2022 (4) TMI 1525 - AT - Income Tax

Penalty u/s. 271D - receipt of the amount exceeding Rs.20, 000 in cash - amount having been received from the trustee - main contention of the ld. AR is that the transaction is genuine and it is not found that the loan has been taken out of unaccounted cash from the managing trustee - HELD THAT - In the present case the assessee s plea that in view of the intention of the legislature while enacting the provisions of s. 269SS and 269T as well as 271D and 271E which as explained in Circular No. 387 dt. 6th July 1984 was to curb the transaction of black money is liable to be accepted because in the present case the Revenue has accepted the transaction as genuine and has not found the deposit being out of unaccounted cash or the deposit having been made with an effort to explain or introduce cash in the garb of loan/deposit. Penalty like 271D of the Act will not be imposed unless the party concerned has acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligation and penalty will not be imposed merely because it is lawful to do so. Imposition of penalty for failure to perform statutory obligation is only a discretionary power of the authority exercising judicial functions in consideration of all the relevant circumstances. If the assessee acted on genuine belief that penal provisions have no application to deposits when it is between the trustee and assessee then penalty could not be levied. In the present case in our opinion there exists reasonable cause in accepting loan in cash. Therefore the assessee is exonerated from levy of penalty. In the present case the assessee accepted loan from its managing trustee who is looking after the day to day affairs of the present assessee. This being so the transaction between the assessee and managing trustee cannot be termed as loan so as to apply the provisions of section 269SS of the Act. The transaction between the assessee and managing trustee is in the course of discharge of duty of the managing trustee in the day to day affairs of the assessee trust and when the assessee needed some funds to meet the day to day operation of the construction of the college building it was facilitated by the managing trustee and assessee is having running account with the managing trustee and the transaction between these two parties cannot be termed as loan transaction so as to levy penalty u/s. 269SS. Transaction undertaken by the assessee with managing trustee is incidental to attainment of main object of assessee society and in this context if the assessee has not paid money to the contractors who have undertaken construction of the building the managing trustee himself is liable for all the consequences of non-payment even bouncing of cheques for insufficient funds and in that view the money advanced by the managing trustee to the assessee to meet the urgent business exigency amounts to reasonable cause within the purview of section 273B of the Act and on this count also the penalty cannot be levied. Concept of mutuality is primarily based on the principle that one cannot profit from himself. Thus when the managing trustee provided funds to the society to meet urgent business exigency it cannot be said that it was a loan transaction so as to attract penalty u/s. 269SS. Thus the managing trustee of the society is not covered by the expression any other persons occurring in section 269SS or 269T of the Act. The transaction also is attributed to various exigencies relied by the assessee which constitute reasonable cause contemplated by section 273B of the Act. Appeal of assessee allowed.

Issues Involved:
1. Legitimacy of the penalty imposed under Section 271D of the Income Tax Act, 1961.
2. Applicability of Section 269SS to transactions between a trustee and a trust.
3. Reasonable cause for accepting cash deposits in violation of Section 269SS.
4. Interpretation of "any other person" under Section 269SS.

Issue-Wise Detailed Analysis:

1. Legitimacy of the Penalty Imposed under Section 271D:
The appellant challenged the penalty of Rs. 15,64,50,000/- imposed by the Additional Commissioner of Income Tax under Section 271D for violating Section 269SS. The appellant argued that the transaction was genuine, involved no black money, and was not intended to evade taxes. The appellant relied on CBDT Circular No. 387 and various case laws to support the contention that genuine transactions should not attract penalties under Section 271D.

2. Applicability of Section 269SS to Transactions Between a Trustee and a Trust:
The appellant contended that the trustee, Sh. K Muniraju, was acting in two capacities: as the Managing Trustee and in his individual capacity. The appellant argued that the trustee is not considered "any other person" under Section 269SS, and thus, the transaction should not attract the provisions of Section 269SS. The appellant cited several case laws to support this argument, asserting that transactions between closely connected persons, such as trustees and trusts, should not fall under the purview of Section 269SS.

3. Reasonable Cause for Accepting Cash Deposits in Violation of Section 269SS:
The appellant argued that the cash deposits were made due to urgent financial requirements for the construction of a medical college and hospital building. The appellant maintained that the trustee was maintaining a running account with the trust, and the transactions were made in good faith to meet immediate financial needs. The appellant claimed that this constituted a reasonable cause under Section 273B, which should exempt the appellant from the penalty.

4. Interpretation of "Any Other Person" Under Section 269SS:
The appellant argued that "any other person" in Section 269SS should not include a trustee who is intimately connected with the trust. The appellant cited the legislative intent behind Section 269SS, which is to curb black money transactions, and argued that genuine transactions between trustees and trusts should not be penalized. The appellant relied on various judicial precedents to support the argument that closely connected persons, such as trustees, should not be considered "any other person" under Section 269SS.

Judgment Analysis:
The Tribunal analyzed the arguments and evidence presented by both parties. It noted that the legislative intent behind Sections 269SS and 271D was to curb black money transactions. The Tribunal observed that the transactions in question were genuine, as accepted by the Revenue, and there was no involvement of black money. The Tribunal also noted that the trustee and the trust were closely connected, and the transactions were made to meet urgent financial needs for the construction project.

The Tribunal referred to several judicial precedents, including the cases of Chandra Cement Ltd., Mohan Kaikare, Shrepak Enterprises, Dillu Cine Enterprises (P) Ltd., and Citizen Co-operative Society Ltd., which supported the appellant's contention that genuine transactions between closely connected persons should not attract penalties under Section 271D.

The Tribunal concluded that the appellant had a reasonable cause for accepting cash deposits from the trustee, as the transactions were made to meet urgent financial needs and were not intended to evade taxes. The Tribunal held that the transactions between the trustee and the trust did not fall under the purview of Section 269SS, as the trustee was not considered "any other person" in this context.

Conclusion:
The Tribunal allowed the appeal, canceling the penalty imposed under Section 271D. The Tribunal held that the transactions between the trustee and the trust were genuine, made to meet urgent financial needs, and did not involve black money. The Tribunal concluded that the appellant had a reasonable cause for accepting cash deposits, and the trustee was not considered "any other person" under Section 269SS.

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