2011 (5) TMI 356 - AT - Income Tax

Penalty u/s 271E - contravention of the provisions of section 269T - Assessee had repaid deposits in cash exceeding Rs. 20,000 to various depositors - - Held that - the assessee society was classified as cooperative bank under section 12(1) of the Maharashtra Cooperative Society Act, 1960 as per the registration certificate issued by the Assistant Registrar, Cooperative Society, Mumbai and the said classification, in our opinion, was sufficient for the assessee to entertain a belief that the provisions of section 269T were not applicable - Penalty levied by AO and confirmed by CIT(A) cancelled.

Summary

Issues:
- Penalty imposed under section 271E for contravention of section 269T by a Cooperative Credit Society.

Analysis:
1. The appeal was against the penalty imposed under section 271E by the Assessing Officer, confirmed by the CIT(A), for contravention of section 269T. The assessee, a Cooperative Credit Society, repaid deposits in cash exceeding Rs. 20,000 to depositors, totaling Rs. 23,29,081. The Assessing Officer held this contravened section 269T and imposed the penalty.

2. The assessee contended that as per the Maharashtra Cooperative Societies Act, it was classified as a cooperative bank, exempting it from section 269T per the proviso. However, the CIT(A) disagreed, stating the society was a credit society, not a bank under the Banking Regulation Act, thus subject to section 269T. The penalty was upheld based on the clear violation of section 269T by the assessee.

3. The assessee argued that it believed the repayments were not covered by section 269T due to its classification and the nature of transactions with members. The Tribunal noted the bona fide belief of the society, considering various factors. It found the society's belief reasonable, given the classification and the mutuality with its members, akin to a decision in a similar context by the ITAT.

4. Referring to a Supreme Court decision, the Tribunal emphasized the importance of considering genuine and bona fide transactions, coupled with the discretion under section 273B to avoid undue hardship. It concluded that the society's belief was bona fide, considering its classification and the nature of transactions with members, justifying the failure to comply with section 269T.

5. Given the society's genuine belief, the Tribunal found no justification for the penalty under section 271E. The appeal was allowed, directing the Assessing Officer to cancel the penalty imposed.

This detailed analysis highlights the arguments presented, the legal provisions involved, and the Tribunal's reasoning in overturning the penalty imposed on the Cooperative Credit Society.