Citizen Co-Operative Society Ltd. v. Addl. CIT

INCOME TAX ACT, 1961

--Penalty under section 271D and 271E--Contravention of sections 269SS and 269T--Technical or venial breach--Assessee was a registered co-operative society and doing banking business. During the course of banking business it inter alia accepted deposit(s) from members and distributed the loans to members, as they required. However, the deposits were in some cases more than Rs. 20,000 and also loan amount was more than Rs. 20,000. Held Before imposition of penalty under section 271D/271E, AO must be satisfied, not arbitrarily but judiciously, that assessee had without reasonable cause failed to comply with the provisions. If assessee having bona fide belief that it would not attract the penalty provisions, given the nature of the transactions and circumstances, the penalty need not be levied. In other words, bona fide belief coupled with genuineness of the transactions constitute reasonable cause for not invoking the provisions of sections 271D and 27IE. Therefore, it cannot be said that assessee did commit any infringement or it is incorrect to say that there was any deliberate attempt on the part of assessee to accommodate tax dodgers. The deposits accepted and repaid by assessee were part of its banking activities and the depositors were its members. The deposits received by assessee, which was carrying on the banking business, were not in the nature of taking of any loans or deposits for the purpose of funding its project as a source of investment. The authority vested with the power to impose penalty has a discretionary power not to levy the penalty. There was no addition on account of these impugned deposits in the return of income; which meant that deposits were genuine. Veracity of creditor was not doubted by revenue. AO did accept the deposit as genuine. The breach of provisions of section 269SS/269T occurred from a bona fide belief. Ex facie, it was a venial breach. If the assessee acted on genuine belief that penal provisions had no application to deposits and it applied only to other kind of assessees, then penalty could not be levied. As such, in present case, there existed reasonable cause in accepting the deposits in cash and paying by cash, assessee was therefore exonerated from the levy of penalty. The assessee had been carrying on the banking business and it was having bona fide belief that provision of section 269SS/269T was not applicable to the assessee’s case and same coupled with genuineness of the transaction constituted a reasonable cause and in such case the default on the part of assessee was merely of a technical or venial nature and no penalty be levied. Ordinarily, a plea as to ignorance of law cannot support the breach of a statutory provision but the fact of such a technical break due to ignorance of the relevant provisions of law or on account of bona fide belief, coupled with the fact that transactions in question were genuine and bona fide, transaction were undertaken during the regular course of its business would not result in levy of penalty under sections 271D and 271E.