2017 (8) TMI 726 - HC - Income Tax

High Court upholds penalty under Income Tax Act for contravening payment rules.

The High Court held that the deletion of the penalty imposed under Section 271-D of the Income Tax Act, 1961, for contravening Section 269-SS was ... Penalty under Section 271-D - violation of Section 269-SS - Held that:- Finding of the Assessing Officer that it is fact that the assessee had accepted deposits, which are otherwise than by account payee cheque /draft stands undisturbed. The ITAT has also not touched the above finding in any manner. In view of the aforesaid facts and circumstances, the finding as recorded by the Assessing Officer that the respondent-assessee received deposits otherwise than by cheque or draft stand confirmed. Once the aforesaid finding remains undisturbed, a clear breach of Section 269-SS of the Act occur inasmuch as the aforesaid receipt of deposit is after 30th June, 1984 and is not in the manner provided under the aforesaid provision. The contention that the said entries are not in the nature of the loan or deposit on the face of it are not acceptable for the reason that once any amount has been received by the respondent-assessee and the same is shown to have been received in its books of accounts, it partakes the nature of the deposit. Accordingly, the panel provision of Section 271-D gets attracted, leaving no scope for the respondent-assessee to escape from the liability of the penalty. The breach of Section 269-SS of the Act is apparent making the respondent-assessee liable for penalty under Section 271-D of the Act. - Decided against assessee. Issues involved:Dispute over penalty under Section 271-D of the Income Tax Act, 1961 for contravening Section 269-SS of the Act.Detailed Analysis:The case involves a dispute over the penalty imposed under Section 271-D of the Income Tax Act, 1961, for contravening the provisions of Section 269-SS of the Act. The Assessing Officer noted credit and debit entries in the books of the respondent-assessee, indicating loans or deposits received through non-banking channels, amounting to Rs. 46 lakh. Consequently, a penalty equal to the amount was imposed under Section 271-D. However, the CIT (Appeals) deleted the penalty, a decision upheld by the ITAT, stating that Section 269-SS aims to uncover unaccounted money and does not apply to transparent transactions among sister concerns. The Revenue appealed against the deletion of the penalty, arguing that the respondent-assessee breached Section 269-SS by accepting deposits without evidence of banking transactions.The provisions of Section 269-SS prohibit receiving loans or deposits of Rs. 20,000 or more after June 30, 1984, except through specified banking channels. The penalty under Section 271-D is mandatory for contravening Section 269-SS, requiring payment equal to the amount received. The strict interpretation of taxing statutes mandates penalty imposition irrespective of transaction genuineness. The breach of Section 269-SS occurs when loans or deposits above Rs. 20,000 are received through non-banking channels after June 30, 1984.The Assessing Officer's finding that the respondent-assessee accepted deposits without account payee cheques or drafts remained undisputed by the CIT (Appeals) and ITAT. This confirmed breach of Section 269-SS, as any received amount shown in the books qualifies as a deposit. The reliance on previous court judgments did not support the respondent-assessee's case, as the absence of banking transactions indicated a breach of Section 269-SS. The respondent failed to establish a reasonable cause for the breach to avail relief under Section 273-B.Ultimately, the High Court held that the deletion of the penalty by the ITAT and CIT (Appeals) was erroneous. The penalty under Section 271-D was justified for the violation of Section 269-SS, and the appeal by the Revenue was allowed. The orders deleting the penalty were set aside, affirming the liability of the respondent-assessee for the penalty under Section 271-D.