2005 (11) TMI 48 - HC - Income Tax

Penalty u/s 271D and 271E - violation of sections 269SS and 269T - Commissioner of Income-tax (Appeals), deleted the penalty holding that the contravention alleged against the assessee did not result in any unaccounted transaction such as lending and repayment and that both lending and repayment were entered in the books of the assessee and the figure involved was meagre and that the same was incurred only for meeting the sudden demand of overdraft account. Tribunal found that the order of the Commissioner of Income-tax (Appeals) is a well reasoned one and the same does not suffer from any infirmity requiring any interference - We hold that there is no reason whatsoever to interfere with the findings of the Tribunal that there was reasonable cause for the assessee not strictly complying with the provisions of section 269SS - Tribunal was right in holding that the penalty under sections 271D and 271E cannot be imposed for violation of sections 269SS and 269T

Summary

Issues:
- Appeal against order of Income-tax Appellate Tribunal dated April 3, 2002.
- Levy of penalty under sections 271D and 271E for contravention of sections 269SS and 269T.
- Deletion of penalty by Commissioner of Income-tax (Appeals).
- Endorsement of Commissioner of Income-tax (Appeals) decision by Tribunal.
- Substantial question of law regarding imposition of penalty.

Analysis:
The High Court of MADRAS heard tax case appeals against the order of the Income-tax Appellate Tribunal dated April 3, 2002, concerning the levy of penalties under sections 271D and 271E for contravention of sections 269SS and 269T for the assessment year 1989-90. The assessee, a partnership firm, had accepted cash loans exceeding Rs. 20,000, leading to the penalty imposition by the Assessing Officer. The Commissioner of Income-tax (Appeals) deleted the penalty, stating that the contravention did not involve unaccounted transactions and was incurred to meet an overdraft account demand. The Tribunal upheld the Commissioner's decision, emphasizing that the transactions were recorded in the books and the amount involved was minimal, thus finding no reason to interfere with the decision.

The High Court considered a similar case before the Delhi High Court and noted that the Tribunal's conclusion of reasonable cause for non-compliance with section 269SS was based on relevant factors. The Court held that the Tribunal's findings were factual and did not raise any substantial question of law. Applying this reasoning to the present case, the High Court affirmed the Tribunal's decision, stating that there was a reasonable cause for the assessee's non-compliance with section 269SS. Consequently, the High Court ruled in favor of the assessee, affirming that penalties under sections 271D and 271E cannot be imposed for violations of sections 269SS and 269T. The appeals were dismissed, and no costs were awarded.