2012 (10) TMI 441 - HC - Income Tax

Penalty u/s 271D - whether provisions of section 269SS are attracted to the amounts received from sister concern as Temporary accommodation to meet immediate requirements of the business and is levy of penalty u/s271D justified - Held that - It is not in dispute that the assessee had transaction with its own sister concerns having the commercial transaction and during that course, they used to pay the amount through cheque or cash. It cannot be said that the transactions could not have been business transactions and during the course of the transactions, some payments have been made in cash. Otherwise also, it may only be a technical mistake retaining certain loans of one party, thus imposing penalty cannot be justified - in favour of assessee.

Summary

Issues:
1. Interpretation of Section 269SS regarding amounts received from sister concern as temporary accommodation.
2. Consideration of the Finance Minister's statement for interpreting the law.

Analysis:
1. The case involved substantial questions of law referred by the Income Tax Appellate Tribunal regarding the applicability of Section 269SS on amounts received from a sister concern. The C.I.T.(A) initially held that the transactions between the parties were part of the business course and not a violation of Section 269SS, setting aside the penalties imposed under Sections 271E and 271D for the Assessment Year 1991-92. However, the Income Tax Appellate Tribunal reversed this finding, considering the transactions as financial transactions falling under Section 269SS, leading to the imposition of penalties against the assessee.

2. The petitioner relied on a judgment by a Division Bench of the High Court, emphasizing that technical mistakes should not warrant penalties under Section 271 of the Income Tax Act. The Revenue argued that specific provisions like Section 269SS were created to prevent such transactions, with no exceptions for cash dealings between parties. The Court noted that the transactions between the sister concerns were part of their commercial dealings, involving payments through cheques or cash. The Court found that the excess cash payment received by the assessee could be attributed to a technical mistake in retaining certain loans, peculiar to the case. Consequently, the Court set aside the Income Tax Appellate Tribunal's order and held that in the given circumstances, the imposition of penalties under Section 271D was not justified.

In conclusion, the High Court ruled in favor of the petitioner, stating that the transactions between the parties did not render the assessee liable for penalties under Section 271D of the Income Tax Act, 1961. The Court emphasized that the nature of the transactions and the specific circumstances of the case did not warrant the imposition of penalties, ultimately setting aside the Income Tax Appellate Tribunal's decision.