Tribunal Upholds Relief in Penalty Dispute Over Deposit Receipts

The Tribunal upheld the CIT(A)'s decision to grant relief to the assessee in a dispute over penalty under section 271D for receiving Rs. 20,000 deposits from five persons, contrary to section 269SS. Relying on a CBDT Circular and the Rajasthan High Court's decision, the Tribunal found the assessee's explanation reasonable, as they believed the deposits were permissible under section 269SS. Consequently, the appeal by the Revenue challenging the CIT(A)'s decision was dismissed.

---

---

Issues:
- Dispute over penalty under section 271D for contravention of section 269SS by receiving deposits of Rs. 20,000 each from five persons.

Analysis:
1. The appeal was against the order of the CIT(A) regarding the penalty of Rs. 1 lakh imposed under section 271D for receiving Rs. 20,000 deposits from five persons in violation of section 269SS. The CIT(A) granted relief based on CBDT Circular No. 572, which implied that section 271D would not apply to receipts of Rs. 20,000 or below. Reference was made to the Supreme Court decision in Motilal Padampat Sugar Mills Co. vs. State of UP (1979) 118 ITR 326 (SC). The Revenue challenged this decision.

2. The Departmental Representative argued that section 269SS applies to deposits of Rs. 20,000 and above, thus, the assessee's receipt of Rs. 20,000 deposits constituted a contravention. Therefore, penalty under section 271D was warranted. The assessee's counsel supported the CIT(A)'s order, citing the possibility of mistakes by the assessee or their accountant in interpreting the law. Also, the counsel referred to the Rajasthan High Court's decision in CIT vs. Ajanta Dyeing & Printing Mills (2003) 130 Taxman 442 (Raj), which stated that for penalty under section 271D, the Rs. 20,000 amount should be excluded.

3. The Tribunal noted that the CBDT Circular suggested that section 269SS does not apply to deposits or loans of Rs. 20,000 and above. Considering this, the assessee's explanation that they accepted the Rs. 20,000 deposits under the belief that it was not prohibited by section 269SS was deemed valid. Additionally, following the Rajasthan High Court's ruling in Ajanta Dyeing & Printing Mills, where penalties were not applicable if the deposit did not exceed Rs. 20,000, the Tribunal upheld the CIT(A)'s decision. Consequently, the appeal by the Revenue was dismissed.

---