Tarai Transport Corporation Vs JCIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata, has set aside a penalty of ₹1 crore imposed on Tarai Transport Corporation by the Joint Commissioner of Income Tax (JCIT) for alleged violations of Section 269SS of the Income Tax Act, 1961. The penalty was levied because the assessee, a partnership firm engaged in transportation, was found to have accepted cash payments exceeding ₹1 lakh on multiple occasions from Sunil Kumar Kundu during the financial year 2015-16, totaling ₹1 crore. Section 269SS mandates that loans or deposits exceeding ₹20,000 should be transacted through account payee cheques or drafts.
The assessment proceedings against Tarai Transport for the Assessment Year (AY) 2016-17 were initiated following observations made in the case of Sunil Kumar Kundu, who had made the cash payments. The JCIT subsequently initiated penalty proceedings under Section 271D, which provides for a penalty equal to the amount of the loan or deposit accepted in contravention of Section 269SS. Aggrieved by the penalty order, Tarai Transport filed an appeal before the CIT(A), who upheld the JCIT’s decision.
During the hearing before the ITAT, the appellant’s counsel argued that the penalty did not directly arise from the assessment order in their own case, as the information regarding the cash transactions was discovered during the assessment of Sunil Kumar Kundu. The counsel further relied on the Supreme Court’s decision in CIT vs. M/s. Jai Laxmi Rice Mills Ambala City [(2015) 379 ITR 521 (SC)] regarding the necessity of the Assessing Officer (AO) recording satisfaction for initiating penalty proceedings.
Crucially, the appellant’s counsel also brought to the ITAT’s attention a previous order of the same Tribunal in their own case for AY 2001-02. In that case, involving similar cash transactions with Sunil Kumar Kundu and other sister concerns, the ITAT had accepted the assessee’s contention that there was reasonable cause for accepting cash due to business exigencies. This earlier order was upheld by the Calcutta High Court and subsequently by the Supreme Court, which dismissed the Income Tax Department’s Special Leave Petition (SLP).
The ITAT, in its current order, noted the striking similarity between the facts of the present case and the case for AY 2001-02. The Tribunal specifically referred to Section 273B of the Act, which provides that no penalty shall be imposed if the assessee proves that there was reasonable cause for the failure to comply with the provisions mentioned therein, including Section 271D.
The Tribunal acknowledged the appellant’s explanation that the cash was required for making payments to laborers and vehicle owners involved in their transportation business and that the funds were sourced from sister concerns where cash was readily available. The ITAT also noted that in the earlier case, the genuineness of the transactions was not disputed by the Revenue, the sister concerns were assessed to income tax, and the amounts were duly recorded in their books. Furthermore, no interest was paid or received on these transactions, and individual cash acceptances were below ₹20,000.
Drawing a parallel with the AY 2001-02 case where the ITAT had invoked Section 273B to grant relief, the Tribunal held that the present case also warranted the cancellation of the penalty. The ITAT concluded that since the appellant’s case was squarely covered by the decision in their own case for the earlier assessment year, it was unnecessary to address other legal arguments raised. Consequently, the appeal filed by Tarai Transport Corporation was allowed, and the ₹1 crore penalty was cancelled.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
