2011 (7) TMI 1226 - AT - Income Tax

Summary

Issues involved: Appeal against penalty u/s.271D of the I.T.Act,1961 for the assessment year 1998-99.

Issue 1: Justification of quashing penalty by ld. CIT(Appeals)
- The appeal questioned the validity of the penalty levied by the Assessing Officer u/s.271D.
- The ld. CIT(Appeals) quashed the penalty after considering the reasons provided by the assessee.
- The Tribunal upheld the decision of the ld. CIT(Appeals) based on the genuine and reasonable cause shown by the assessee for accepting cash cheques.
- The Tribunal referred to previous cases where penalties were not levied for technical or venial breaches of law when genuine and reasonable cause was established.

Issue 2: Commercial expediency for accepting cash loan
- The assessee, a PWD contractor, had to raise funds due to urgent financial needs.
- Cash cheques were accepted from a relative to avoid delays in accessing funds required for business operations.
- The ld. CIT(Appeals) accepted the reasons provided by the assessee as a reasonable cause for accepting the cash loan.
- The Tribunal found that the cash cheques were obtained solely due to commercial expediency and upheld the decision of the ld. CIT(Appeals) in deleting the penalty.

Issue 3: Compliance with Section 269SS and penalty imposition
- The Revenue argued that the assessee violated Section 269SS by accepting loans in cash on multiple occasions.
- The ld. CIT(Appeals) and the Tribunal found that the reasons given by the assessee for accepting the cash cheques were genuine and reasonable.
- The Tribunal held that penalties should not be levied for technical breaches when genuine and reasonable causes are established, as per Section 273B.
- The Tribunal upheld the decision of the ld. CIT(Appeals) in deleting the penalty imposed u/s.271D.

Separate Judgement:
- The Tribunal dismissed the appeal of the Revenue, upholding the decision of the ld. CIT(Appeals) to quash the penalty u/s.271D based on the genuine and reasonable cause shown by the assessee for accepting cash cheques due to commercial expediency.