Kerala High Court confirms Penalty as Assessee Failed to Prove Reason for Accepting Deposits from Staff Members in Cash [Read Judgment]

The Kerala High Court in the case, Commissioner of Income Tax versus M/S Al- Ameen Educational Trust has ruled in favour of Revenue and confirmed the penalty since Assessee failed to prove the reason for accepting the deposits from staff members in Cash.

In instant case, Respondent-Assessee is a trust raised advances and loan from staff members for the construction of trust building. In circumstances, the daughter of the president of the trust had taken a loan from the Bank and had advanced it to the Trust. At that point of time president of trust was abroad and there was an immediate need for the fund for the construction.

Since the daughter had made a specific contention regarding the loan taken from the bank and advanced it on the very same day to the Trust, the judicial member while passing the order did not agree with the findings of accountant member and on later third member, the Vice-President of the Tribunal concurred with the judicial member’s order and held that deleted the penalty.

Here no penalty proceeding was issued by AO, but the additional Commissioner who passed the original order confirmed that penalty under section 271D of the Income Tax Act can be levied even without any direction of tax evasion and the violation of Section 269SS of the Income Tax Act. Accordingly Additional commissioner confirmed the penalty on the ground that Assessee received the amount other than by way of cheque or drafts.

The first appellate authority followed the decision but the tribunal by majority bench member deleted the penalty on the ground that assessee had offered a reasonable cause for having accepted money in cash.

The division bench comprising of Justice K.Vinod Chandran and Justice Ashok Menon heard the contention and perused the records and submissions made by both the parties.

The bench while confirming the penalty observed that “Tribunal erred egregiously in deleting the penalty levied under Section 271D, on the facts disclosed and cause shown, which approach and conclusions are perverse. The assessee failed to discharge its burden in proving that there was a reasonable cause in accepting the deposits from staff members other than by way of cheque or draft. The Tribunal failed to appreciate the import of Section 271D in the correct perspective”.