2015 (12) TMI 1544 - AT - Income Tax

Penalty u/s 271E - repayment of fixed deposits of various depositors at various branches of the bank - Held that - 271E confer discretion on authorities to levy or not to levy penalty and such discretion needs to be exercised with wisdom and in a fare and just manner. Even if the relevant provisions of law prescribe the levy of penalty it does not mean that penalty must necessarily be imposed in every case falling within the provisions of section 269T. Even if penalties are prescribed the higher authorities will be justified in refusing to impose penalty when there is a technical breach of provisions of the Act In the present cases the Department has not doubted the genuineness of the transactions and has imposed & upheld the penalties holding that the reasons for repayment as submitted by assessee did not constitute reasonable cause. We further find that in different years the violation has been made by different branches of the Bank & the violation has not been repeated. In Asst. Year 2008-09 the violation was by Bulbul Nowgam L.D. Hospital & Islamia College Branches & in Asst. Year 2007-08 the violation was by Lal Mandi Branch whereas in Asst. Year 2005-06 the violation was by Lal Bazar Branch. We further find that learned CIT(A) himself in Asst. Year 2006-07 has deleted the penalty imposed by Assessing Officer under similar facts circumstances. We further find that no mens rea is involved as the violation is not intentional. Therefore in view of the above facts and circumstances and in view of the legislature intention of introducing these penal provisions & also in view of the precedents relied upon by learned AR we hold that penalties are not imposable in these cases. - Decided in favour of assessee

Summary

Issues Involved:
1. Confirmation of penalty imposed under Section 271E for violation of Section 269T of the Income Tax Act, 1961.
2. Determination of "reasonable cause" under Section 273B for the violation of Section 269T.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Imposed under Section 271E for Violation of Section 269T:

The case revolves around the imposition of penalties under Section 271E of the Income Tax Act, 1961, due to the repayment of deposits exceeding Rs. 20,000 in cash, which is in contravention of Section 269T. The assessee, a banking company, repaid fixed deposits in cash to various depositors at different branches. The Assessing Officer imposed penalties after noting instances of such repayments. The assessee contended that the repayments were made due to genuine hardships faced by the depositors, such as the absence of bank accounts, medical emergencies, and other urgent needs.

The CIT(A) upheld the penalties, stating that the reasons provided by the assessee did not constitute a "reasonable cause" under Section 273B. The CIT(A) emphasized that the mandatory nature of Section 269T was violated and that the repayments should have been made through account payee cheques or drafts.

2. Determination of "Reasonable Cause" under Section 273B for the Violation of Section 269T:

The assessee argued that the penalties should not be imposed due to the existence of reasonable cause, as defined under Section 273B. The reasons included the urgent need for cash by depositors who did not have bank accounts, elderly depositors, and those requiring funds for medical or marriage expenses. The assessee highlighted that similar penalties were deleted in the past by the CIT(A) and the Tribunal under comparable circumstances.

The Tribunal examined the facts and found that the repayments were genuine transactions and not aimed at tax evasion. It noted that the purpose of Sections 269T and 271E was to curb black money and benami transactions, not to penalize genuine transactions. The Tribunal cited precedents, including the case of Faridkot Bathindha Kshetriya Gramin Bank vs. JCIT, where it was held that bona fide belief and genuineness of transactions constitute a reasonable cause under Section 273B. The Punjab & Haryana High Court in CIT vs. Saini Medical Store also supported the view that penalties should not be imposed when there is a reasonable cause and no intention to evade tax.

The Tribunal concluded that the penalties were not justified in the present cases, as the transactions were genuine, and the breaches were technical rather than intentional. It emphasized that the discretion to levy penalties should be exercised judiciously, considering the circumstances and the legislative intent behind the provisions.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, holding that the penalties under Section 271E were not imposable due to the existence of reasonable cause for the cash repayments, which were genuine and not aimed at evading tax. The order was pronounced in the open court on 17th December 2015.