2006 (9) TMI 102 - HC - Income Tax

Penalty assessee was under bonafide belief that limit for deposit and repayment of loan in cash was Rs., 20,000 Penalty imposed for crossing specified limit is set aside.

Summary

Issues:
- Whether the deletion of penalty under section 271E was justified based on the bona fide belief of the assessee regarding the deposit limit?

Analysis:
1. The case involved the appeal of the revenue regarding the deletion of penalty under section 271E of the Income-tax Act, 1961. The Assessing Officer noted that the assessee had repaid a deposit in cash, contravening the provisions of section 269T of the Act. Penalty proceedings were initiated, and a penalty of Rs.10,000 was imposed.

2. The Commissioner of Income-tax (Appeals) Jalandhar later deleted the penalty, stating that the assessee genuinely believed the limit for deposit and repayment of loans in cash was Rs.20,000 for the relevant year. This belief was considered bona fide, leading to the deletion of the penalty.

3. The Tribunal affirmed the decision of the Commissioner of Income-tax (Appeals) in deleting the penalty. The judgment referred to a Supreme Court case where it was highlighted that if a cash payment was made due to a reasonable belief, the imposition of a penalty would not be justified. Section 273B of the Act provides for no penalty if there was a reasonable cause for the failure to comply with certain provisions.

4. Citing the Supreme Court case, the judgment emphasized that if there was a genuine and bona fide transaction and the taxpayer could not use account-payee cheques or demand drafts due to valid reasons, the authority imposing the penalty had discretionary power. Based on this interpretation, the question was answered against the revenue and in favor of the assessee.