1993 (3) TMI 182 - AT - Income Tax

Summary

Issues:
1. Whether penalty under section 271D of the Income-tax Act, 1961 was rightly deleted by the CIT (A) based on the reasonableness and bonafide nature of the transaction?
2. Whether the deposits received in cash by the assessee contravened section 269SS, making them liable for penalty under section 271D?

Analysis:
Issue 1:
The Revenue contended that the CIT (A) erred in deleting the penalty levied under section 271D based on reasonableness and bonafide nature of the transaction. The Assessing Officer found that cash deposits were received by the assessee, contravening section 269SS, and imposed a penalty. The CIT (A) accepted the assessee's submissions, citing genuine impression and absence of mens rea, and relied on legal precedents to cancel the penalty. The CIT (A) observed that one deposit received on a Sunday should not have been considered for penalty imposition. The Tribunal upheld the cancellation of penalty for the Sunday transaction but confirmed the penalty for other deposits, emphasizing that misconception of law cannot be a reasonable cause when there is no ambiguity in the relevant section.

Issue 2:
The departmental representative argued that the penalty for deposits received in cash, contravening section 269SS, was rightly levied. The assessee contended that the section's application was erroneous as there was no mention of unaccounted cash or deposits in the assessment order. The Tribunal analyzed the purpose of section 269SS, emphasizing its intent to discourage cash transactions for deposits or loans over a certain amount. It clarified that even for genuine transactions, the assessee must explain why cash was used, failing which penalty under section 271D is applicable. The Tribunal rejected the assessee's argument of unintended misinterpretation of the section, confirming the penalty except for the transaction falling on a Sunday. The Tribunal suggested that the CBDT should issue instructions for a purposive interpretation of section 269SS to avoid confusion and ensure effective implementation.

In conclusion, the Tribunal partly allowed the appeal, confirming the penalty under section 271D except for the deposit received on a Sunday. The judgment highlights the importance of complying with the provisions of the Income-tax Act and the need for clear interpretation and application of relevant sections to avoid penalties.