2016 (6) TMI 694 - AT - Income Tax

Penalty u/s 271E - violation of provisions of Section 269 T - Held that - We find that the genuineness of repayments of depositors has not been doubted by the authorities below and the repayments of depositors in view of hardships of depositors is a reasonable cause for failure to comply with any provisions of the Act. The purpose of introduction of the penal provisions in the legislature were to curb black money and benami transactions. The purpose of legislature can never be to impose penalty in case of genuine transactions. The penal provisions of section 271D and 271E confer a discretion on the authorities to levy or not to levy penalty and such discretion needs to be exercised with wisdom and in a fair and just manner. Even if the relevant provisions of law prescribe levy of a minimum penalty, it does not mean that penalty must necessarily be imposed in every case falling within Sections 269SS and 269T. Even if the minimum penalty is prescribed the higher authorities will be justified in refusing to impose penalty when there is a technical breach or violation of the provisions of the Act - Decided in favour of assessee

Summary

Issues Involved:
Appeal against penalty imposed under section 271E for violation of Section 269T provisions.

Detailed Analysis:

1. Issue of Penalty Imposed under Section 271E:
The appeal was filed against the penalty imposed by the Assessing Officer under section 271E of the Income Tax Act for violating the provisions of Section 269T. The penalty was confirmed by the learned CIT(A). The Assessing Officer observed cash repayments of fixed deposits exceeding ?20,000 made by a Banking Company, which were deemed as a violation of Section 269T. The penalty amount imposed was ?3,75,189.

2. Reasonable Cause for Violation:
The appellant argued that the repayments were made in cash due to genuine hardships faced by the depositors, as they did not have bank accounts. The genuineness of the entries was not disputed. The appellant contended that the intention was not to violate any provisions of the Act. The genuineness of the repayments and the hardships faced by the depositors were considered as reasonable cause for failure to comply with the Act.

3. Exercise of Discretion in Penalty Imposition:
The Tribunal emphasized that the purpose of penal provisions like section 271E was to curb black money and benami transactions, not to penalize genuine transactions. The authorities have the discretion to levy or not levy penalties, and this discretion should be exercised judiciously. Even if minimum penalties are prescribed, they need not be imposed in every case. The Tribunal cited previous judgments where penalties were deleted due to genuine transactions and reasonable cause shown by the assessee.

4. Judicial Precedents and Precedents Relied Upon:
The Tribunal referred to various judicial precedents, including decisions by the ITAT Amritsar Bench and the Punjab & Haryana High Court, where penalties were deleted when reasonable cause was shown for non-compliance with Section 269T. The Tribunal noted that the Department did not question the genuineness of the transactions and that the violations were not intentional. The Tribunal, based on the precedents and legislative intent, deleted the penalty imposed by the Assessing Officer and upheld by the CIT(A).

5. Final Decision:
Considering the facts, circumstances, legislative intent, and judicial precedents, the Tribunal allowed the appeal filed by the assessee and deleted the penalty imposed under section 271E. The decision was pronounced in the open court on 17th June 2016.

This detailed analysis outlines the issues involved in the legal judgment, the arguments presented, the reasoning behind the decision, and the reliance on judicial precedents to reach the final outcome.