Cash wrongly deposited due to mistake in filling bank slip: ITAT deletes penalty for contravention of Sec 269SS

Ahmedabad Tribunal in a recent order held that the operation of Section 271D with reference to the violation of the provisions contained in Section 269SS also is not automatic.

The brief facts of the case is that the assessee is a Private Limited Company filed its Return of Income for the Assessment Year 2013-14, declaring a loss of Rs. 3,92,95,118/-. Assessment was completed u/s. 143(3) vide order dated 29.01.2016 determining the loss at Rs. 3,89,22,520/-. During the course of assessment proceedings, the Assessing Officer found that assessee borrowed unsecured loans from related parties. The assessee has accepted a loan of Rs. 4,78,000- in cash on 24.08.2012 which is found to be in contravention to Section 269SS of the Act. Therefore the assessee was issued a show cause notice why not a penalty u/s. 271D is leviable in contravention to Section 269SS of the Act, namely loan availed by cash mode.

The Ld. Counsel for the assessee submitted that the sum of Rs. 4,78,000/- was deposited by M/s. Om Ceramics, a sister concern of the assessee. However, while filling the bank deposit slip, the staff filled the name of the depositor correctly but the account number was wrongly mentioned as that of the assessee namely 25360200000020 instead of 25360200000026 and produced copy of the bank slip dated 24.08.2012. Immediately on noting this mistake, the next day i.e. on 25.08.2012, the assessee transferred the said amount of Rs. 4,78,000/- vide Cheque No. 2623 to the sister concern M/s. Om Ceramics. The Ld. Counsel produced before us copy of the Certificate issued by Bank of Baroda to show the genuineness of the transaction.

The assessee also produced the copy of the Income Tax Returns filed by M/s. Om Ceramics to prove that the sister concern is also functioning in the same premises of the assessee. Further an Affidavit filed by its reply is also produced before us. Thus pleaded that there was a genuine and reasonable cause in depositing the cash in the assessee’s account which was being rectified on the next day by issuing cheque in favour of M/s. Om Ceramics. Therefore the assessee should not be levied of penalty u/s. 271D of the Act. The assessee also further informed that the assessment is also ending with an addition of Rs. 3,72,598/- thereby determining the loss at Rs. 3,89,22,520/-. In the above facts and circumstances, the levy of penalty is unwarranted and the same is liable to be deleted.

The bench containing Ms. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member held that section 273B has provided a statutory fetter to the automatic application of Section 271D. It provides that no penalty shall be imposable on a person under these provisions for any violation, if the person could establish the existence of any “reasonable cause”. It is only where a person could not explain any “reasonable cause” for the failure in complying with the provisions of Section 269SS, then the penalty under section 271D would follow.

The Tribunal stated that the assessee has explained the circumstances under which the cash deposit, which was in the nature of mistaken bank challan entry was received. However the same was rectified by the assessee on the very next day i.e. on 25.08.2012 by remitting the said amount of Rs. 4,78,000/- by issuing Cheque No. 2623 to M/s. Om Ceramics to prove the genuineness. Further, the assessee also produced the banking challan of cash deposits and certificate from Bank of Baroda, as well as the bank statement and an affidavit filed by the assessee’s staff. The assessee also produced the Income Tax Returns filed by M/s. Om Ceramics which carries the same address that of the assessee herein.

Taking into overall consideration of the facts in the present case, the assessee has proved a reasonable cause of wrongly coating the bank account number of the sister concern which was rectified the next day itself. Thus as per the Income Tax Appellant Tribunal (ITAT), it was not a fit case for imposition of penalty u/s. 271D r.w.s. 273B of the Act.

Thus the penalty levied was quashed and grounds of appeal raised by the assessee were allowed.

Citation: Opaque Ceramics Pvt. Ltd. v/s The ACIT; ITA No. 1356/Ahd/2019; Assessment Year 2013-14