2024 (4) TMI 140 - AT - Income Tax

Penalty levied u/s 271DA - cash receipts by assessee of Rs. 2,00,000/- or more from a single persons by splitting the invoices against sale of goods at its stores - violation of provisions of section 269ST - whether good and sufficient cause proved? - proceedings of search and seizure operation that was conducted on director of assessee company - CIT(A) confirmed addition and held that the assessee has issued two bills to the customer bifurcating it below Rs. 2,00,000/- as obvious i.e. circumventing the provisions of section 269ST - CIT(A) held that no person issues two bills to the same customer for two different items HELD THAT - The Hon ble Apex Court in the case of Hindustan Steel Ltd Vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT held that held that penalty may not be imposed when there is technical or venial breach of the provisions of the Act. 'Good cause as defined Lexicon - Reason which is found to be adequate or proper and justified by a court or a competent authority dealing with the matter. Sufficient cause - The expression sufficient cause implies no negligence nor inaction nor want of bonafides on the part of the party . See MYSORE FERTILISER COMPANY 1982 (11) TMI 15 - MADRAS HIGH COURT ,CHEMBARA PEAK ESTATES LIMITED 1989 (8) TMI 35 - KERALA HIGH COURT ,BHIKAJI RAMCHANDRA 1982 (2) TMI 1 - BOMBAY HIGH COURT and JAIPUR ELECTRO PRIVATE LIMITED 1979 (10) TMI 6 - RAJASTHAN HIGH COURT The default, if any, at most be said to be a technical default. It has been held by the Hon ble Apex Court in the case of Hindustan Steels vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT that penalty cannot be levied merely because the authorities are empowered to levy and when there is technical or venial breach of the provisions of the Act, the authorities competent to impose penalty shall be justified in refusing to impose the penalty - Appeal of the assessee is allowed.

Summary

Issues:
The judgment involves the levy of penalty u/s 271DA of the Income Tax Act, 1961 on cash receipts of Rs. 2,00,000 by the assessee, based on the violation of provisions of section 269ST.

Levy of Penalty u/s 271DA:
The penalty order u/s 271D was passed following a search and seizure operation on Directors of M/s Finessee international Design Pvt. Ltd. It was found that the assessee violated section 269ST by splitting invoices against sale of goods, leading to cash receipts of Rs. 2,00,000 or more from single persons. The Addl. CIT noted this violation and initiated penalty proceedings u/s 271D. The assessee appealed before the ld. CIT(A), who upheld the penalty for transactions made through cash, citing that splitting bills to circumvent section 269ST is unjustifiable.

Legal Provisions and Legislative Intention:
Section 271DA imposes a penalty for contravention of section 269ST, emphasizing the legislative intent to curb black money and promote digital economy. The chapter containing sections 269SS/T/ST aims to counteract tax evasion by regulating modes of payment in certain cases.

Judicial Interpretation and Precedents:
Referring to the case of Hindustan Steel Ltd Vs. State of Orissa, the judgment highlighted that penalties are not warranted for technical or venial breaches. The definitions of 'good cause' and 'sufficient cause' were provided for clarity. Case laws like CIT vs. Mysore Fertilizer Co. were cited to support the argument for good and sufficient cause.

Decision and Conclusion:
Considering the facts and circumstances, the tribunal held that no penalty is justified in this case, as the violation was deemed a technical default rather than deliberate evasion. Citing the case of Addl. CIT Vs. Smt. Prahati Baruah, the tribunal concluded that the breach, if any, does not merit a penalty. Therefore, the appeal of the assessee was allowed, and no penalty was levied.