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2015 (11) TMI 1121 - AT - Income TaxPenalty u/s 271D and 271E - Held that - Nothing has been brought on record by the Revenue to show that the assessee as a result of his business and interactions with the department in the earlier years had been made aware that accepting and repaying in cash to sister concerns in order to tide over financial emergencies were in violation of the provision of the Act. In the absence of any such evidence the plea of bonafide belief in the peculiar circumstances cannot be discarded. It is seen that the assessee has consistently canvassed that there was a bonafide belief that the amount taken from the sister concern in cash is not a violation of any provision. Return of loan by cash to the sister concern under a bonafide belief that the transaction with sister concerns is not in violation for similar reasons in the absence of any evidence to the contrary cannot be disbelieved. It is seen that the genuineness of the transactions have not been questioned despite the fact that the group company has been searched accordingly since nothing has been brought on record to canvass that reasonable cause is not constituted appeals of the assessee have to be allowed. Decision rendered in Bhalotia Engineering Works (2004 (8) TMI 66 - JHARKHAND High Court ) is entirely distinguishable on facts the impugned orders are set aside and the penalties imposed in each of these appeal is quashed. - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271D of the Income Tax Act, 1961. 2. Imposition of penalty under Section 271E of the Income Tax Act, 1961. 3. Interpretation of "reasonable cause" under Section 273B of the Income Tax Act, 1961. 4. Applicability of judicial precedents in determining the validity of penalties. Issue-wise Analysis: 1. Imposition of Penalty under Section 271D: The core issue in ITA Nos. 856/Del/2014, 785/Del/2014, 786/Del/2014, and 857/Del/2014 revolves around the imposition of penalty under Section 271D for accepting cash in violation of Section 269SS. The assessee argued that the transactions were genuine and carried out under commercial expediency and bonafide belief. The AO imposed penalties relying on the decision of the Hon'ble Jharkhand High Court in Bhalotia Engineering Works (P.) Ltd. vs CIT (2005) 275 ITR 399, which was upheld by the CIT(A). In ITA No. 856/Del/2014, the assessee received Rs. 50,000 in cash from a sister concern, M/s Gagan Buildwell Pvt. Ltd., as share application money, which was accepted by the AO but penalized under Section 271D. The assessee argued that the transaction was genuine and undertaken to meet urgent financial needs. In ITA No. 785/Del/2014, the assessee received cash from M/s Gagan Buildwell Pvt. Ltd. for similar reasons and was penalized under Section 271D. The assessee contended that the cash was required to meet stamp duty and court fee expenses for a land purchase deadline. In ITA No. 786/Del/2014, the assessee received Rs. 2,50,000 in cash from M/s Adharshila Buildwell Pvt. Ltd. The amount was accepted as genuine, and the assessee argued that it was under a bonafide belief that the transaction was lawful. In ITA No. 857/Del/2014, the assessee received Rs. 4,00,000 in cash from M/s Fortune Buildwell Pvt. Ltd., which was also used to meet urgent financial needs. The amount was later repaid by cheque. 2. Imposition of Penalty under Section 271E: In ITA No. 855/Del/2014, the issue concerns the imposition of penalty under Section 271E for repaying Rs. 3,00,000 in cash to M/s V.K. Fiscal Services Pvt. Ltd., violating Section 269T. The assessee argued that the repayment was made under a bonafide belief that transactions with sister concerns did not constitute a violation. 3. Interpretation of "Reasonable Cause" under Section 273B: The assessee consistently argued that the penalties should be quashed due to "reasonable cause" under Section 273B. The plea was based on the bonafide belief that transactions with sister concerns to meet urgent financial needs were not violations. The assessee cited various judicial precedents, including CIT vs I.P. India Ltd. 343 ITR 353 (Delhi High Court), which supported the view that such transactions, if genuine and under commercial expediency, do not warrant penalties. 4. Applicability of Judicial Precedents: The Tribunal considered the conflicting judicial opinions, particularly the decision of the Hon'ble Jharkhand High Court in Bhalotia Engineering Works (P.) Ltd. vs CIT and the decisions of the Hon'ble Delhi High Court and other High Courts. The Tribunal noted that there was a "cleavage of judicial opinion" on the issue of reasonable cause under Section 273B. Following the Supreme Court's judgment in CIT vs Vegetables Products Ltd. 88 ITR 192 (SC), the Tribunal decided in favor of the assessee, quashing the penalties. Conclusion: The Tribunal quashed the penalties imposed under Sections 271D and 271E, finding that the assessee had a reasonable cause for the transactions. The Tribunal relied on the judicial precedents favoring the assessee and noted the absence of evidence from the Revenue to disprove the assessee's bonafide belief. The decision of the Hon'ble Jharkhand High Court was found distinguishable on facts, as the transactions in the present cases involved identified sister concerns and were genuine. Result: All appeals of the assessee were allowed, and the penalties imposed were quashed. The order was pronounced in the open court on 16.10.2015.
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