2024 (11) TMI 761 - AT - Income Tax

Penalty proceedings u/s. 271D - violating provisions of sec.269SS - Assessee had received a sum of Rs. 18 lakh from its trustee by way of bank transfer - other amounts were received from the employees of the trust as security deposits and the said amounts were utilized in the construction activities carried out by the trust - HELD THAT - In the present case before us, the jurisdictional Assessing Officer as well as the JCIT and the CIT(A) had not doubted about the transactions and to that effect no addition or nothing has been made by the AO while framing the assessment. To prove that the transactions are genuine, the assessee also filed various documents including notarized affidavit to show that the security deposits are genuine and would not attract provisions of sec.269SS and consequently sec.271D- jurisdictional AO had not made further inquiries to ascertain the genuineness of the security deposits and in fact the CIT(A) also not considered the notarized affidavit filed before him, but relied on the findings of the JCIT and affirmed the levy of penalty u/s. 271D of the Act. Further, the dispute involved in this appeal is only penalty which was levied mechanically without giving any contra evidences to show that the assessee is indulging in the mischief and also without proving that the said security deposits are unaccounted money, the penalty could not be sustained. In respect of the levy of penalty, the Hon ble Supreme Court in the judgment reported in Hindustan Steel Ltd. v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT wherein the Hon ble Supreme Court had elaborated the circumstances under which the penalty need not be levied. By taking into account of the facts and the various documents filed by the assessee before the ld.CIT(A) and also considering the fact that there is no unaccounted money or some false entries in the books of account, we are also of the view that the penalty needs not be levied in this case. Further, in support of the case of the Revenue, the Revenue had not established that there is some unaccounted money and for which false entries were made in the books of account. Assessee appeal allowed. Penalty u/s 271E - returning the deposits by cash - As already discussed the assessee received the deposits by way of security from the newly appointed employees and the same deposits were returned back to the employees when they left the service. The payments were made by cash since they insisted for cash. Also perused the details furnished by the assessee as annexure 1 and from which we are able to find that not the entire deposits were repaid in cash. A sum of Rs 28.50 lakhs were paid through bank and a sum of Rs 29 lakhs were paid by cash to the assessee s ex-employees. In order to reduce their genuine hardships the assessee had repaid their deposits by cash at the time of their retirement or resignation which can not be found fault with. Even the payment by cash was because of their insistence. Further the ledger account produced by the assessee would support the case of the assessee. Moreover the assessee also filed affidavits in support of their claim from their ex employees to show that the transactions are genuine. The department has no other documents to disprove the claim of the assessee except relying on the provision. There is not even a single allegation about the unaccounted money or false entries in the books of accounts. The object for the introduction of the provision was not defeated since the assessee had established the facts in detail and therefore we are of the view that it is not a fit case for imposing the penalty u/s 271 E of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Imposition of penalty under Section 271D for accepting cash deposits in violation of Section 269SS.
3. Imposition of penalty under Section 271E for repaying deposits in cash in violation of Section 269T.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The tribunal condoned a delay of 23 days in filing the appeal, citing the principle of substantial justice over technicalities. This decision aligns with the precedent set in the case of Collector Land Acquisition v. Mst. Katiji & Ors., where the Supreme Court emphasized that procedural delays should not impede justice.

2. Imposition of Penalty under Section 271D:
The core issue was the imposition of a penalty under Section 271D for accepting cash deposits exceeding Rs. 20,000, which contravenes Section 269SS. The assessee, a registered trust, argued that the cash deposits were security deposits from employees and were duly accounted for in the books. The tribunal examined precedents, including the Supreme Court's ruling in Assistant Director of Inspection (Investigation) v. Kumari A.B. Shanthi, which highlighted that penalties should not be imposed if there is a reasonable cause for the transactions. The tribunal noted that the transactions were genuine, supported by affidavits, and there was no evidence of unaccounted money. The tribunal also referenced the judgment of the Madhya Pradesh High Court in Patiram Jain, which interpreted "any other person" in favor of the assessee. Consequently, the tribunal found that the penalty under Section 271D was imposed mechanically without establishing any malafide intent or false entries, and thus, it set aside the penalty.

3. Imposition of Penalty under Section 271E:
The tribunal addressed the penalty under Section 271E for repaying deposits in cash, which violated Section 269T. The assessee contended that these repayments were made upon the insistence of former employees and were partly through bank transfers. The tribunal reviewed the evidence, including affidavits from ex-employees, and found that the transactions were genuine and accounted for. The tribunal emphasized that the penalty should not be imposed mechanically, especially when there is no indication of unaccounted money or false entries. The tribunal relied on the same rationale as in the Section 271D appeal, noting that the department failed to provide evidence of any wrongdoing beyond the statutory violation. Therefore, the tribunal concluded that the penalty under Section 271E was not justified and allowed the appeal.

Conclusion:
The tribunal allowed both appeals, emphasizing that penalties under Sections 271D and 271E should not be imposed without substantial evidence of malafide intent or unaccounted transactions. The tribunal's decision underscores the importance of examining the genuineness of transactions and the presence of reasonable cause before imposing penalties.