2016 (3) TMI 1106 - AT - Income Tax

Penalty under section 271D - Held that - Imposition of penalty under section 271D is neither automatic nor mandatory as section 273B provides that no penalty is imposable if the assessee proves that there was reasonable cause for failure in complying to the provisions of the Act. A conjoint reading of sections 269SS 271D and 273B of the Act would demonstrate that every violation under section 269SS will not culminate in imposition of penalty under section 271D. If the assessee proves that there was reasonable cause for non compliance to the relevant provision then penalty cannot be imposed. In other words in a given case if assessee shows reasonable cause for the failure Assessing Officer is empowered under the Act to refrain from imposing penalty. In the present case after considering the explanation of the assessee in the context of facts and material on record we are of the firm view that the assessee has proved that there was reasonable cause for accepting the cash loans. Further the authority concerned while imposing the penalty has not established that the transaction relating to acceptance of cash loan is either non genuine or not bonafide. On careful analysis of the decision cited by the learned Authorised Representative it is found that ratio laid down therein squarely applies to the facts of the present case. In the aforesaid view of the matter we do not see any reason to upset the order of the learned Commissioner (Appeals). Accordingly upholding the same we dismiss the ground raised by the Department. - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of penalty under section 271D of the Income Tax Act, 1961 for the assessment year 2008-09.
- Dispute over cash loans received by the assessee from various companies.
- Challenge regarding the imposition of penalty under section 271D.
- Consideration of reasonable cause for accepting cash loans and violation of section 269SS.

Analysis:
1. The appeal was filed by the Department against the deletion of a penalty under section 271D imposed on the assessee for the assessment year 2008-09. The dispute arose from the assessee receiving cash loans from several companies, leading to the imposition of the penalty. The Assessing Officer treated the cash loans as unexplained cash credit under section 68 of the Act and initiated penalty proceedings. The assessee explained the reasons for receiving the loans in cash, but the Addl. CIT imposed the penalty under section 271D, citing a violation of section 269SS.

2. The learned Commissioner (Appeals) considered the submissions and facts on record and held that the cash loans received by the assessee were not unexplained cash credit, thereby deleting the addition. As the penalty appeal came up for hearing, the Commissioner noted that since the addition under section 68 had been deleted, the penalty under section 271D could not be sustained. The Departmental Representative argued for the penalty, emphasizing the violation of section 269SS, while the assessee's representative contended that there was a reasonable cause for accepting the cash loans.

3. The Tribunal analyzed the case, noting that the Assessing Officer had treated the cash loan as income under section 68, making it ineligible for treatment as a loan for invoking section 269SS and 271D. Additionally, before the disposal of the appeal against the addition, the amount was considered as income. The Tribunal found that the assessee had provided a valid explanation for accepting the cash loans due to urgent circumstances, which was not refuted by the Assessing Officer. It was highlighted that imposition of penalty under section 271D is not automatic and requires proof of a lack of reasonable cause for non-compliance with the Act.

4. The Tribunal emphasized that every violation of section 269SS does not mandate penalty under section 271D, especially if the assessee demonstrates a reasonable cause for non-compliance. The provisions of sections 269SS, 271D, and 273B were analyzed to show that penalty imposition is subject to the presence of a reasonable cause. The Tribunal concluded that the assessee had proven a reasonable cause for accepting the cash loans, and the transaction was not found to be non-genuine or non-bonafide. Citing relevant case law, the Tribunal upheld the decision of the learned Commissioner (Appeals) and dismissed the Department's appeal, thereby affirming the deletion of the penalty under section 271D.

5. In conclusion, the Tribunal dismissed the appeal, highlighting the importance of demonstrating a reasonable cause for non-compliance with the provisions of the Income Tax Act to avoid the imposition of penalties, even in cases of technical breaches.