2016 (3) TMI 1381 - AT - Income Tax

Penalty levied under section 271E - violation of Section 269SS - reasonable cause to be entitled to the benefit of Section 273B - accepting and repayment of loan in cash in excess as permitted by law - HELD THAT - As decided in P. MUTHUKARUPPAN VERSUS THE JOINT COMMISSIONER OF INCOME TAX PONDICHERRY RANGE PONDICHERRY 2015 (7) TMI 848 - MADRAS HIGH COURT appellant having taken loan amount by cash in contravention of the provisions of Section 269SS and repaying the same by cash in contravention of the provisions of Section 269T cannot seek the support of Section 273B. The appellant has not explained as to the urgency compulsion or any other important circumstance for the breach and that too repeatedly. Taking into account the conduct of the assessee the assessing authority after giving repeated reasonable opportunities finding no explanation whatsoever was unable to exercise his discretion under Section 273B and accordingly imposed the penalty under Sections 271D 271E of the Act. Penalty orders confirmed - Decided against assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under section 271E of the Income Tax Act, 1961 for the assessment years 2006-07 to 2012-13.
2. Deletion of penalty levied under section 271D of the Income Tax Act, 1961 for the assessment years 2006-07 and 2012-13.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271E:

The Revenue filed appeals against the deletion of penalties levied under section 271E for the assessment years 2006-07 to 2012-13. The penalties were imposed following a survey under section 133A, which revealed that the assessee repaid loans in cash, violating section 269T of the Act. The Assessing Officer (AO) observed that the loans and repayments were not recorded in the regular books of accounts and were done with an intentional motive to dishonor the law. The AO levied penalties amounting to ?2,00,000 for 2006-07, ?24,00,000 for 2007-08, 2008-09, 2009-10, and ?6,00,000 for 2010-11.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)], following the decision of the Coordinate Bench of the Tribunal in earlier cases, directed the AO to delete the penalties. The Revenue, aggrieved by this decision, appealed to the Tribunal.

The Tribunal, after considering both sides and reviewing the materials on record, noted that similar facts and circumstances were present in the case of Shri P. Muthukaruppan v. JCIT, where the Tribunal and the Hon'ble Jurisdictional High Court upheld the penalties. The Tribunal extracted sections 269SS and 269T, emphasizing that no amount should be received or repaid in cash beyond the prescribed limits. The Tribunal found that the assessee repeatedly violated these provisions without any reasonable cause, and there was no justification for the cash transactions, which were meant to evade tax provisions.

The Tribunal concluded that the CIT(A) erred in deleting the penalties and reversed the findings, confirming the penalties levied under section 271E for the assessment years 2006-07 to 2010-11.

2. Deletion of Penalty under Section 271D:

For the assessment years 2006-07 and 2012-13, the Revenue also challenged the deletion of penalties under section 271D, which were imposed for accepting loans in cash, violating section 269SS of the Act. The AO observed that the assessee accepted loans in cash without any business exigency or urgency, and the transactions were not recorded in the regular books of accounts. Penalties amounting to ?20,00,000 for 2006-07 and ?50,00,000 for 2012-13 were levied.

The CIT(A), following the decision of the Coordinate Bench, directed the deletion of these penalties. The Revenue, dissatisfied with this decision, appealed to the Tribunal.

The Tribunal, referencing the same case of Shri P. Muthukaruppan v. JCIT, reiterated that the provisions of sections 269SS and 269T mandate non-cash transactions for amounts exceeding the prescribed limits. The Tribunal emphasized that the assessee failed to establish any reasonable cause for the cash transactions and repeatedly violated the provisions without any justification.

The Tribunal reversed the CIT(A)'s findings and confirmed the penalties levied under section 271D for the assessment years 2006-07 and 2012-13.

Conclusion:

The Tribunal allowed the appeals filed by the Revenue for all the assessment years, confirming the penalties levied under sections 271D and 271E of the Income Tax Act, 1961. The order was pronounced on 31st March 2016 at Chennai.