Learning from judgment of Madras High Court in case of M. Sougoumarin v. Asstt. CIT- do not take legal provisions about cash transactions carelessly and also prepare case seriously taking all facts and contentions.

[CA DEV KUMAR KOTHARI]

Links and references:

Sections 269SS, 269T, 271D and 271E of the Income-tax Act, 1961.

M. SOUGOUMARIN VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX [2018 (5) TMI 1731 - MADRAS HIGH COURT]

The relevant provisions as mentioned are very well known to the readers therefore the same are not reproduced. These provisions are about accepting or taking loans and repaying loans  in cash and penalty for contravention.

On reading of the judgment of the High Court, it appears that the AO levied penalty u/s 271D and 271E and it was deleted by the CIT(A). Therefore, revenue preferred appeal before the Tribunal. Tribunal reversed order of CIT(A) and confirmed penalty. The order of Tribunal was based on finding of facts.

The assesse preferred appeal before honourable Madras High Court, the appeal was admitted on substantial questions of law. However, while considering the appeal, the High Court observed that the order of tribunal is based on facts found. And there is no question of law, leave aside any substantial question of law. Therefore the appeal  of assesse was dismissed hence their lordships confirmed penalty levied by the AO.

Facts gathered and analysed from the judgment:

a) Assessee obtained and repaid loans in cash exceeding prescribed monetary limit on regular basis,

b) There was no business exigency or urgency

c) The assesse has not made any claim or made out case of business exigency or urgency

d) There was a prolonged and persistent system of accepting and repaying loans only in cash.

e) Transactions were not recorded in books of account. Even in respect of some transactions recorded in books of account of assessee or firm in which he was partner, any reason for taking or repayin loan in cash was not made out.

f) Case of assesse was only based on one contention that the other party in transaction was not penalised.

g) The counsel had also relied on judgment of co-ordinate bench deleting similar penalty. However, in case of penalty it is dependent on facts, and there cannot be application of a precedence , even in case of same assessee for two years when facts are different.

h) The AO had found that there could not be a reasonable cause for regular and persistent practice of receiving and repaying loans in cash in excess of permitted limits. It was also observed that the father of assesse had adopted such practice and the son (assesse)continued the same practice.

Observation of author

from facts it is clear that the assesse had taken the provision very lightly and was a regular non –complier of provisions, and therefore assessee had regularly obtained and repaid loans in cash above prescribed limits.

Any reasonable cause for taking and repaying loans in cash was not made bout by assessee.

The assesse even did not consider judgments about the provisions in which the contention as raised by assesse was not accepted by a number of Courts including Madras High Court, and Gujarat High Court and provisions were held valid.

Conclusion from judgment:

a) Deliberate flouting of the law can never be a justification for exemption from penalty, except in the rarest of rare cases of extreme exigency.

b) The matter is involving facts of case for each year. For this reason judgment of co-ordinate bench in other cases cannot be a binding precedence.

 b.  The appeals of assessee  are dismissed.

Learning from judgment:

Transactions should be carried as per procedures prescribed under law.

There should be respect for law and attempt should be made for compliance.

Only in exceptional circumstances a lenient view can be expected from authorities and courts if reasonable cause is shown for non-compliance.

Over confidence on basis of technical or legal provisions is not good when applicability or non-applicability of any provision is dependent on facts and circumstances of case.

In such proceedings all contentions should be raised and mere technical grounds should not be basis for seeking relief.