1999 (12) TMI 102 - AT - Income Tax

Tribunal Upholds Penalty for Violating Loan Rules: Limits Penalty to Rs. 3,500

Ravi Iron & Scrap Co. Versus Deputy Commissioner Of Income-Tax.

The Tribunal upheld the penalty under section 271D for contravention of section 269SS, emphasizing that penalties apply only to loan/deposit amounts ... Quantification Issues: Penalty under section 271D of the IT Act for contravention of section 269SS.Analysis:1. Facts and Initiation of Penalty Proceedings: The Assessing Officer (AO) observed that the assessee had taken loans/deposits exceeding Rs. 20,000 in cash, contravening section 269SS, leading to penalty proceedings under section 271D. Despite a show-cause notice, no response was received, and the penalty was imposed equal to the aggregate amount of the loan/deposit.2. First Appeal and CIT(A) Decision: The counsel argued that penalty imposition was unjustified, presenting evidence that cash deposits below Rs. 20,000 were validly accepted. CIT(A) agreed, stating that penalty could only apply to deposits exceeding Rs. 20,000 and directed the AO to reduce the penalty to the minimum for two specific amounts totaling Rs. 3,500. Both parties were dissatisfied with this decision.3. Defending Penalty Reduction: The counsel further contended that the penalty should have been entirely deleted, citing a reasonable cause for accepting the cash amounts. Referring to legal provisions and case law, the counsel argued that the assessee had no intention to violate the law and had a valid reason for accepting the cash deposits.4. Departmental Representative's Argument: The Departmental Representative supported the AO's decision, asserting that the entire amount of the loan/deposit taken in violation of section 269SS warranted penalty under section 271D, and that no reasonable cause was present.5. Judgment: The Tribunal analyzed the provisions of sections 269SS and 271D, emphasizing that penalties under section 271D apply only to loan/deposit amounts exceeding Rs. 20,000. The Tribunal agreed with CIT(A)'s decision to restrict the penalty to Rs. 3,500. The argument of a reasonable cause for accepting cash deposits below Rs. 20,000 was rejected, as there was no compulsion to accept such deposits, and accepting such pleas could lead to circumventing the law's intent. The Tribunal upheld CIT(A)'s decision, dismissing both cross-appeals.In conclusion, the Tribunal upheld the penalty under section 271D for contravention of section 269SS, emphasizing the legislative intent behind the provisions and rejecting arguments of a reasonable cause for accepting cash deposits below the specified threshold.