2017 (3) TMI 1310 - AT - Income Tax

Waiver of penalty u/s 273B - Levy of penalty u/s. 271D - violating the provisions of section 269SS - Assessee is a Co-operative credit society and has accepted cash deposits from its members exceeding 20, 000/- in single transaction - Held that - It was a widespread even if erroneous belief that the provisions of Section 269 SS do not apply to the credit cooperative societies and it is also evident from the fact that even the CBDT has taken notice of imposition of resultant penalties in large number of cases and issued a circular highlighting that these penalties should not be imposed indiscriminately and without considering the scheme of Section 273 B. Such a widespread belief by itself can be viewed as a reasonable cause for assessee s bonafide belief. Having said that we may also add that it is not a case where even after the assessee after having come to know of the correct legal position due to income tax department s action against him continues to follow the same practice. Once the assessee comes to know as to what is the correct legal position or at least the revenue s stand on that issue there is no question of his having bonafide but incorrect belief about the legal position. That is a different situation and we are not at all concerned with such a situation in the present case. This decision cannot have any precedence value in such a situation. In view of the totality of the facts and explanation offered we are of the considered view that the assessee has been able to show reasonable cause for inadvertent violation of provisions of section 269SS of the Act. Accordingly the impugned order is set aside and the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Levy of penalty under Section 271D of the Income Tax Act, 1961 for violating the provisions of Section 269SS.
2. Assessee's claim of reasonable cause for accepting cash deposits exceeding ?20,000.
3. Application of CBDT guidelines on the imposition of penalties under Sections 271D and 271E.
4. Precedents and judicial interpretations concerning penalties for similar violations by cooperative societies.

Detailed Analysis:

1. Levy of Penalty under Section 271D for Violating Section 269SS:
The appeal concerns the levy of a penalty amounting to ?21,50,000 under Section 271D of the Income Tax Act, 1961, due to the assessee's acceptance of cash deposits exceeding ?20,000 in violation of Section 269SS. The assessee, a cooperative credit society, accepted these deposits from its members, which was observed during the assessment proceedings.

2. Assessee's Claim of Reasonable Cause:
The assessee argued that the cooperative credit society operates as a non-profit organization aimed at improving the economic status of low-income individuals. The members, primarily agriculturalists and small traders without bank accounts, found it convenient to transact in cash. The assessee claimed that the violation was unintentional and due to ignorance of the provisions of Section 269SS. The society had no intention of sheltering unaccounted money and has since complied with the relevant provisions. The assessee referenced the Tribunal's decision in the case of Gurukrupa Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit, where similar penalties were deleted under comparable circumstances.

3. Application of CBDT Guidelines:
The assessee highlighted a CBDT letter dated 25th March 2004, which directed tax officers not to impose penalties under Sections 271D and 271E indiscriminately and to consider the provisions of Section 273B, which allows for the waiver of penalties if reasonable cause is shown. The assessee argued that their situation fell within the scope of these guidelines, and thus, the penalty should not have been levied.

4. Precedents and Judicial Interpretations:
The Tribunal referenced several precedents, including the case of Ratnagiri Jilha Gramsevak Sahakari Pat Sanstha Maryadit and Vishal Purandar Nagari Sahakari Pat Sanstha Maryadit, where penalties under Section 271D were deleted due to the assessees' bona fide belief and subsequent compliance with the law once the violation was pointed out. The Tribunal noted that these cooperative societies, managed by elected representatives often lacking in-depth legal knowledge, believed that Section 269SS did not apply to them. The Tribunal emphasized that widespread erroneous belief and subsequent compliance with the law constituted reasonable cause under Section 273B.

Conclusion:
The Tribunal found that the assessee had demonstrated a reasonable cause for the inadvertent violation of Section 269SS, citing the precedent cases and the CBDT guidelines. Consequently, the Tribunal set aside the impugned order and directed the Assessing Officer to cancel the penalty levied under Section 271D.

Result:
The appeal of the assessee was allowed, and the penalty was deleted.

Order Pronouncement:
The order was pronounced on Wednesday, the 08th day of March, 2017.