2018 (4) TMI 1278 - AT - Income Tax

Levy of penalty u/s. 271D and 271E - violation of the provisions of Section 269SS and 269T - Held that - Assessee has taken the amount from brother and father in cash. There is also no dispute that the repayment has also been made in cash Shri Bhupendrabhai Patel was also an employee of the assessee and his salary was also credited in the same account where the impugned acceptance/repayment of cash was found and is akin to current account. The amount of Shri Bhadresh Patel is also akin to current account. Considering the nature of business of the assessee and its business exigencies, the immediate requirement of cash cannot be ruled out. Further, the relationship of the persons with the assessee also establishes the genuineness of the transaction. Considering the facts in totality, we do not find this to be a fit case for the levy of penalty u/s. 271D & 271E of the Act. - Decided in favour of assessee

Summary

Issues:
- Appeal against penalty u/s. 271D and 271E for violation of Sections 269SS and 269T of the Act.

Detailed Analysis:
1. The appellant filed two appeals against the CIT(A)'s orders regarding the levy of penalties u/s. 271D and 271E for the assessment year 2012-13. Both appeals were heard together and disposed of in a common order for convenience.
2. The grievance of the assessee was that the CIT(A) erred in upholding the penalties imposed for violating the provisions of Section 269SS and 269T of the Act.
3. The AO observed that the assessee accepted cash amounts from individuals and made cash repayments, violating Sections 269SS and 269T. Consequently, penalties of ?1,92,000 and ?1,04,000 were imposed under sections 271D and 271E, respectively.
4. The assessee's appeal before the CIT(A) was unsuccessful.
5. The assessee's counsel argued that the cash transactions were with the assessee's brother and father for genuine business needs, not to deal with unaccounted money. The counsel sought the penalty's deletion, while the DR supported the AO's findings.
6. The tribunal considered previous judgments emphasizing the legislative intent behind Sections 269SS and 269T to prevent false explanations for unaccounted money. It noted that the relationship between the parties and the nature of the transactions indicated genuine business needs, warranting no penalty.
7. Given the business exigencies and the genuine nature of transactions, the tribunal found no grounds for penalty under sections 271D and 271E. The CIT(A)'s decision was set aside, directing the AO to delete the penalties imposed. Both appeals by the assessee were allowed.

This judgment highlights the importance of considering the context and nature of transactions while interpreting tax provisions and imposing penalties, especially in cases involving genuine business needs and relationships between parties.