2001 (9) TMI 248 - AT - Income Tax

Summary

Issues Involved:
1. Constitutional validity of Section 269SS.
2. Jurisdiction of Addl. Commissioner to levy penalty u/s 271D.
3. Limitation period for imposing penalty u/s 271D.
4. Nature of transactions and applicability of Section 269SS.
5. Reasonable cause for non-compliance with Section 269SS.

Summary of Judgment:

1. Constitutional Validity of Section 269SS:
The Tribunal held that the question of the constitutional validity of Section 269SS cannot be entertained by it as it is a creature of the statute. The constitutional validity can only be decided by the High Court or the Apex Court. The Tribunal dismissed this ground as various High Courts have upheld the validity of Section 269SS.

2. Jurisdiction of Addl. Commissioner to Levy Penalty u/s 271D:
The Tribunal concluded that the Addl. Commissioner of Income-tax, being a superior authority and discharging the functions of the erstwhile Dy. Commissioner of Income-tax, had jurisdiction to levy the penalty u/s 271D. The Tribunal found that Section 120 of the Income-tax Act confers wide powers to the Board, thus validating the actions of the Addl. Commissioner.

3. Limitation Period for Imposing Penalty u/s 271D:
The Tribunal opined that the penalty levied u/s 271D has no rational nexus with the completion of the assessment u/s 143(3). The Tribunal held that the penalty proceedings should be governed by Section 275(1)(c) of the Act for the purposes of limitation. The initiation of penalty proceedings by the Assessing Officer on 21-3-1997 was considered valid, and the penalty should have been levied on or before 30-9-1997. As the penalty was levied on 24-3-1998, the Tribunal held that the levy of penalty was barred by limitation.

4. Nature of Transactions and Applicability of Section 269SS:
The Tribunal found that the transactions between the assessee and the director were genuine and did not involve unaccounted money. The transactions were neither loans nor deposits, but temporary advances due to business exigencies. The Tribunal referred to various judicial pronouncements and held that Section 269SS was not intended to penalize genuine transactions where no tax evasion was involved. The Tribunal also noted that the term "any other person" in Section 269SS does not include a director of the company.

5. Reasonable Cause for Non-Compliance with Section 269SS:
The Tribunal accepted that the transactions were due to business exigencies and constituted a "reasonable cause" as contemplated by Section 273B of the Act. The Tribunal emphasized that penalty provisions are penal in character and should be imposed only if there is deliberate defiance of law or contumacious conduct. The Tribunal concluded that the default was technical and venial, and the assessee had a bona fide belief that no offence was committed.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleted the penalty levied u/s 271D, and held that both on law and on facts, the penalty was not maintainable.