2005 (10) TMI 33 - HC - Income Tax

Whether Tribunal was right in confirming the order of the Commissioner of Income-tax (Appeals) cancelling the penalties under section 271E of the Act in spite of there being total lack of evidence to prove the existence of reasonable cause in terms of section 273B of the Income-tax Act? - it is seen that cash payments made by the assessees in certain cases were for justifiable cause and sufficient reasons and explanations have been offered. The Commissioner of Income-tax (Appeals) as well as the Tribunal have accepted the aforesaid aspects and found the question in favour of the assessee and that being the question of fact, we do not find any ground to interfere with the finding of the Income-tax Appellate Tribunal

Summary

Issues:
- Appeal against order of Income-tax Appellate Tribunal
- Contravention of section 269T of the Income-tax Act
- Penalty proceedings under section 271E of the Act
- Reasonable cause for repayment of deposits in cash
- Application of section 273B of the Income-tax Act

Analysis:
The case involved appeals against the order of the Income-tax Appellate Tribunal concerning the contravention of section 269T of the Income-tax Act and penalty proceedings under section 271E of the Act. The Revenue contended that the Tribunal erred in confirming the cancellation of penalties by the Commissioner of Income-tax (Appeals) due to a lack of evidence to prove the existence of reasonable cause under section 273B of the Income-tax Act. The assessees were a group of seven partnership firms engaged in real estate and property development business, accepting deposits from the public. A search under section 132 of the Act revealed contraventions of section 269T in repaying deposits with interest. Penalty proceedings were initiated, claiming ignorance of the law as the reason for cash repayments exceeding the limit set by section 269T.

The Joint Commissioner found the explanation provided by the assessees to be general in nature without supporting evidence, leading to the imposition of penalties under section 271E. However, the Commissioner of Income-tax (Appeals) later canceled the penalties, citing reasonable cause for cash repayments and the non-automatic application of section 271E, considering the provisions of section 273B. Bank statements showed most repayments were made through cheques, with some being inter-company transfers or made after banking hours. Cash repayments were justified in cases involving lady depositors without bank accounts, as per the findings of the Tribunal and the Commissioner of Income-tax (Appeals).

The Commissioner of Income-tax (Appeals) and the Tribunal accepted the explanations and reasons provided by the assessees for the cash repayments, deeming them justifiable. The Tribunal's findings in favor of the assessees were upheld, emphasizing that the cash payments were made for valid reasons. As the issue pertained to questions of fact, the High Court found no grounds to interfere with the Tribunal's decision, ultimately dismissing the appeals. The court concluded that no substantial question of law was raised by the appellant, leading to the dismissal of the appeals.