2019 (9) TMI 1269 - HC - Income Tax

Penalty u/s 271D and 271E - violation of Sections 269SS and 269T - repeated mistake - penalty for earlier years was dropped - HELD THAT - Imposition of penalty depends upon the facts and circumstances of each case and if the Assessee can put forth a reasonable cause for accepting the deposits in cash then, such circumstances can be considered by the Assessing Authority to waive or reduce the penalty in question. In similar circumstances and for the same Assessee, the Assessing Authority himself entirely waived off the penalty for the preceding Assessment Year 1999-2000 Tribunal, in our opinion, fell in error in upholding the imposition of penalty by just observing that the Assessee ought not have repeated such a mistake and ought to have done the transaction only through Bank which method, in fact, as the learned counsel for the Assessee submitted, was adopted on 31.8.2001 on which date, the Bank Account was opened by the Assessee and therefore, it is only for this Assessment Year 2000-2001 which stands out and in respect of which the present Appeals are concerned. The law laid down in the decision of Vasan Healthcare (P) Ltd. v. Additional Commissioner of Income-tax, Chennai Range-2, Chennai 2019 (2) TMI 1000 - MADRAS HIGH COURT is not applicable to the present case as the facts of the judgment in that case are distinguishable as there was no such fact of dropping penalty proceedings in the preceding year in that case. We are, therefore, inclined to take a lenient view in favour of the Assessee in the facts and circumstances of the case and are inclined to allow the present Appeals in favour of the Assessee on the ground that the for the preceding Assessment Year viz., 1999-2000, on the same set of facts and circumstances, the Assessing Authority himself dropped the penalty proceedings in question. - Decided in favour of assessee.

Summary

Issues:
Appeal against imposition of penalty under Section 271D and 271E of the Income Tax Act for alleged violation of Sections 269SS and 269T.

Detailed Analysis:

Issue 1: Imposition of penalty under Section 271D
The Assessee filed Appeals under Section 260-A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal imposing penalties under Sections 271D and 271E for the Assessment Year 2000-2001. The Tribunal dismissed the Assessee's Appeal, stating that the genuineness of the transactions cannot be considered a reasonable cause for the violation of Section 269SS. The Tribunal emphasized that the Assessee failed to provide any reasonable cause for the violation, and the claim of transactions being genuine was unsupported by evidence. The Tribunal noted that the Assessee's repeated mistakes showed a callous attitude and deliberate violation of the Act. The Tribunal upheld the penalty under Section 271D, emphasizing the need for a reasonable cause for accepting loans in cash.

Issue 2: Imposition of penalty under Section 271E
The Tribunal also upheld the penalty under Section 271E for violation of Section 269T. The Tribunal found that the Assessee failed to provide a reasonable cause for repaying loans in cash, leading to a deliberate violation of Section 269T. The Tribunal relied on its previous findings and arguments in a similar case, concluding that the penalty under Section 271E was justified. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) in this regard.

Issue 3: Appellant's Arguments
The Appellant's counsel argued that penalty proceedings were dropped for the preceding Assessment Year 1999-2000, indicating a reasonable cause for accepting deposits in cash. The Appellant, engaged in the liquor business, explained the necessity of cash transactions due to the uncertain nature of liquor license bids. The Appellant highlighted opening a bank account in the subsequent year for transactions. The counsel contended that the Tribunal should have considered the circumstances and taken a lenient view based on the previous year's penalty waiver.

Issue 4: Respondent's Arguments
The Respondent's counsel supported the Tribunal's decision, emphasizing the Assessee's awareness of the business nature. The Respondent argued that dropping penalties for the previous year did not justify a similar decision for the current year. The Respondent cited a court decision and noted that the Assessing Authority's order was justified and well-reasoned.

Judgment
The High Court reviewed the substantial questions of law raised in the Appeals and found that the Tribunal erred in upholding the penalties. The Court opined that a liberal view should have been taken, considering the circumstances and the previous year's penalty waiver. The Court noted the Assessee's efforts to rectify the method of transactions by opening a bank account. The Court distinguished a previous judgment cited by the Respondent, stating that the facts were different. Ultimately, the Court allowed the Appeals in favor of the Assessee, citing the Assessing Authority's previous penalty waiver for the same set of circumstances. The Court held that the Assessee should not be penalized for rectifying the transaction method and answered the questions framed in favor of the Assessee.