2015 (1) TMI 393 - HC - Income Tax

Waiver of penalty u/s 273B - Penalty u/s 271D - Breach of Section 269SS - assessee had accepted cash deposits of ₹ 5,21,000/- from five parties otherwise than by account payee cheques or account payee bank drafts - Held that - Tribunal has rightly held that assessee was under the bona fide believe that the transaction was not covered by Section 269SS of the Income Tax Act. Further, the Tribunal has rightly held that the lower authorities have not given any finding that these deposits represented unaccounted income of the assessee in any manner. - Tribunal has not committed any error in allowing the appeal of the assessee. We are in complete agreement with the view taken by the Tribunal - Following decision of COMMISSIONER OF INCOME-TAX AHMEDABAD IV Versus MAA KHODIYAR CONSTRUCTION 2014 (7) TMI 137 - GUJARAT HIGH COURT - Decided against Revenue.

Summary

Issues:
Challenge to order by Income Tax Appellate Tribunal imposing penalty under Section 271D for accepting cash deposits exceeding specified limit, Appeal to Commissioner of Income Tax (Appeals) and subsequent appeal to Tribunal, Question of law regarding cancellation of penalty under Section 271D, Tribunal's decision to cancel penalty, Appellant-revenue's contention of error in Tribunal's decision.

Analysis:
The High Court of Gujarat heard an appeal challenging the order of the Income Tax Appellate Tribunal imposing a penalty under Section 271D of the Income Tax Act for accepting cash deposits exceeding the specified limit. The appellant-revenue contested the Tribunal's decision to cancel the penalty imposed on the assessee. The Court noted that the assessee had accepted cash deposits from parties exceeding the prescribed limit without using account payee cheques or bank drafts, leading to the penalty imposition. The Commissioner of Income Tax (Appeals) had partially allowed the appeal, reducing the penalty amount. The Tribunal, in its impugned order, completely allowed the appeal of the assessee, leading to the current appeal by the revenue.

Upon formulating the substantial question of law, the Court considered whether the Tribunal was correct in canceling the penalty imposed under Section 271D. The advocate for the appellant-revenue argued that the Tribunal erred in canceling the penalty and did not properly assess the evidence. However, the Court, after reviewing the material on record, referred to a previous decision and observed that the assessee had shown reasonable cause for the failure to comply with Section 269SS of the Act. The Court highlighted that the transactions were not doubted by the Revenue authorities, and the assessee had provided satisfactory reasons for the cash deposits.

The Court delved into the legal provisions of Sections 269SS, 271D, and 273B of the Act to analyze the case. It emphasized the need for the assessee to prove a reasonable cause for the breach of Section 269SS. The Court observed that the assessee had produced substantiating evidence, including account transactions and loan advancements reflected in books, establishing the genuineness of the transactions. The Court found that the lower authorities were correct in deleting the penalty as the cause shown by the assessee was reasonable and the breach was technical in nature.

In conclusion, the Court dismissed the appeal, upholding the Tribunal's decision to cancel the penalty. It concurred with the Tribunal's view that the assessee had a bona fide belief that the transactions did not fall under Section 269SS. The Court also noted that there was no finding that the deposits represented unaccounted income of the assessee. Referring to a previous case, the Court emphasized that penalties should not be imposed for technical or venial breaches and supported the Tribunal's interpretation of the law in the present case. The Court answered the substantial question of law in favor of the assessee and against the revenue, affirming the cancellation of the penalty under Section 271D.