2022 (4) TMI 1220 - AT - Income Tax

Penalty under Section 271D and under Section 271E - accepting/repayment of cash - HELD THAT - The assessee is engaged as a transporter and has not maintained any regular books of account. The assessment has been made on estimations, keeping in mind the transportation receipts earned by the assessee which also includes some of impugned entries towards cash receipts by way of loan. The assessee in the course of survey itself, on being questioned, responded that the cash has been received by way of temporary loan from family members to meet the business exigency having regard to the nature of business he is involved in. The fact of business exigency has not been denied by the Revenue.CIT(A) has disregarded the defense of the assessee mainly on account of the fact that the assessee has failed to come out with complete facts and documents regarding the transactions. We find that the turnover receipts declared by the assessee at ₹ 39,61,195/- was enhanced to ₹ 1,33,67,162/- for the purposes of estimation of income based on such impounded records. Therefore, imposition of penalty separately towards such receipts by way loan is not justified. The impromptu response of the purportedly uneducated assessee at the time of survey, in our view, requires to be seen in its natural perspective and requires to be given credence. The assessee has declared that the money was received from family members to meet the business exigencies. Having regard to the nature of business of the assessee and ground realities, such explanation appears plausible. Breach of Sections 269SS and 269T for receipt/repayment of cash attributable to business exigencies is a mere technical or venial breach. The assessee has shown existence of reasonable cause in accepting/repayment of cash to meet the immediate business requirements. In our view, mitigating circumstances exists to exonerate the assessee from the recourse of penalty under Sections 271D and 271E of the Act. We accordingly set aside the order of the CIT(A) and cancel the penalty imposed under Sections 271D and 271E of the Act by the competent authority. - Decided in favour of assessee.

Summary

Issues:
Challenge of penalty under Section 271D and 271E of the Income Tax Act, 1961 concerning AY 2008-09.

Analysis:
The appeal was filed by the assessee challenging the penalty imposed under Sections 271D and 271E of the Income Tax Act, 1961. The assessee, engaged in the transportation business, had a survey conducted at their business premises, where certain documents were impounded. The assessment was completed based on these impounded registers, showing cash receipts and payments exceeding a certain amount. The Additional Commissioner of Income Tax imposed penalties under Sections 271D and 271E for alleged violations of Sections 269SS and 269T. The CIT(A) upheld the penalties, leading to the appeal before the Tribunal.

During the hearing, the assessee's counsel argued that the cash transactions were due to business exigencies and loans were taken from family members for operational needs. The counsel highlighted the immediate repayment of these loans, the lack of formal accounting due to the assessee's education level, and the small amounts involved. The Revenue's counsel contended that the assessee should have followed statutory requirements and avoided cash transactions. The Tribunal considered these arguments along with the case facts.

The Tribunal observed that the assessee, a transporter, operated without regular books of account and the assessment was based on estimations, including impounded cash receipts. The assessee explained that the cash loans were received from family members to address business needs, a fact not disputed by the Revenue. The Tribunal found the penalty imposition unjustified as the impromptu response of the uneducated assessee during the survey was plausible given the business context. Citing relevant case laws, the Tribunal noted that breaches due to business exigencies are technical and can be excused. Consequently, the Tribunal set aside the CIT(A)'s order and canceled the penalties under Sections 271D and 271E.

In conclusion, the Tribunal allowed the assessee's appeal, emphasizing the mitigating circumstances and reasonable cause for the cash transactions. The penalties under Sections 271D and 271E were revoked, considering the business realities and explanations provided by the assessee.

The judgment was delivered on 04/04/2022 by Shri Saktijit Dey, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member of the Appellate Tribunal ITAT Delhi.