2013 (3) TMI 795 - HC - Income Tax

Summary

Issues involved: Challenging deletion of penalty u/s 271D of the Income Tax Act.

Summary:

Issue 1: Deletion of penalty u/s 271D

The appellant challenged the deletion of penalty of Rs. 11,75,000 levied u/s 271D of the Income Tax Act for accepting cash loan exceeding Rs. 20,000. The assessing officer added this amount as unexplained cash credit under section 68 of the Act. The Commissioner (Appeals) partly confirmed the addition by deleting the penalty. The Tribunal concurred with the Commissioner's finding that penalty cannot be levied if there was a reasonable cause for the violation of section 269-SS of the Act. The appellant argued that the penalty should be invoked as the assessee had not established a pressing need for accepting cash loans in contravention of section 269-SS.

Issue 2: Interpretation of Section 269-SS

Section 269-SS requires loans or deposits exceeding Rs. 20,000 to be accepted through account payee cheques or bank drafts to prevent tax evasion. In this case, the assessee accepted cash exceeding Rs. 20,000 from Shri Ambika Finance. The Commissioner (Appeals) found the transactions genuine as the cash was received through cheque discounting to meet urgent business needs, thus not violating section 269-SS.

Issue 3: Invocation of Penalty

The assessing officer invoked section 68 of the Act for unexplained cash credit, adding the amount to the assessee's income. As the explanation provided was deemed unsatisfactory, the penalty under section 271-D was not applicable. The Tribunal upheld this decision, stating that penalty is not leviable when there is a reasonable cause for not adhering to section 269-SS and the transaction's genuineness is not in doubt.

Conclusion:

The Tribunal dismissed the Tax Appeal, as the cash received through cheque discounting was for urgent business needs, and there was no interference required based on the decisions of the Commissioner (Appeals) and the Tribunal. The assessing officer was deemed unjustified in invoking penalty provisions under section 271-D.