Income Tax cash receipts & payments exceeding Rs 20,000: ITAT cancels penalty considering business difficulties

The assessee is engaged in the business of transportation as proprietor of M/s. Balwan Road Carriers & M/s. Global Travelling Corporation. A survey under Section 133A was conducted on 19.11.2007 in the business premises of the assessee. Certain documents and registers were impounded from the business premises towards lorry receipts, expenses and other entries. In the course of the assessment under Section 143(3) of Income Tax dated 31.12.2010, the assessee could not produce any books of accounts and claimed that assessee does not maintain any regular books of account. The assessment was completed on the basis of registers impounded. These registers allegedly contained entities of cash receipts and cash payments exceeding Rs.20,000/- from various persons which are admitted as cash loan deposits receipts and cash loan deposits repayments. The competent authority, i.e., Additional Commissioner of Income Tax invoked the provisions of Sections 271D and 271E for alleged infringement of Sections 269SS and 269T and imposed penalty of Rs.21,82,000/- and Rs.16,70,500/- respectively. The assessee challenged the imposition of penalty under Sections 271D and 271E of the Act before the CIT(A). The CIT(A) however dismissed the appeal of the assessee and confirmed the action of the Assessing Officer.

Being aggrieved, the assessee preferred appeal before the Tribunal.

It was pointed out that no books of accounts were maintained and the assessee being uneducated does not understand such laws. Ld. counsel pointed out that repayment has been made in few days time against the receipt from transportation and the amount involved are very small. It was further pointed out that no inquiry has been made with the corresponding family members for granting such hand loans. Referring to several decisions rendered by different Benches for exoneration from penalty in case of such immediate business exigencies, ld. counsel submitted that having regard to the totality of the facts, where it is practically unfeasible for an uneducated/undereducated assessee or its drivers and staff to make effective use on any banking channel, a benign view should be taken consistent with the ground realities and judicial pronouncements and the penalty imposed under Sections 271D and 271E should be cancelled.

ITAT Order:

6. We have carefully considered the rival submissions. Before we proceed to adjudicate the issue, certain facts are reiterated for convenience. The assessee is engaged as a transporter and has not maintained any regular books of account. The assessment has been made on estimations, keeping in mind the transportation receipts earned by the assessee which also includes some of impugned entries towards cash receipts by way of loan. The assessee in the course of survey itself, on being questioned, responded that the cash has been received by way of temporary loan from family members to meet the business exigency having regard to the nature of business he is involved in. The fact of business exigency has not been denied by the Revenue. The CIT(A) has disregarded the defense of the assessee mainly on account of the fact that the assessee has failed to come out with complete facts and documents regarding the transactions. We find that the turnover receipts declared by the assessee at Rs.39,61,195/- was enhanced to Rs.1,33,67,162/- for the purposes of estimation of income based on such impounded records. Therefore, imposition of penalty separately towards such receipts by way loan is not justified. The impromptu response of the purportedly uneducated assessee at the time of survey, in our view, requires to be seen in its natural perspective and requires to be given credence. The assessee has declared that the money was received from family members to meet the business exigencies. Having regard to the nature of business of the assessee and ground realities, such explanation appears plausible. Some of the case law of the Hon’ble High Courts and Co-ordinate Benches of Tribunal viz; DCIT vs. Rupen Dass, (2011) 7 ITR 55 (Kol) (Trib); CIT vs. Balaji Traders, (2008) 167 Taxman 27 (Mad); CIT vs. Laxmi Trust Co., (2008) 303 ITR 99 (Mad); DCIT vs. Vignesh Flat Housing, (2007) 105 ITD 359 (Chennai); Dillu Cine Enterprises vs. CIT, (2002) 80 ITD 484 (Hyd); Hindustan Steel Limited vs. State of Orissa, (1972) 83 ITR 26 (SC) Says in corus that the breach of Sections 269SS and 269T for receipt/repayment of cash attributable to business exigencies is a mere technical or venial breach. The assessee has shown existence of reasonable cause in accepting/repayment of cash to meet the immediate business requirements. In our view, mitigating circumstances exists to exonerate the assessee from the recourse of penalty under Sections 271D and 271E of the Act. We accordingly set aside the order of the CIT(A) and cancel the penalty imposed under Sections 271D and 271E of the Act by the competent authority.