2018 (5) TMI 1731 - HC - Income Tax

Penalty u/s 271E and 271D - loans and repayments had not been accounted for in the regular books of accounts - no business exigency or urgency established for accepting and repaying loans only in cash - books of accounts and supporting documents were impounded u/s 133A(3) - Held that - There is no justifiable reasonable cause for repayment of loans in cash exceeding 20000/- and thus it is a clear violation of law for many years - assessee has not produced books of accounts to vouch for entering such details - hence there was no such reason for regular loan transactions so as to escape penal liability u/s 271E and 271D - ground raised by the Revenue stands allowed - Decided against the assessee.

Summary

Issues Involved:
1. Legality of the imposition of penalties under Sections 271E and 271D of the Income Tax Act, 1961.
2. Justifiability of the assessee's actions under Section 273B of the Income Tax Act.
3. Consistency of the Tribunal's decision with previous orders of coordinate Benches.

Issue-wise Detailed Analysis:

1. Legality of the imposition of penalties under Sections 271E and 271D of the Income Tax Act, 1961:
The case arose from a survey under Section 133A of the IT Act, revealing that the assessee had repaid loans exceeding ?20,00,000/- in cash. The Assessing Officer found that these transactions were not recorded in the regular books of accounts, and no business exigency justified the cash transactions. Consequently, penalties were imposed under Sections 271E and 271D for violating Sections 269SS and 269T, which mandate that loans and repayments exceeding ?20,000/- must be made through account payee cheques or bank drafts. The Tribunal upheld these penalties, emphasizing that the assessee's actions constituted a clear violation of the law.

2. Justifiability of the assessee's actions under Section 273B of the Income Tax Act:
The assessee argued that there was a reasonable cause for the cash transactions, which should exempt him from penalties under Section 273B. However, the Assessing Officer and the Tribunal found that the assessee had not demonstrated any business exigency or urgency to justify the prolonged and persistent cash transactions. The Tribunal noted that the transactions were not recorded in the regular books of accounts, indicating intentional and negligent behavior rather than ignorance. Thus, the claim of reasonable cause was rejected, and penalties were upheld.

3. Consistency of the Tribunal's decision with previous orders of coordinate Benches:
The assessee contended that the Tribunal breached judicial discipline by ignoring the orders of other Benches of coordinate strength. However, the court clarified that each assessment year is different, and factual findings for one year do not serve as binding precedents for subsequent years. The court emphasized that statutory provisions prohibiting cash transactions are binding on all taxpayers, and breaches attract penalties. The Tribunal's decision was based on the specific facts of the case, and there was no inconsistency with previous orders.

Conclusion:
The High Court dismissed the appeals, affirming the Tribunal's decision to restore the penalties under Sections 271E and 271D. The court held that the assessee's deliberate flouting of the law could not justify exemption from penalties, except in rare cases of extreme exigency. The court found no substantial question of law in the appeals and upheld the penalties imposed for the cash transactions. Consequently, the appeals were dismissed with no costs, and the connected miscellaneous petition was closed.