2004 (10) TMI 304 - AT - Income Tax

Tribunal Upholds Penalty for Violating Cash Deposit Rules: Strict Provisions Apply

Khizaria Leathers. Versus Deputy Commissioner Of Income-Tax.

The Tribunal upheld the penalty imposed under Section 271D for violating Section 269SS by accepting cash deposits exceeding Rs. 20,000 without a ... Reasonable Cause Issues Involved:1. Whether the CIT(A) was correct in confirming the penalty order under Section 271D of the IT Act, 1961.2. Whether there was a violation of Section 269SS of the IT Act, 1961 by accepting loans in cash exceeding Rs. 20,000.3. Whether there existed a reasonable cause for the assessee to accept the deposits in cash.4. Whether the transactions in question can be considered genuine and if that affects the applicability of Section 269SS.Issue-wise Detailed Analysis:1. Confirmation of Penalty Order under Section 271D:The Tribunal examined whether the CIT(A) was correct in confirming the penalty order under Section 271D of the IT Act, 1961. The CIT(A) had confirmed the penalty imposed by the Deputy Commissioner of Income Tax (Dy. CIT) for accepting cash deposits exceeding Rs. 20,000, which violated Section 269SS of the IT Act. The Tribunal upheld the CIT(A)'s decision, stating that the assessee failed to prove any reasonable cause for accepting the cash deposits and thus, the penalty was rightly imposed.2. Violation of Section 269SS:The Tribunal scrutinized whether the assessee violated Section 269SS by accepting loans in cash exceeding Rs. 20,000. The facts revealed that the assessee-firm received cash deposits totaling Rs. 5,19,917 from Smt. Mohsina Begum on various dates. The Tribunal noted that these transactions were recorded as unsecured loans in the balance sheet, and the money was withdrawn from bank accounts and deposited in cash with the assessee-firm. The Tribunal concluded that these transactions indeed violated Section 269SS, which mandates that loans or deposits exceeding Rs. 20,000 should be accepted only through an account payee cheque or bank draft.3. Existence of Reasonable Cause:The Tribunal evaluated whether there was a reasonable cause for the assessee to accept the deposits in cash. The assessee argued that the deposits were made for convenience and safe custody, as the depositor was a former partner and mother of the current partners. However, the Tribunal found this explanation insufficient to constitute a reasonable cause. The Tribunal emphasized that the burden of proving a reasonable cause lies with the assessee, and in this case, the assessee failed to provide a convincing justification for accepting the cash deposits.4. Genuineness of Transactions:The Tribunal considered whether the genuineness of the transactions affects the applicability of Section 269SS. The assessee contended that the transactions were genuine and hence should not attract the penalty under Section 271D. The Tribunal referred to various case laws, including the Supreme Court's decision in Asstt. Director of Inspection (Inv.) vs. Kumari A.B. Shanthi, which upheld the strict application of Section 269SS irrespective of the genuineness of the transactions. The Tribunal concluded that the genuineness of the transactions does not exempt the assessee from the provisions of Section 269SS, and the penalty under Section 271D was rightly imposed.Conclusion:The Tribunal dismissed the assessee's appeal, confirming the CIT(A)'s order that upheld the penalty imposed under Section 271D for violating Section 269SS by accepting cash deposits exceeding Rs. 20,000 without a reasonable cause. The Tribunal emphasized that the strict provisions of Section 269SS apply irrespective of the genuineness of the transactions, and the assessee failed to provide a reasonable cause for the cash deposits.