9911796707
|
Home
Issues Involved:
1. Penalty under Section 271D for violation of Section 269SS due to alleged cash loans. 2. Enhancement of penalty from Rs. 3,50,000/- to Rs. 23,50,000/- for transactions through bearer cheques. Detailed Analysis: 1. Penalty under Section 271D for violation of Section 269SS due to alleged cash loans: The assessee, a construction firm, was subjected to a search under Section 132 of the Income Tax Act on 18-10-2003, where documents related to financial transactions, many in cash, were found and seized. The search also covered the partners and associate concerns of the assessee group. Prior searches on 29-7-2003 in the case of Shri B.H. Shah revealed blank cheques amounting to Rs. 1,01,00,000/- belonging to the assessee and its group concerns. The Assessing Officer (A.O.) noted that these cheques were handed over to Shri B.H. Shah for amounts borrowed by various persons, including the assessee, and were due for repayment or renewal. The A.O. found a violation of Section 269SS and levied a penalty under Section 271D, stating that the cheques amounting to Rs. 95,50,000/- represented unaccounted cash loans taken in violation of Section 269SS. Shri B.H. Shah admitted that these cheques were security for cash loans advanced by him, returned upon loan repayment, with interest received in cash. The A.O. presumed the assessee borrowed Rs. 95,50,000/- in cash and levied a penalty of Rs. 99,00,000/- in total, including Rs. 3,50,000/- for loans obtained through bearer cheques. The CIT (A) deleted the penalty of Rs. 95,50,000/- but enhanced the penalty for bearer cheques to Rs. 23,50,000/-. The Revenue opposed the deletion, citing Shri B.H. Shah's statement. The assessee argued that the penalty was based on presumption without concrete evidence and that they were not given an opportunity to cross-examine Shri B.H. Shah, violating principles of natural justice. Upon review, it was found that the cheques were issued as security for the entire Sneh group, and no concrete evidence indicated the assessee received Rs. 95,50,000/- in cash. The penalty was imposed based on presumption, and the CIT (A) rightly deleted it. The Tribunal upheld this deletion, stating that general statements from third parties cannot justify penalties without concrete evidence. 2. Enhancement of penalty from Rs. 3,50,000/- to Rs. 23,50,000/- for transactions through bearer cheques: The A.O. initially imposed a penalty of Rs. 3,50,000/- for loans taken via bearer cheques, which violated Section 269SS. The CIT (A) enhanced this penalty to Rs. 23,50,000/-, a figure not disputed by either party. The assessee argued that they were under the bona fide impression that accepting loans by cheques complied with Section 269SS and that ignorance of law can be a reasonable cause, citing the Bombay High Court's decision in CIT Vs. Schell International. The Tribunal reviewed the case, noting that the assessee's practice of taking loans through bearer cheques was genuine and recorded in the books of accounts. The assessee was unaware that this violated Section 269SS, a point not raised by auditors. The Tribunal referenced several legal precedents, including the Supreme Court's observation that ignorance of law can be a defense under certain circumstances. In conclusion, the Tribunal found that the assessee's ignorance of the specific legal provisions constituted a reasonable cause under Section 273B, justifying the deletion of the enhanced penalty. The appeal of the Revenue was dismissed, and the appeal of the assessee was allowed. Result: - The penalty of Rs. 95,50,000/- under Section 271D was rightly deleted. - The enhanced penalty of Rs. 23,50,000/- was deleted due to the assessee's bona fide impression and ignorance of the law. Pronounced in the open court on 20th May 2011.
|
