2019 (5) TMI 1783 - AT - Income Tax

Penalty imposed u/s 271D - reasonable cause as mandated u/s 273B - accepting the deposits or repayment of loan in cash and not by way of account payee cheque or demand draft - HELD THAT - In the instant case, the assessee was unable to prove that there was the compelling circumstance for accepting the deposits in cash. In the absence of such explanation by the assessee, going by the judgment of the Hon ble jurisdictional High Court in the case of Listin Stephen v. DCIT 2019 (4) TMI 293 - KERALA HIGH COURT we hold that there is no reasonable cause as mandated u/s 273B of the I.T.Act. Therefore, we confirm the penalty imposed u/s 271D of the I.T.Act. - Decided against revenue.

Summary

Issues Involved:
- Whether the CIT(A) is justified in confirming the penalty imposed under Section 271D of the Income Tax Act.

Detailed Analysis:

1. Background and Facts:
The assessee was engaged in a finance business that involved accepting deposits and advancing loans in cash above the permissible limit, violating Section 269SS of the Income Tax Act (I.T. Act). Consequently, a notice was issued by the Assessing Officer (AO) to show cause why a penalty under Section 271D should not be levied. Despite the assessee's explanation, the penalty was imposed, confirmed by the CIT(A) and ITAT. The assessee then appealed to the High Court, which remanded the matter back to the AO to consider if there was a reasonable cause for accepting deposits and advancing loans in cash.

2. High Court's Directions:
The High Court directed the AO to verify if there was a reasonable cause for the assessee's actions. The AO, upon reconsideration, imposed a penalty of ?4,74,15,591, noting that the assessee failed to provide a satisfactory explanation for the cash transactions exceeding ?20,000.

3. CIT(A)'s Findings:
The CIT(A) reiterated the High Court's emphasis on the necessity of proving a reasonable cause for cash transactions. The CIT(A) found that the assessee failed to demonstrate any reasonable cause during the appeal proceedings, dismissing the arguments of bonafide transactions and genuine deposits as insufficient to absolve the penalty.

4. Tribunal's Observations:
The Tribunal examined the High Court's directions, which stressed that the burden of proving a reasonable cause for cash transactions lies with the assessee. The Tribunal noted that the assessee's plea of ignorance of the law and lack of intention to evade tax were not considered valid reasons under Section 273B of the I.T. Act.

5. Jurisdictional High Court Precedents:
The Tribunal referenced the latest judgment of the jurisdictional High Court in the case of Listin Stephen v. DCIT, which clarified that the reasonable cause must be a compelling circumstance for accepting cash deposits instead of account payee cheques or demand drafts. The High Court held that mere proof of repayment through cheques or the absence of black money does not constitute a reasonable cause.

6. Tribunal's Conclusion:
The Tribunal concluded that the assessee failed to prove any compelling circumstance for accepting the deposits in cash. In line with the jurisdictional High Court's judgment in Listin Stephen v. DCIT, the Tribunal upheld the penalty imposed under Section 271D, confirming that there was no reasonable cause as mandated by Section 273B of the I.T. Act.

7. Final Decision:
The appeal filed by the assessee was dismissed, and the penalty under Section 271D was confirmed.

Order Pronounced:
The order was pronounced on the 8th day of May, 2019.