2017 (11) TMI 1823 - AT - Income Tax

Penalty u/s 271D - violation of Section 269SS - reasonable cause for violation to comply with the provisions of Law - HELD THAT - In this case, the A.O. merely initiated penalty proceedings separately for violation of Section 269SS of the I.T. Act. He did not record any satisfaction under section 271D of the I.T. Act before initiating the penalty proceedings under section 271D. The explanation of assessee on merit clearly suggest that assessee had a reasonable cause for violation to comply with the provisions of Law because no cash given directly to assessee but deposited at Shilong Branch over which assessee did not have any control. The assessee immediately acted on the matter and refunded the amount in question. The finding of fact recorded by CIT(A) have not been disputed through any evidence or material on record. Therefore, considering the issue in the light of reasonable cause under section 273B of I.T. Act, for failure to comply with the provisions of Law, no penalty is leviable in the matter. In the light of judgment of the Hon ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT set aside the orders of the authorities below and cancel the entire penalty. - Decided in favour of assessee

Summary

Issues:
- Challenge against cancellation of penalty and deletion of part penalty under section 271D of the I.T. Act, 1961.

Analysis:
1. The case involved cross-appeals against the order of the Ld. CIT(A)-21, New Delhi, regarding the cancellation of penalty and deletion of part penalty under section 271D of the I.T. Act, 1961 for the A.Y. 2010-2011.

2. The Assessing Officer (A.O.) added back a sum of &8377; 16.18 lakhs under section 68 of the I.T. Act, and initiated penalty proceedings under section 271D separately. The penalty was levied in the sum of &8377; 15,80,000, equal to the amount of cash loan taken or accepted. However, the Ld. CIT(A) noted that the cash loan was directly deposited in the assessee's bank account by a third party over whom the assessee had no control. The assessee promptly refunded the amount, indicating no foul play. The Ld. CIT(A) canceled the penalty to the extent of &8377; 15 lakhs but confirmed it for &8377; 80,000.

3. The Learned Counsel for the Assessee argued that the bonafide of the assessee was not in dispute, and the A.O. did not record any satisfaction under section 271D of the I.T. Act before initiating penalty proceedings. The departmental appeal against the addition of &8377; 15,80,000 was dismissed by ITAT, Delhi Bench, supporting the deletion by the Ld. CIT(A).

4. The Hon'ble Supreme Court's judgment in CIT vs. Jai Laxmi Rice Mills (2015) was cited, emphasizing the need for satisfaction under section 271D of the Act before initiating penalty proceedings. The A.O. did not record any satisfaction, and the assessee had a reasonable cause for non-compliance as the cash was not directly given to them but deposited in a bank branch over which they had no control. The penalty was deemed not leviable based on the 'reasonable cause' provision under section 273B of the I.T. Act.

5. Consequently, the Tribunal set aside the orders of the authorities below and canceled the entire penalty, dismissing the appeal of the Revenue and allowing the appeal of the Assessee based on the lack of satisfaction recorded under section 271D and the 'reasonable cause' for non-compliance.

This detailed analysis outlines the key points and legal considerations leading to the decision to cancel the penalty and delete part of the penalty under section 271D of the I.T. Act, 1961.