2017 (8) TMI 619 - HC - Income Tax

Penalty u/s 271E - violating the provisions of Section 269T - genuineness of the transaction - proof of intentional violation - Held that - The Tribunal has relied on a decision of Punjab & Haryana High Court in the case of CIT v. Saini Medical Store (2005 (2) TMI 72 - PUNJAB AND HARYANA High Court) and has held that if assessee shows reasonable cause for the failure to comply with any provisions referred thereto, the penalty for its violation shall not be imposable on the assessee. The Tribunal recorded a finding that the assessee has shown reasonable cause for making the payment in cash exceeding ₹ 20,000/-. The aforesaid finding is purely a finding of fact, which is based on sound reasoning. - Decided against revenue.

Summary

Issues: Validity of penalty under Section 271E of the Income Tax Act, 1961 for violating Section 269T - Discretion of Revenue to levy penalty - Reasonable cause for failure to comply with provisions - Applicability of precedent from Punjab & Haryana High Court.

The judgment pertains to an appeal under Section 260A of the Income Tax Act, 1961, where the revenue challenged the order of the Income Tax Appellate Tribunal. The penalty of &8377; 4,73,499/- was imposed on the respondent for violating Section 269T by making cash repayments to depositors. The Commissioner of Income Tax (Appeals) upheld the penalty, but the Tribunal, in its order dated 17.12.2015, allowed the respondent's appeal. The Tribunal noted that the genuineness of the transaction was not in doubt, and the penalty was imposed due to the violation of Section 269T. It highlighted that the provisions granting the Revenue the power to assess penalties are discretionary and not mandatory. The Tribunal also referenced a similar case from the Punjab & Haryana High Court, emphasizing that if the assessee shows reasonable cause for non-compliance, the penalty may not be imposed.

The Tribunal's decision was based on the reasoning that the assessee had demonstrated a reasonable cause for making cash payments exceeding &8377; 20,000, which was considered a factual finding supported by sound reasoning. Consequently, the Tribunal concluded that no substantial question of law arose for consideration in the appeal, leading to the dismissal of the appeal. The judgment underscores the importance of demonstrating reasonable cause for non-compliance with statutory provisions and the discretionary nature of penalties under the Income Tax Act. The reliance on precedent from the Punjab & Haryana High Court further solidified the Tribunal's decision in favor of the respondent, highlighting the significance of factual findings and sound reasoning in such cases.