TaxTMI 
TaxTMI 
2024 (11) TMI 761
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....he case are that the assessee is a trust registered under the provisions of the Act and run various educational institutions. During the assessment year 2012- 2013, the assessment was made without any additions to the income returned by the assessee. On going through the documents the AO found that the assessee had received loans and deposits in cash exceeding Rs. 20,000 on various occasions which was elaborated by scrutinizing the ledger account copies of the assessee as well as trustees. Thereafter the AO forwarded the matter to the Joint Commissioner of Income-tax(Exemption),Cochin-18 for initiation of proceedings u/s. 271D of the Act for violating provisions of sec.269SS of the Act. The JCIT(E) issued notice and the assessee also submitted their objections, which was not accepted by the JCIT(E) and penalty u/s. 271D of the Act was imposed. As against the said penalty order, the assessee filed an appeal before the CIT(A) and contended that the assessee had received a sum of Rs. 18 lakh from its trustee Sri.K.P.Shaji by way of bank transfer and the other amounts were received from the employees of the trust as security deposits and the said amounts were utilized in the constructi....
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.... of the Act. The Hon'ble apex Court further held that where a reasonable cause exists for transactions covered under Section 269SS, the penalty shall not be imposed merely because it is lawful to do so. In the backdrop of legal position, the facts and circumstances requires to be looked at in cumulative manner to ascertain the existence of mala fide if any. c) The appellant has also referred to the judgment of the Hon'ble ITAT Mumbai Bench (in appeal dated 31* January, 2020, in Lodha Builders P.Ltd, Mumbai vs DCIT Cen Cir 7(3), Mumbai). In the judgement of the above referred case, the Hon'ble Tribunal stated that the imposition of the penalty under section 271D by the department cannot be mechanical in nature. d) The Income Tax Appellate Tribunal "C", Bench, Kolkota,, in the case of Auto Fuel Centre, Durgapur Vs J.C.I.T., Circle-1, Durgapur, (Date of order, 16thMarch, 2020), (ITA No.398/Kol/2019, AY 2013914) held that "it is an undisputed fact that the penalty u/s. 271E of the Income Tax Act, 1961 was imposed in respect of the repayment in the aggregate sum of Rs. 5,80,000/-being amount so borrowed from the relatives and friends of the partner....
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.... into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation". e) As stated in the above referred legal precedents, it is an established principle that the imposition of penalty u/s 271D should not be blind folded and mechanical. The intention of the legislature in bringing out this section, as referred in the above case laws also reiterates the tenet that the introduction of section 269SS is that the tax payer is not allowed to give false explanation for his unaccounted money. In the instant case of the appellant, the acceptance of deposits are accounted in books of accounts for FY 2011-12 which are audited and Income Tax Returns are filed accordingly. Therefore, there is no malafide intention on the part of the appellant in accepting deposits from employee by way of cash. f) Thus on the above explained grounds and other grounds, as may be allowed, at the time of proceedings before the Hon'ble Tribunal, the appellant seeks the followings reliefs: 3) Relief Sought: a) The appellant prays for quashing the order of the CIT (Appeals), ....
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....d to give false explanation for his unaccounted money, or if he has given some false entries. in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so-called lender also to manipulate his records later to suit the plea of the taxpayer. The main object of section 2695S was to curb this menace. As regards the tax legislations, it is a policy matter, and it is for Parliament to decide in which manner the legislation should be made. Of course, it should stand the test of constitutional validity. ................ The above dictum applies in full force as regards the present case. The object sought to be achieved was to eradicate the evil practice of making of false entries in the account books and later giving explanation for the same. To a great extent, the problem could be solved by the impugned provision." 7. The Hon'ble Supreme Court in the above judgment had clearly spelt out the reasons for having the provisions in the statute and h....
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....y to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." 9. By taking into account of the facts and the various documents filed by the assessee before the ld.CIT(A) and also considering the fact that there is no unaccounted money or some false entries in the books of account, we are also of the view that the penalty needs not be levied in this case. Further, in support of the case of the Revenue, the Revenue had not established that there is some unaccounted money and for which false entries were made in the books of account. 10. We are not expressing any opinion on the judgment of the Hon'ble Kerala High Court relied on by the Revenue when the Hon'ble Supreme Court had pointed out the circumstances under which the penalty can be imposed as per sec.271D of the Act and also the when the circumstances under which pe....
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....nspection (Investigation) v. Kum. A.B. Shanthi, (2002) 255 ITR 258 (SC), where the apex court held that the legislature has given discretion to the authority in the matter of levy of penalty under Section 271D of the Act. The Hon'ble apex Court held that where a reasonable cause exists for transactions covered under Section 269SS, the penalty shall not be imposed merely because it is lawful to do so. Drawing parallel, same proposition would apply in the matter of provisions of Section 271E of the Act which is enacted on the similar footings. Similar proposition was echoed towards existence of reasonable cause by the Hon'ble Delhi High Court in Director of Income Tax vS. All India Deaf and Dumb Society (2006) 198 CTR 376 (Del). In the backdrop of legal position, the facts and circumstances requires to be looked at in cumulative manner to ascertain the existence of mala fide if any. c) The appellant has also referred to the judgment of the Hon'ble ITAT Visakhapatnam Bench(in appeal No ITA 317/Viz/2019-judgment dated 18-03-2020 in SudhaAgro Oil & Chemical Industries Limited Vs Addl CIT, in the reply to the notice dated 28-11-2023 submitted to the CIT(Appeals), NFA....
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....erefore, we find that the transactions are closely associated in respect of day to day affairs as well as the financial transactions of the company. d) The facts of the case involved in our case are similar to the facts contained in the above decided by the Hon'ble ITAT Visakhapatnam Bench, the said appellant Company borrowed funds from its directors and shareholders and in certain occasions repaid funds in cash and in remaining occasions repaid by way of account payee cheque. The transactions were genuine and accounted in the books of accounts of the Company and the persons to whom the deposits are repaid are persons closely associated with the Company. The facts are similar in the case of this appellant Trust, where the persons to whom the funds are repaid are former employees and Trustee of the Trust and not third parties. The appeal was allowed by the hon'ble ITAT Visakhapatnam Bench. e) The Income Tax Appellate Tribunal "C", Bench, Kolkota,, in the case of Auto Fuel Centre, Durgapur Vs J.C.I.T., Circle-1, Durgapur, (Date of order 16th March, 2020), (ITA No.398/Kol/2019, AY 2013914) held that "It is an undisputed fact that the penalty u/s. 271E of the ....
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....out by the Income Tax Department is often explained by taxpayers as representing loans taken from or deposits made by various persons. Unaccounted income is also brought into the books of account in the form of such loans and deposits, and taxpayers are also able to get confirmatory letters from such persons in support of their explanation". A As stated in the above referred legal precedents, it is an established principle that the imposition of penalty u/s 271E should not be blind folded and mechanical. The intention of the legislature in bringing out this section, as referred in the above case laws also reiterates the tenet that the introduction of section 269T is that the tax payer is not allowed to give false explanation for his unaccounted money. In the instant case of the appellant, the repayment of deposits are accounted in books of accounts for FY 2011-12 which are audited and Income Tax Retums are filed accordingly. Therefore, there is no malafide intention on the part of the appellant in repaying certain of the employee deposits by cash. g) Thus on the above explained grounds and other grounds, as may be allowed, at the time of proceedings before the Hon....