2005 (5) TMI 32 - HC - Income Tax

Penalty proceedings under sections 271D and 271E - As per the case of the Revenue the provisions of sections 269SS and 269T of the Act had been violated as the assessee had made payments in cash - Tribunal has recorded a finding that the funds were not available for meeting day-to-day expenses therefore loans were taken in cash and when the funds were available the same were returned in cash accordingly. The assessee is running a school for deaf and dumb children/persons and meets all its expenses from donations or grants - Tribunal came to the conclusion that there were no mala fides on the part of the assessee and there was no intent of violating the law as such it accepted the explanation of the assessee. The provisions of sections 271D and 271E are penal provisions and their ingredients must be satisfied upon the strict construction. It is a settled principle of law that the finding of fact recorded by the Tribunal would not be disturbed by the High Court in an appeal under section 260A of the Act unless it was totally perverse

Summary

Issues:
1. Imposition of penalty under sections 271D and 271E of the Income-tax Act, 1961.
2. Violation of provisions of sections 269SS and 269T of the Act regarding cash payments.

Analysis:
1. The case involved an appeal under section 260A of the Income-tax Act, 1961, where the assessee had initially declared a loss in the return of income. The Assessing Officer assessed the assessee at a different amount than declared, imposing penalties under sections 271D and 271E of the Act separately. The Joint Director of Income-tax later confirmed and imposed penalties for the same year. The appeals against these penalties were dismissed by the Commissioner of Income-tax (Appeals) but were accepted by the Income-tax Appellate Tribunal based on the reasoning that there was a reasonable cause for taking and repaying loans in cash due to the financial situation of the school for deaf and dumb children/persons run by the assessee. The Tribunal found no mala fides on the part of the assessee and canceled both penalties, which was upheld in the final judgment by the High Court.

2. The Revenue contended that the Tribunal erred in law by accepting the explanation provided by the assessee regarding cash payments, which were seen as violations of sections 269SS and 269T of the Act. However, the Tribunal's finding was based on the fact that the funds were not available for day-to-day expenses, leading to cash transactions for loans, which were later repaid in cash when funds were available. The Tribunal considered the unique circumstances of the school being dependent on donations and grants for expenses. The High Court upheld the Tribunal's decision, emphasizing that penal provisions like sections 271D and 271E must be strictly construed and satisfied, and the Tribunal's factual findings should not be disturbed unless entirely perverse. The High Court found no substantial question of law for consideration and dismissed the appeal accordingly.