2015 (4) TMI 144 - AT - Income Tax

Penalty u/s 271D - cash deposits with in contravention of Section 269SS - Held that - No shred of doubt about the genuineness of the transactions and their disclosure in the books of account and returns of both the assessee who happen to be husband and wife, carrying on the business as sister concerns. Section 271D read with Section 269SS was introduced by the legislature to discourage the menace of black money. Since these transactions are genuine, this element of black money is totally ruled out. Under these circumstances, we are of the view that the transactions being genuine and the assessee having offered reasonable explanation justifying these cash transactions, the impugned penalty u/s 271D is not leviable. See Raj Kumar Sharma (2007 (4) TMI 218 - RAJASTHAN High Court ) and Saini Medical Store (2005 (2) TMI 72 - PUNJAB AND HARYANA High Court)and Sunil Kumar Goel (2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT). Thus penalty is deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty u/s 271D of the Income Tax Act, 1961 for the assessment year 2006-07.

Analysis:
1. The assessee received cash loans from her husband, triggering penalty proceedings u/s 271D for contravening Section 269SS. The AO imposed the penalty citing lack of reasonable cause despite the transactions being genuine and reflected in both parties' books.

2. The assessee's explanation, including business exigencies and belief in permissible cash transactions below Rs. 20,000, was rejected by the AO. The first appeal reiterated these points and cited various case laws to support the contention that no penalty should be levied.

3. The CIT(A) upheld the penalty, stating that the husband's involvement was not sufficient cause and no proof of business exigency was provided. The case did not fall under the exempted category of Section 269SS, leading to confirmation of the penalty.

4. The High Court judgments in similar cases emphasized the genuineness of transactions, ignorance of law not being a valid excuse, and the presence of reasonable cause for not imposing penalties. These judgments formed the basis for the assessee's argument against the penalty.

5. The ITAT, considering the genuine nature of transactions, the explanation provided by the assessee, and precedents cited, ruled in favor of the assessee. The tribunal highlighted the absence of black money elements, the reasonable business exigencies, and the lack of tax evasion in the transactions as reasons for deleting the penalty.

6. Ultimately, the ITAT allowed the appeal, emphasizing the genuine nature of transactions, the reasonable explanation offered by the assessee, and the absence of black money implications. The decision aligned with the cited legal precedents, leading to the deletion of the penalty u/s 271D.