2012 (12) TMI 894 - HC - Income Tax

Penalty u/s 271D & 271E - acceptance and repayment of loan or deposit in excess of Rs. 20,000/- in cash from/to any other person - violation of the provisions of Section 269SS and Section 269T - ITAT deleted the levy - Held that - Order of the Tribunal stating that since the business of the assessee itself is to collect and repay deposits, there can be no violation of the provisions of Section 269SS and Section 269T is not the only reason given by the Tribunal for approving the orders of the CIT(Appeals) cancelling the penalties. Facts taken into consideration by the Tribunal in accepting the assessee s explanation that there existed reasonable cause in mobilizing these deposits in rural and semi-urban areas within the meaning of Section 273B. The Tribunal has in substance relied on its earlier order in the case of M/s Sahara India Financial Corporation Ltd., (a group company) () that the finding of the Tribunal that there was reasonable cause for the default within the meaning of 273B is a question of fact which cannot be disturbed by the High Court as there was no material or evidence brought before the Court to show that the finding was perverse or was of such nature that no reasonable person, duly instructed on the facts and the legal position, would have reached. In the present case also the revenue has not been able to bring on record any material to show that the finding of the Tribunal as to the existence of reasonable cause is perverse - also as decided in CIT v. Parma Nand 2002 (11) TMI 13 - DELHI HIGH COURT and CIT v. ITOCHU Corpn. 2004 (5) TMI 53 - DELHI HIGH COURT that whether or not there was reasonable cause for the default is a question of fact which does not give rise to a substantial question of law unless the finding is perverse or irrational. Thus having regard to the finding of fact entered by the Tribunal that there was reasonable cause for the defaults, no substantial question of law arising for consideration - in favour of assessee.

Issues Involved:
1. Applicability of penalties under Sections 271D and 271E of the Income Tax Act, 1961.
2. Existence of reasonable cause under Section 273B for the acceptance and repayment of deposits in cash.
3. Whether the Tribunal's findings on reasonable cause are perverse or irrational.

Issue-wise Detailed Analysis:

1. Applicability of Penalties under Sections 271D and 271E:
The Revenue filed six appeals challenging the common order of the Income Tax Appellate Tribunal ("Tribunal") which upheld the orders of the CIT(A) cancelling the penalties levied on the assessee. The penalties were imposed under Section 271D for accepting deposits in excess of Rs. 20,000 in cash and under Section 271E for repaying deposits in cash, both in contravention of Sections 269SS and 269T of the Income Tax Act, 1961. The Tribunal relied on its previous orders in the case of a group company, Sahara India Financial Corporation Ltd., and confirmed the CIT(A)'s orders cancelling the penalties.

2. Existence of Reasonable Cause under Section 273B:
The assessee, a mutual benefit company, argued that it had reasonable cause for accepting and repaying deposits in cash due to several factors, including:
- The deposits were mobilized from its shareholders/members who were known and identifiable.
- The company operated in rural and semi-urban areas with inadequate banking facilities.
- Agents faced difficulties in opening bank accounts due to competition with banks.
- The percentage of cash transactions was minimal compared to the total deposits/repayments.
- The procedural formalities for accepting deposits were similar to those of banks.
- The agents could not refuse legal tender from depositors.
The Tribunal accepted these explanations and held that there was reasonable cause for the defaults, thus cancelling the penalties under Sections 271D and 271E.

3. Tribunal's Findings on Reasonable Cause:
The Revenue contended that the Tribunal's order was untenable as it suggested that the business of collecting and repaying deposits itself justified the non-compliance with Sections 269SS and 269T. However, the Tribunal considered multiple factors and circumstances, including the business realities and the difficulties faced by the assessee in mobilizing deposits from rural areas. The Tribunal's findings were based on the specific facts and circumstances of the case, and it concluded that there was reasonable cause for the defaults within the meaning of Section 273B.

The High Court held that the Tribunal's finding of reasonable cause was a question of fact and could not be disturbed unless it was shown to be perverse or irrational. The Revenue failed to provide any material evidence to prove that the Tribunal's findings were perverse. Citing previous judgments, the High Court reiterated that the existence of reasonable cause is a factual determination that does not give rise to a substantial question of law unless the finding is perverse or irrational.

Conclusion:
The High Court dismissed the Revenue's appeals, upholding the Tribunal's decision that there was reasonable cause for the assessee's defaults under Sections 269SS and 269T, thereby cancelling the penalties under Sections 271D and 271E. No substantial question of law was found to arise from the Tribunal's findings.

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