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2015 (1) TMI 1115 - HC - Income TaxPenalty levied under Section 271D - assessee firm accepted loans/deposits of ₹ 20,000/- each from 13 parties totalling to ₹ 2,60,000/- in cash, in contravention of the provisions of Section 269SS - Held that - Looking to the facts and circumstances we are of the opinion that the loan/deposits taken to meet urgent and immediate requirements of business and the impression gathered as taxpayers from the aforesaid circular and the advertisement did constitute a reasonable cause for accepting the said loans/deposits of ₹ 20,000 from each party in cash within the meaning of 273B of the Act. It is found therein that loans/deposits raised were to meet exigencies of business. Thus the penalty levied was cancelled. Thus as relying on case of Madhukar B. Pawar (2008 (6) TMI 321 - BOMBAY HIGH COURT ), we are of the considered opinion that the Tribunal has rightly cancelled the penalty imposed on the assessee. - Decided in favour of assessee Whether the ignorance of law was a proper excuse - Held that - This issue is answered in negative i.e. in favour of the revenue and against the department. Therefore, we hold that ignorance of law was not a proper excuse. - Decided in favour of revenue.
Issues Involved:
1. Whether the Appellate Tribunal is right in law and on facts in deleting the penalty levied under Section 271D of the Act? 2. Whether the Appellate Tribunal has correctly appreciated the facts on record so as to impliedly reach a conclusion that ignorance of law was a proper excuse? Issue-Wise Detailed Analysis: Issue 1: Deletion of Penalty under Section 271D The Tribunal referred to the High Court for consideration whether the Appellate Tribunal was correct in deleting the penalty levied under Section 271D of the Income Tax Act. The facts of the case revealed that the assessee firm accepted loans/deposits of Rs. 20,000 each from 13 parties, totaling Rs. 2,60,000 in cash, in contravention of Section 269SS. The Deputy Commissioner of Income Tax imposed a penalty of Rs. 2,60,000 under Section 271D after rejecting the assessee's explanation that the deposits were taken in cash for business expediency. The CIT(A) upheld this penalty, but the Tribunal allowed the assessee's appeal and canceled the penalty. The revenue argued that the Tribunal erred in reversing the CIT(A)'s order and claimed that the assessee's actions were a systematic attempt to avoid Section 269SS. The Tribunal, however, noted that the loans/deposits were accepted as genuine by the revenue, and the assessee had provided a reasonable cause for accepting the deposits in cash due to business exigencies. The Tribunal also referenced the Board Circular No. 387 and Circular No. 572, which explained the legislative intent behind Section 269SS and provided that loans/deposits of Rs. 20,000 or below could be accepted in cash. The High Court, after considering the Tribunal's observations and the principles laid down by the Bombay High Court in Commissioner of Income Tax Vs. Madhukar B. Pawar, concluded that the Tribunal was correct in deleting the penalty. The High Court held that the Tribunal rightly canceled the penalty imposed on the assessee, and therefore, the question was answered in favor of the assessee and against the revenue. Issue 2: Ignorance of Law as an Excuse The second issue was whether the Tribunal correctly appreciated the facts to conclude that ignorance of law was a proper excuse. The Tribunal had observed that the assessee's impression, based on the Board Circular and advertisement, constituted a reasonable cause for accepting the loans/deposits in cash. However, the High Court held that ignorance of law cannot be a proper excuse and answered this question in favor of the revenue. Conclusion: The High Court concluded that the Tribunal was right in law and on facts in deleting the penalty levied under Section 271D of the Act, answering the first issue in favor of the assessee. However, it held that ignorance of law was not a proper excuse, answering the second issue in favor of the revenue. The reference was thus partly allowed and disposed of accordingly.
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