2016 (5) TMI 1030 - AT - Income Tax

Revenue appeals granted, penalties upheld for cash transactions under Sections 271D and 271E

The Tribunal allowed the Revenue's appeals, reversing the deletion of penalties under Section 271D and confirming penalties under Section 271E. The ... Penalty passed u/s.271D and 271E - borrowing the money in cash - Held that:- For the asst. year 2008-09, the assessee borrowed ₹ 20 lakhs and deposited by the assessee in bank account No.32 with UCO Bank. Thereafter the amount was transferred to M/s. ICICI Bank account. Similarly for the asst. year 2009-10, the assessee borrowed ₹ 20 lakhs and deposited with UCO Bank and M/s. ICICI Bank. For the asst year 2010-11 also, the assessee borrowed ₹ 20 lakhs in cash and deposited by him in UCO Bank and M/s. SBI. For the asst. year 2001-12, the assessee borrowed ₹ 20 lakhs and ₹ 50 lakhs and deposited in the account of SBI. Though the assessee is having bank account, he borrowed the money in cash and later deposited the same in the bank accounts. The ld. AR pleaded that due to urgency and compulsion, money was repeatedly borrowed in cash. The assessee has not explained the nature of urgency or compulsion. The provisions of sec.273B of the Act comes to the rescue of the assessee, if the assessee show reasonable cause for borrowing the money in cash. This is the case, where the assessee is having bank account, repeatedly borrowing the money in cash with gross violation of the Act. The plea of the ld. AR is that the creditors are genuine and confirmed by the parties and there was no revenue loss to the Department. Had it been, the creditors are not genuine, the AO would have invoked the provisions of sec.68 of the Act. The question of revenue loss is not a reason to consider the levy of penalty u/s.271D of the Act. The provisions of sec.269SS of the Act is constitutionally valid in view of the judgment of ADIT v. Kum A.B.Shanthi (2002 (5) TMI 4 - SUPREME Court ). Further, business exigencies shall be supported by evidence. The assessee has not brought on record any material to show that due to business commitment, the assessee has borrowed money in cash. There was no sufficient balance on the date of borrowing of cash and he has not placed any evidence to establish that there was bank balance on the date of borrowing. Thus we are inclined to reverse the order of the CIT(Appeals) in deleting the penalty and confirming the penalty levied u/s.271D of the Act for all these assessment years. - Decided against assessee Issues Involved:1. Deletion of penalties under Section 271D of the Income Tax Act.2. Confirmation of penalties under Section 271E of the Income Tax Act.Detailed Analysis:1. Deletion of Penalties under Section 271D:The appeals by the Revenue are against the orders of the Commissioner of Income-tax (Appeals) for the assessment years 2006-07 to 2011-12, concerning penalties under Section 271D and 271E of the Income Tax Act, 1961. The primary issue is the deletion of penalties under Section 271D by the CIT(Appeals).A survey under Section 133A was conducted at the business premises of a proprietor engaged in money lending, revealing cash transactions involving loans and repayments. The loans were advanced in cash, violating Sections 269SS and 269T of the Income Tax Act, which led to penalties under Sections 271D and 271E.The Joint Commissioner of Income Tax issued show cause notices and, after hearing the submissions, imposed penalties. The CIT(Appeals) deleted the penalties under Section 271D but confirmed those under Section 271E. The Tribunal, in a similar case, had previously deleted penalties under Section 271E, citing reasonable cause due to the nature of the money lending business, which necessitated cash transactions.However, in this case, the Tribunal found that the assessee had not demonstrated any urgency or compulsion for borrowing in cash. The assessee's continuous cash borrowings despite having bank accounts indicated a gross violation of the Act. The Tribunal referred to the jurisdictional High Court's judgment in P. Muthukarupan v. JCIT, which upheld penalties in similar circumstances, emphasizing that the transactions were not bona fide and caused prejudice to the Revenue.The Tribunal concluded that the CIT(Appeals) erred in deleting the penalties under Section 271D, given the repeated violations and lack of reasonable cause. Therefore, the order of the CIT(Appeals) was reversed, and the penalties under Section 271D were confirmed.2. Confirmation of Penalties under Section 271E:The CIT(Appeals) had confirmed the penalties under Section 271E, which the Tribunal also upheld. The Tribunal noted that the assessees were compelled to repay loans in cash due to the nature of the money lending business. However, the Tribunal emphasized that the repeated cash transactions and the lack of urgency or compulsion did not justify the violation of Sections 269SS and 269T.The Tribunal referred to the Supreme Court's observations in Hindustan Steel Ltd. v. State of Orissa, which stated that penalties should not be imposed unless there is deliberate defiance of law or contumacious conduct. In this case, the Tribunal found that the assessees had not established a reasonable cause for repaying loans in cash, and the violations were not merely technical but substantive breaches of the law.The Tribunal also cited the jurisdictional High Court's judgment in P. Muthukarupan v. JCIT, which held that repeated cash transactions without reasonable cause warranted penalties. The Tribunal concluded that the CIT(Appeals) was correct in confirming the penalties under Section 271E, given the lack of bona fide reasons for the cash transactions.Conclusion:The Tribunal allowed the Revenue's appeals, reversing the CIT(Appeals)'s deletion of penalties under Section 271D and confirming the penalties under Section 271E. The judgment emphasized the importance of adhering to the statutory provisions and the lack of reasonable cause for the assessees' cash transactions, which justified the imposition of penalties.