The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) concurred with the contentions of the assessee and found that there was genuine and bonafide reason for violating sections 269SS and 269T of the Income Tax Act, 1961.
The two-member bench of Shamim Yahya and Asta Chandra while cancelling the penalty order observed that discarding the explanation submitted by the assessee merely because they proceeded on the premise that breach of condition provided under section 269SS and 269T shall necessarily lead to penal consequences which understanding in our humble opinion is not in accordance with law.
The assessee, M/s. Delhi State Taxi Operators’s Co-operative Thrift Credit & Services Society Ltd., a Cooperative society filed two appeals against the two separate orders of the Commissioner of Income Tax (Appeals) [CIT(A)].
The CIT(A) upheld the penalty of Rs. 16,71,24,134 and Rs. 2,01,58,524 levied by the Joint Commissioner of Income Tax (JCIT) under section 271D and 271E of the Income Tax Act, 1961 for the Assessment Year 2013-14 for violation of the provisions of section 269SS and 269T respectively of the Income Tax Act.
Before the Joint Commissioner of Income Tax (JCIT) and the Commissioner of Income Tax (Appeals), the assessee claimed that section 273B of the Income Tax Act’s definition of “reasonable cause” applied to its default.
The JCIT observed that during the assessment proceedings, the Assessing Officer order vide sheet entry sought a list of members of the assessee society from whom deposits have been accepted. On perusal, cash deposits of Rs. 16,71,24,134 and repayment of deposits of Rs. 2,01,58,524 were found to be in contravention of section 269SS and 269T respectively of the Income Tax Act.
The assessee submitted that the society is under the bonafide belief that the deposits are made/repaid voluntarily by the members and are genuine. The case of the assessee is of mutually aided society for the benefit of its members. The penalty proceedings be kindly dropped
According to JCIT, the genuineness of deposits in cash and repayment of deposits is not a criteria while considering the provisions of section 269SS and section 269T of the Income Tax Act which have been inserted to curb the circulation of black money.
The counsel of the assessee contended that the Assessing Officer /JCIT have not established that there was deliberate and intentional violation of the provisions of Section 269SS/269T in order to hide any income or to evade any payment of tax.
Also submitted that the assessee society runs on the principles of mutuality. The money received from the members of the society is in the nature of capital receipt and can in no way be treated as loan/deposit. The deposits accepted and repaid by the assessee were part of its business activities and the depositors were its members.
Conversely, the Counsel of the Department vehemently argued that genuineness of transaction is not a criteria for imposition of penalty. Even in genuine transactions transacting in cash is not allowed under Sections 269SS and 269T of the Income Tax Act. The case of the assessee does not fall under the exclusionary clause.
The bench observed that there was no allegation at all against the assessee that by accepting loans/deposits in cash its intention ever was to avoid payment of tax or to defraud Revenue.
Further observed the CBDT circular Circular F. No. 415/6/2000-IT(Inv.I) dated 25th March, 2004 acknowledging that it was a widespread belief, even if erroneous that the provisions of section 269SS do not apply to the credit co-operative societies and advised the field officers not to impose penalty under section 271D and 271E indiscriminately and should keep in view the provisions of section 273B of the Income Tax Act.
Section 273 of the Income Tax Act ordains that no penalty under Sections 271D and 271E shall be imposed on the person or the assessee if he proves that there was reasonable cause for the failure.
Thus, while allowing the appeals, the tribunal cancelled the penalty levied under Section 271D and 271E of the Income Tax Act.
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