2020 (6) TMI 507 - HC - Income Tax

Penalty u/s 271D - violation of the provisions contained u/s 269SS - reasonable cause or as compelling circumstances provided under Section 273B - HELD THAT - It should be proved that there existed reasonable and acceptable cause for not accepting the loans or deposits through crossed cheques or demand drafts. It was found that the mere proof regarding genuineness of the transaction or the intention in accepting the amounts in cash or that there was no attempt to induct black money into the business etc. cannot be considered as a reasonable cause or as compelling circumstances provided under Section 273B to avoid the penal action contemplated u/s 271D, with respect to violation of the provisions contained under Section 269SS. Analysed on the basis of the principle remaining settled as above, contention raised all along by the assessee is that it was due to ignorance of the provisions or due to lack of banking facilities in the area etc; cannot be accepted. Contention that both the parties to the transaction were having agricultural income and therefore the transaction will fall within the purview of the 2nd proviso to Section 269SS, cannot also be accepted, because the admitted case itself is that the appellant is a company doing finance business of money lending and receiving deposits. Appellant has raised a contention that the assessee will fall within the exempted category of banking company contained under the 1st proviso to Section 269SS. There is nothing to indicate that the assessee has got any registration as a banking company, as defined under the Banking Regulation Act or not even to the effect that the appellant is a 'non-banking financing company' having authorisation from the Reserve Bank of India. Therefore the said contention also cannot be accepted. No substantial question of law.

Summary

Issues:
1. Appeal challenging an order of the Income Tax Appellate Tribunal
2. Violation of provisions under Section 269SS of the Income Tax Act
3. Imposition of penalty under Section 271D
4. Failure to establish reasonable cause for accepting deposits in cash
5. Interpretation of 'reasonable cause' under Section 273B
6. Dismissal of appeal before the Appellate Tribunal

Issue 1: The appellant challenged an order of the Income Tax Appellate Tribunal, which dismissed the appeal filed against the Commissioner of Income Tax (Appeals) order. The Assessing Officer found that the appellant violated Section 269SS by accepting cash deposits exceeding ?20,000. Penalty proceedings under Section 271D were initiated, leading to the imposition of a penalty of ?4,74,46,248.

Issue 2: The appellant contended that being a charitable organization, they believed the Income Tax provisions did not apply to them. However, the authorities found a clear contravention of Section 269SS without any reasonable cause, leading to the penalty imposition.

Issue 3: The first appeal and subsequent appeal before the Tribunal were unsuccessful for the appellant. The matter was remanded for fresh consideration based on the 'reasonable cause' aspect under Section 273B. The Court observed inconsistencies in the explanations provided by the appellant regarding the 'reasonable cause' for accepting cash deposits.

Issue 4: After the remand, the penalty imposition was reaffirmed as the appellant failed to establish any 'reasonable cause' for accepting cash deposits exceeding the limit. The penalty amount was reworked to ?4,74,15,591. The appellant's argument of ignorance of the law and lack of intention to evade tax were not accepted.

Issue 5: The Tribunal dismissed the second appeal, stating that the appellant could not prove compelling circumstances for accepting cash deposits, as required under Section 273B. The Court referred to previous judgments emphasizing the need for a valid 'reasonable cause' for not accepting deposits through banking channels.

Issue 6: The Court rejected the appellant's contentions of ignorance of provisions, lack of banking facilities, and falling under the exempted category of a banking company. The total penalty amount was computed, and the appellant was given the opportunity to seek rectification if any errors were found in the computation.

Conclusion: The Court found no substantial question of law warranting interference with the Tribunal's order, leading to the dismissal of the Income Tax Appeal.