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2013 (8) TMI 486 - HC - Income TaxPenalty under section 271D of the Income Tax Act Violation of bar provided by Section 269SS of the Act, which provides all transactions above Rs.20,000/- to be made through banking channels Held that - There is no evidence to show that there is urgent requirement of the fund for purpose of repaying to the bank - There is no deadline set by the Bank for repayment of the loan amount - Assessee had taken loans from four individuals in cash of Rs. 2 lacs each in violating Section 269SS of the Act - Section 273-B, in an exception to Section 269-SS, and provides that no penalty is imposable on the person or assessee as the case may be for any failure referred to in the said provisions (including Section 269-SS), if he proves that there was reasonable cause for the said failure Held that - The assessee, could not satisfactorily give explanation for the alleged hurry in which he had to arrange the money to be deposited in bank for release of the property - The findings, whether there was any reasonable cause for non-compliance of Section 269SS are findings of fact. The Tribunal is the last forum for recording such findings - All the Income Tax authorities including the Tribunal have concurrently held that there was no reasonable cause inasmuch as the story set up by the assessee to arrange the money in hurry to save the honour of the family was not proved, the assessee would not get the benefit of Section 273B of the Act Decided against the Assessee.
Issues Involved:
1. Justification of penalty under Section 271D relying on Dharmendra Textile Processor case. 2. Mandatory and automatic imposition of penalty under Section 271D for violation of Section 269SS. 3. Imposition of penalty based on technical mistake without revenue loss and absence of malafide intent. 4. Consideration of reasonable cause under Section 273B for taking loans in cash. 5. Disclosure of loan and intention to evade tax in relation to Section 269SS. Detailed Analysis: 1. Justification of Penalty under Section 271D Relying on Dharmendra Textile Processor Case: The appellant questioned the applicability of the Dharmendra Textile Processor case, which pertains to Section 271(1)(c), to penalties under Section 271D. The court upheld the penalty, noting that the tribunal's reliance on the Dharmendra Textile Processor case was valid, as the principle that mens rea is not essential for civil penalties applied. 2. Mandatory and Automatic Imposition of Penalty under Section 271D for Violation of Section 269SS: The appellant argued that penalties under Section 271D should not be automatic and mandatory, given Section 273B allows for reasonable cause exceptions. The court found that the assessee failed to demonstrate reasonable cause for not complying with Section 269SS. The urgency claimed by the assessee was not substantiated with evidence, and the tribunal's decision to impose the penalty was upheld. 3. Imposition of Penalty Based on Technical Mistake Without Revenue Loss and Absence of Malafide Intent: The appellant contended that the penalty was imposed merely for a technical breach without any revenue loss or malafide intent. The court noted that the genuineness of the transaction does not exempt the assessee from compliance with Section 269SS. The explanation provided by the assessee was deemed unsatisfactory, and the penalty was justified despite the absence of revenue loss or malafide intent. 4. Consideration of Reasonable Cause under Section 273B for Taking Loans in Cash: The appellant claimed that the loans were taken in cash due to urgent circumstances, which should be considered a reasonable cause under Section 273B. The court examined the circumstances and found that the urgency was not proven. The assessee had sufficient time to arrange the funds through banking channels, and the explanation of urgency was not credible. Hence, the reasonable cause defense under Section 273B was not accepted. 5. Disclosure of Loan and Intention to Evade Tax in Relation to Section 269SS: The appellant argued that the loans were disclosed voluntarily and there was no intention to evade tax, thus Section 269SS should not apply. The court held that disclosure of the loan does not negate the requirement to comply with Section 269SS. The purpose of Section 269SS is to ensure financial discipline and transparency, and the appellant's failure to comply with the provision warranted the penalty under Section 271D. Conclusion: The court dismissed the appeal, affirming the imposition of penalty under Section 271D. The appellant's explanations were found inadequate, and the concurrent findings of fact by the AO, CIT(A), and ITAT were upheld. The court emphasized the importance of compliance with Section 269SS to maintain financial discipline and transparency in transactions.
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