2015 (8) TMI 1214 - HC - Income Tax

Penalty levied u/s 271D and 271E - cash loans taken by the assessee in contravention of 261SS - Tribunal was correct in holding that the orders imposing penalty under Section 271D and E were passed within the period of limitation prescribed under Section 275(1)(c) and whether the Tribunal was correct in confirming the findings? - Held that - The only case of the assessee is that if the period of limitation prescribed in Section 271(1)(c) is reckoned from the date of the assessment order dated 6.11.2007, the penalty order passed by the Joint Commissioner on 29.7.2008 is beyond the time permitted in the above section. As we have already held, the initiation of the penalty proceedings is not by the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in Section 275(1)(c). It is the admitted case that amounts were received from partners and other sister concerns of the assessee and were repaid, there is no material whatsoever to infer that these receipts were anything other than loans or deposits. There is no law that every receipt from a partner or a sister concern cannot, in all circumstances, be treated as a loan or deposit. On the other hand, the nature of the receipt would depend upon the agreement between the parties and the evidence that is produced. As we have already stated, there is no material whatsoever to accept the case of the assessee that these are loan or deposit. In such circumstances, the findings of the Assessing Officer confirmed by the Appellate Commissioner and the Tribunal that it was a loan or deposit that was received by the assessee also has to be upheld and we do so. - Decided in favour of the Revenue

Summary

Issues Involved:
1. Validity of penalty orders under Sections 271D and 271E of the Income Tax Act.
2. Examination of circumstances providing reasonable cause under Section 273B of the Act.
3. Consideration of cash receipts as loans or deposits under Sections 269SS and 269T of the Act.

Analysis:

Issue 1: Validity of Penalty Orders under Sections 271D and 271E:
The judgment deals with appeals filed by the assessee challenging penalty orders under Sections 271D and 271E of the Income Tax Act. The Tribunal upheld the orders passed by the Commissioner of Income Tax (Appeals) confirming the penalties. The key contention was whether the Tribunal correctly held that the penalty orders were within the prescribed limitation period under Section 275(1)(c). The judgment clarifies that the initiation of penalty proceedings is by the Joint Commissioner, not the Assessing Officer. Therefore, the penalty order passed by the Joint Commissioner within the specified time frame was deemed valid.

Issue 2: Examination of Circumstances Providing Reasonable Cause:
The judgment also addresses the requirement of proving reasonable cause for failure to comply with Sections 269SS and 269T as per Section 273B of the Act. The assessee argued that the cash amounts were taken for urgent business expenses from partners and sister concerns, justifying the transactions. However, the Assessing Officer found the explanations insufficient to establish reasonable cause. The Commissioner of Income Tax (Appeals) and the Tribunal upheld this decision, emphasizing that the findings were factual and did not raise any legal questions under Section 260A of the Act.

Issue 3: Consideration of Cash Receipts as Loans or Deposits:
Regarding the contention that cash receipts from partners or sister concerns should not be treated as loans or deposits, the judgment distinguishes previous cases where judgments were based on available documents. In the present case, the absence of evidence indicating otherwise led to the confirmation that the receipts were indeed loans or deposits. The nature of the transaction is determined by the agreement between parties and supporting evidence. As there was no material to support the claim that the receipts were not loans or deposits, the findings of the Assessing Officer, the Appellate Commissioner, and the Tribunal were upheld.

In conclusion, the judgment rules against the assessee on all issues, affirming the penalties under Sections 271D and 271E, rejecting claims of reasonable cause, and upholding the classification of cash receipts as loans or deposits. The appeals were consequently dismissed in favor of the Revenue.