2004 (8) TMI 315 - AT - Income Tax

Summary

Issues:
1. Permission of leading additional evidence in contravention of r. 46A of the IT Rules.
2. Deletion of penalty under s. 271D of the IT Act.
3. Entertaining documents without affording an opportunity of hearing to the AO.

Analysis:

Issue 1: Permission of leading additional evidence
The Revenue appealed against the order of the CIT(A) permitting the leading of additional evidence in contravention of r. 46A of the IT Rules. The Revenue contended that this permission led to the deletion of a penalty of Rs. 2 lakhs levied under s. 271D of the IT Act. The case involved cash deposits of Rs. 2 lakhs in the name of an individual and HUF, which the AO deemed as accepted in violation of s. 269SS of the Act. The AO issued a show-cause notice for imposing a penalty under s. 271D. The assessee explained that the cash deposits were due to the return of cheques issued to them by parties, leading to a cash deposit by the partners to avoid consequences under the Negotiable Instruments Act. The CIT(A) found this explanation reasonable and deleted the penalty.

Issue 2: Deletion of penalty under s. 271D
The AO was not satisfied with the assessee's explanation and levied a penalty of Rs. 2 lakhs under s. 271D. However, the CIT(A) deleted the penalty, considering the reasonable cause presented by the assessee for accepting the cash deposits. The Tribunal upheld the CIT(A)'s decision, emphasizing that the partners made cash deposits due to cheques not being cleared by the bank, preventing potential consequences under the Negotiable Instruments Act. The Tribunal found no reason to interfere with the CIT(A)'s order, leading to the dismissal of the Revenue's appeal.

Issue 3: Entertaining documents without affording an opportunity
The Revenue argued that the CIT(A) entertained documents without giving the AO an opportunity to be heard, relying on the AO's orders. In contrast, the assessee's counsel supported the CIT(A)'s decision. The Tribunal considered both sides' contentions and concluded that the CIT(A) correctly assessed the situation as a reasonable cause for deleting the penalty. The Tribunal upheld the decision, stating that the CIT(A) appropriately allowed the assessee to produce a bank certificate supporting their explanation. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order.