting that the transactions were bona fide and there was no tax evasion, thus confirming the cancellation of the penalty.

Issue 2: Penalty u/s 271E for Contravention of Section 269T
The Revenue also appealed against the cancellation of a penalty of Rs. 30,92,911/- levied u/s 271E for contravention of section 269T. The Addl. CIT imposed the penalty for repaying loans/deposits in cash. The assessee contended that the transactions were not repayments of loans but were related to operational reimbursements and fee collections. The CIT(A) held that the transactions were in the nature of current accounts and not loans or deposits, thus not violating section 269T. The Tribunal agreed with the CIT(A), emphasizing that the transactions were bona fide and there was no tax evasion, thereby confirming the cancellation of the penalty.

Conclusion:
The Tribunal dismissed both appeals by the Revenue, confirming the CIT(A)'s orders canceling the penalties u/s 271D and 271E. The Tribunal concluded that the transactions were in the nature of current accounts, not loans or deposits, and there was no tax evasion, thus the penalties were not justified.