2023 (1) TMI 884 - AT - Income Tax

Penalty u/s. 271D - contravention to Section 269SS - assessee borrowed unsecured loans from related parties - staff filled the name of the depositor correctly but the account number was wrongly mentioned - HELD THAT - Section 273B has provided a statutory fetter to the automatic application of Section 271D. It provides that no penalty shall be imposable on a person under these provisions for any violation, if the person could establish the existence of any reasonable cause . It is only where a person could not explain any reasonable cause for the failure in complying with the provisions of Section 269SS, then the penalty under section 271D would follow. The assessee has explained the circumstances under which the cash deposit, which was in the nature of mistaken bank challan entry was received by the assessee. The staff filled the name of the depositor correctly but the account number was wrongly mentioned - The same was rectified by the assessee on the very next day i.e. on 25.08.2012 by remitting the said amount of Rs. 4,78,000/- by issuing Cheque No. 2623 to M/s. Om Ceramics to prove the genuineness. The assessee also produced the banking challan of cash deposits and certificate from Bank of Baroda, as well as the bank statement and an affidavit filed by assessee s staff. Assessee also produced before us the Income Tax Returns filed by M/s. Om Ceramics which carry the same address that of the assessee herein. Assessee has proved a reasonable cause of wrongly coating the bank account number of the sister concern which was rectified the next day itself. Thus it is not a fit case for imposition of penalty u/s. 271D r.w.s. 273B of the Act. We therefore cancel the penalty levied and allow the grounds of appeal raised by the assessee.

Summary

Issues:
- Appeal against penalty u/s. 271D of the Income Tax Act, 1961 for AY 2013-14.

Analysis:
The appeal was filed against the penalty imposed under section 271D of the Income Tax Act, 1961 for the Assessment Year 2013-14. The Assessing Officer found that the assessee borrowed unsecured loans from related parties, contravening Section 269SS of the Act. The assessee explained that a clerical error led to a loan being credited to the wrong account, which was rectified promptly by transferring the amount to the correct account the next day. The Assessing Officer, however, did not accept this explanation and levied the penalty.

The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the assessee failed to prove that the related party was indeed a sister concern. The appellant argued that the cash deposited was from a sister concern, and the error in the account number was rectified immediately. Supporting documents, including bank certificates and income tax returns, were presented to substantiate the claim.

Upon careful consideration, the Tribunal noted that while the cash deposit violated Section 269SS, the penalty under Section 271D required the absence of a reasonable cause. The Tribunal found that the error in the bank account number was promptly rectified, and sufficient evidence was provided to support the genuineness of the transaction. Therefore, the Tribunal concluded that there was a reasonable cause for the error and canceled the penalty levied under section 271D.

In conclusion, the Tribunal allowed the appeal, canceling the penalty of Rs. 4,78,000 imposed under section 271D of the Income Tax Act, 1961 for the Assessment Year 2013-14. The decision was based on the establishment of a reasonable cause for the clerical error in depositing the loan amount, which was promptly rectified.