2018 (3) TMI 1469 - HC - Income Tax

Penalty under section 271D - assessee has violated section 269 SS as accepted deposits over ₹ 20,000/in cash - Held that - In case of Shivaji Ramchandra Pawar (2018 (2) TMI 1467 - BOMBAY HIGH COURT), this court had observed that mere fact that a party accepts loans in cash which are otherwise explainable would not absolve a party from penalty under section 271 D of the Act in absence of a reasonable cause. In the present matter it has been observed by the Commissioner (Appeals) and the Tribunal concurrently that the auditor of the respondent advised that Section 269SS of the Act are not applicable to the assessee on the ground that assessee s business is akin to the bank. CIT(Appeals) and Tribunal observed that it is based on the advise of the Auditor. The assessee believed the advice and it can not be said that the assessee s bona fide belief was genuine and honest.Section 271D is a penalty proceedings. The Tribunal and the Commissioner (Appeals) concurrently appreciated the explanation given and found the explanation to be within the purview of reasonable cause. No substantial question of law arises.

Summary

Issues:
Violation of section 269 SS of the Income Tax Act - Application of section 271 D - Reasonable cause for accepting cash deposits - Entertainment of appeal on substantial question of law.

Analysis:
The appellant challenged the tribunal's order dismissing the appeal of the revenue and upholding the Commissioner (Appeals)'s decision. The appellant argued that the respondent assessee breached section 269 SS of the Income Tax Act by accepting cash deposits exceeding ?20,000, invoking section 271 D. Citing judgments from the jurisdictional High Court and Allahabad High Court, the appellant contended that ignorance of the law is not a valid defense. However, after reviewing the case with both parties' advocates, the court proceeded to analyze the situation.

In a previous case, the court had held that merely accepting explainable cash loans does not absolve a party from penalties under section 271 D without a reasonable cause. In the current matter, both the Commissioner (Appeals) and the Tribunal noted that the respondent's auditor advised that section 269 SS was not applicable due to the nature of the assessee's business being similar to a bank. The authorities found that the assessee genuinely believed this advice, indicating a bona fide belief. Consequently, the explanation provided was deemed to fall within the realm of reasonable cause in the penalty proceedings under section 271 D.

The court reiterated that appeals can only be entertained on substantial questions of law, and in this case, no such question arose. Therefore, the appeal was dismissed based on the concurrent appreciation of the explanation provided by the Tribunal and the Commissioner (Appeals), which was found to be reasonable cause for the actions taken by the respondent assessee.