Penalty u/s 273B can’t be invoked for Restrictions on Cash Transactions If Assessee had a ‘reasonable cause’ for Violation of Law: ITAT Delhi

Cash Transactions- Tax

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that if the assessee had a reasonable cause for violation of law, then penalty under Section 273B of the Income Tax Act 1961 would not be attracted.

The assessee has a large amount of deposit in her account with SBI. During the relevant assessment period the AO asked to submit the source document of the deposited amount. The assessee explained that a sum of Rs 16 lakh was received from one of her family friend as housing loan. The amount was credited to her joint bank account with her husband. After receiving the amount, the assessee returned Rs. 14 lakhs on the same day by realizing that it is not the right way to accept such a huge amount and Rs 1 lakh showed in the passbook as an evidence and out of this the amount of Rs. 80,000 were returned back during the month December and the balance amount Rs 20,000 were kept in safe deposit for him. Since the assessee could not prove the said transactions with documentary evidence, the Assessing Officer added back Rs.16.18 lakhs under section 68 of the Income Tax Act and also initiated penalty proceedings for violation of Section 269SS separately.

Considering the above factual circumstances, the first appellate authority deleted the penalty proceedings by finding that the amount of cash loan was never been received by assessee in hand instead the cash has been deposited directly in the Bank account of assessee.

On departmental appeal, the division bench of the Tribunal noted that the assessee had reasonable cause for violation of the law. Because the assessee does not receive any cash directly but the cash deposited in her bank account which she did not any control over the amount and she also immediately refunded the amount. Since there was a ‘reasonable cause’, on the part of the assessee, the bench has cancelled the entire penalty charged by the AO against the assessee. While allowing the appeal of the assessee the bench also mentioned about the same decision taken by the Supreme Court on a similar issue in a previous case.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader