2014 (4) TMI 67 - AT - Income Tax

Penalty u/s 271D Violation of Provisions levy of penalty where loans/deposits are genuine - Waiver of penalty u/s 273B - reasonable cause - Held that - no phrase occurring in section 269SS to indicate that provisions will not apply to genuine transactions as pleaded by assessee - If deposits are proved to be not genuine same could be considered for addition u/s.68 or 69 of Act as deemed income of assessee from other sources and cannot be regarded as loan or deposit within meaning of section 269SS and 269T - Assessee has not brought on record any circumstances which prevented him to violate provisions of section 269SS by bye-passing banking channel while accepting amount - Assessee could not justify byepassing of banking channels - Being sick industrial unit is not sufficient for deviating from banking channel. In absence of reasonable cause, assessee cannot take benefit of provisions of section 273B of Act - CIT(A) was justified in upholding penalty levied u/s.271D Decided against Assessee.

Summary

Issues:
1. Justification of penalty u/s.271D based on the genuinity of loans/deposits.
2. Consideration of limitation in penalty proceedings.
3. Appreciation of reasonable cause under S. 273B of the Act.

Analysis:
1. The appeal was filed challenging the penalty u/s.271D imposed for accepting cash deposits in contravention of section 269SS. The Assessing Officer initiated penalty proceedings which were confirmed by the CIT(A). The argument raised was based on the Hon'ble Supreme Court's judgment in A. B. Shanthi's case and the genuinity of loans/deposits not falling under S. 271D. However, the Tribunal held that the provisions of S. 269SS clearly apply to transactions where loans or deposits are accepted in cash above a certain threshold. The absence of a finding that the transactions were not genuine led to the confirmation of the penalty, as the assessee failed to prove a reasonable cause for bypassing banking channels, despite claiming to be a 'sick industrial unit' in need of funds.

2. Another ground of appeal was the consideration of limitation in penalty proceedings. The Tribunal noted that the argument regarding limitation was not properly considered by the CIT(A). However, it was held that the failure to comply with S. 269SS by accepting cash deposits without a reasonable cause justified the penalty imposition, and the limitation issue did not impact the penalty levied.

3. The third issue revolved around the appreciation of reasonable cause under S. 273B of the Act. The assessee contended that the penalty should be quashed based on the reasonable cause shown, citing a Bombay High Court judgment. The Tribunal emphasized that a reasonable cause should be beyond the control of the assessee and prevent a person of ordinary prudence from acting as such. Despite claiming dire need of funds as a 'sick industrial unit,' the assessee failed to demonstrate circumstances justifying the violation of S. 269SS. The Tribunal upheld the penalty as the assessee did not provide a reasonable cause for accepting cash deposits in contravention of the law.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, confirming the penalty u/s.271D for accepting cash deposits in violation of the provisions of the Income Tax Act. The judgment highlighted the importance of complying with statutory provisions and proving a genuine and reasonable cause for any deviations, emphasizing the need for transparency and adherence to legal requirements in financial transactions.