Case Law Details
N.S.S. Karayogam Vs CIT (Kerala High Court)
In the given case, the appellant is a society which is a company registered under Section 8 of the Companies Act, 2013. While finalising the assessment of income tax of the appellant with respect to the year 2005-2006, the Assessing Officer found that, during the previous year, the assessee had conducted finance business by violating the provisions contained in Section 269SS of the Income Tax Act by accepting deposits in cash from various clients, exceeding the sum of Rs.20,000/-. On the recommendation of the Assessing Authority, penalty proceedings under Section 271D of the Act was initiated.
Assessee could not establish any ‘reasonable cause’ with respect of acceptance of the deposits in cash, exceeding the permissible limit, imposition of the penalty was re-affirmed.
It was concurrently found that the assessee was not successful in discharging the burden by establishing that there existed ‘reasonable cause’ for not receiving the deposits by way of account payee cheque or demand drafts. Hence they have failed in proving before the officer with respect to existence of any ‘reasonable cause’ as contemplated under Section 273B, with respect to which interpretation was contained in K.V. George’s case (supra). Before the Tribunal it was contended that, the management of the assessee was not aware of the penal provision and that there was no intention of evading tax or for introduction of black money in the business in accepting the deposits in cash. But the Tribunal, by relying on the decision of this Court in Listin Stephen v. Deputy Commissioner of Income Tax [2019 (2) KLT 221] (authored by one among us, C.K.Abdul Rehim, J.), held that the assessee in the case at hand was unable to prove that there existed compelling circumstances for accepting deposits in cash and therefore there exists no ‘reasonable cause’ as mandated under Section 273B of the Act.
High Court held that the ‘reasonable cause’ contemplated under Section 273B should be a reasonable cause as to why or what was the reason which compelled the assessee to accept the loans or deposit in cash. In other words, it should be proved that there existed reasonable and acceptable cause for not accepting the loans or deposits through crossed cheques or demand drafts. It was found that the mere proof regarding genuineness of the transaction or the intention in accepting the amounts in cash or that there was no attempt to induct black money into the business etc. cannot be considered as a reasonable cause or as compelling circumstances provided under Section 273B to avoid the penal action contemplated under Section 271D, with respect to violation of the provisions contained under Section 269SS.
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