TaxTMI 
TaxTMI 
2018 (3) TMI 1317
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....the President of the Trust. The Judicial Member [for brevity "JM"], however, did not agree with the AM and wrote a separate order finding the explanation offered by the assessee to be satisfactory to enable the assessee to be absolved of the penalty under Section 273B; by reason of which the matter was placed before a third member. The third member, the Vice-President of the Tribunal concurred with the JM's order. 2. The questions of law arising from the above order, as framed by another Division Bench of this Court while admitting the appeals, are as follows: Whether on the facts and circumstances of the case: "i. The Tribunal is right in law in interfering with the order of penalty levied under Section 271D of the Income Tax Act; ii. Is the approach and conclusion of the Tribunal in accordance with law; iii. Did the Tribunal appreciate the import of Section 271D in its correct perspective? iv. Is not the order of the Tribunal against Section 271D of the I.T.Act? v. Did the assessee discharge the burden of proof?" 3. The learned Senior Counsel Sri.P.K.R.Menon appearing for the Revenue took us through Section 269SS and Section 271D as also the provisions for pe....
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....reasonable cause, as applied to a human action is that which would constrain a person of average intelligence and ordinary prudence" (sic- Dy. CIT Vs. Adinath Industries {[2001] 252 ITR 471 (Delhi)}. Ignorance of law under no circumstance can be a reasonable cause; especially here, looking at the status and stature of the assessee. 6. The learned Senior Counsel appearing for the assessee would take us through the decision in Assistant Director of Inspection (Investigation) v. Kum.A.B.Shanthi [(2002) 255 ITR 258 (SC)], in which the Constitutional validity of Section 269SS was upheld. The decision was relied on to urge that Section 273B, which speaks of reasonable cause intends mitigation of undue harshness in cases of genuine and bona fide transactions. Commissioner of Income Tax v. Saini Medical Store [(2005) 276 ITR 79 (P&H), Commissioner of Income Tax v. Kundrathur Finance & Chit Co. [(2006) 283 ITR 329 (Mad)], Commissioner of Income Tax v. Lakshmi Trust Co. [(2008) 303 ITR 99 (Mad)], Commissioner of Income Tax v. Manoj Lalwani [2003) 260 ITR 590 (Raj)] and a decision in I.T.A.No.86 of 2010 dated 12.01.2011 [Commissioner of Income Tax v. Smt.Rosary Prem] are also relied on. 7. ....
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.... or drafts. The first appellate authority also affirmed the same. The Tribunal, by majority deleted the penalty on the ground that the assessee had offered a reasonable cause for having accepted money in cash. 9. As to reasonable cause, various decisions were placed before us. P.K.Shamsuddin was a case in which an assessee who retired from a Circus Company, started an industry and took loans from various Banks through his relatives. A Division Bench of this Court found that borrowers from Bank having themselves taken a loan could not have issued cheques to further lend the amounts and in such circumstance there was a reasonable cause put forth. Especially in the context of there being no possibility of tax evasion or infusion of black money, the explanation offered by the assessee was found to be plausible. K.V.George was a case in which the assessee again contended ignorance of law as a ground for having accepted money other than by way of cheque in excess of the limit as prescribed under Section 269SS. This Court distinguished P.K.Shamsuddin and specifically referred to Kum.A.B.Shanthi. In Kum.A.B.Shanthi, it was held that 'if there was a genuine and bona fide transaction an....
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....ot absolve a defaulter assessee of penalty, whenever an explanation is offered. It had to be reasonable. What is reasonable is the vexing question for which we get some guidance from the decisions cited on both sides. 11. Saini Medical Store and Lakshmi Trust Company are cases in which the two High Courts found no substantial questions of law arising from the order of the Tribunal, which held the explanation offered by the respective assessees to be reasonable so as to provide mitigation under Section 273B. From a reading of the aforesaid decisions nothing is discernible as to the facts or the explanation. Smt.Rosary Prem caused interference to the penalty on the ground of limitation. None of these decisions are applicable to the facts of the present case. 12. Kundrathur Finance & Chit Co. carrying on chit business offered an explanation for accepting cash deposits; that its activities were carried on in a locality where no banking facility was available, which was found to be acceptable by the High Court of Madras. Manoj Lalwani again was a case in which the assessee an exporter had obtained a cash loan from his brotherin- law, for the purpose of ensuring time bound supplies, fr....
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....sfy the obligation under the Act. This view was followed by the Delhi High Court in two cited decisions which also found favour with the Division Bench of this Court. On facts, it was found that the belief of the assessee of there being no liability to deduct tax, from the interest paid by the partners to the firm, was only a plea of ignorance of law, which was not reasonable, especially considering the status of the assessee, who has the services of experienced Chartered Accountants. The further finding of the Tribunal that there was no revenue loss, was held to be inconsequential as a defense against penalty;which also was not a reasonable cause. 15. Manural Huda Trust dealt with the imposition of penalty under Section 271(1)(c) for concealment of income or furnishing incorrect particulars of income. The assessment of the appellant for the subject year was complete and final disallowing the deductions claimed, resulting in a finding of concealment of income, which led to penalty proceedings. The assessee as explanation, submitted that the books of accounts were impounded by the Revenue, disabling an audit and hence the wrong deductions claimed. It was argued that Hindustan Steel....