Case Law Details

Case Name : Pr. CIT Vs Tehal Singh Khara & Sons (Punjab and Haryana High Court)
Appeal Number : ITA No. 248 of 2017 (O&M)
Date of Judgement/Order : 17/07/2017
Related Assessment Year :
Courts : All High Courts (6133)

Punjab and Haryana High Court held in the case of Pr. CIT Vs Tehal Singh Khara & Sons that Penalty under section 271D of Income Tax Act, 1961 not justified for Contravention of section 269SS if assessee had given reasonable cause for entering into the cash transactions, as creditors from whom the cash was received and repaid were identifiable agriculturists and there was confirmation of the money having been deposited and returned.

The assessing officer in his remand report submitted that the persons from whom cash was received and was subsequently repaid were identifiable agriculturists. It was also submitted in the remand report that the said persons had filed a copy of jamabandi to indicate that agricultural operations were being conducted on their land.

Ordinarily, reasonable cause would mean an honest belief founded upon reasonable grounds of the existence of a state of circumstances which (assuming them to be true), would reasonably lead any ordinary, prudent and cautious person (placed in the position of the person concerned) to come to the conclusion that the same was the right thing to do. The cause has to be considered and only if it is found to be frivolous, without substance or foundation, as held by the Honorable Delhi High Court in the case of the Wood Ward Governors of India (P) Ltd. Civil Writ Petition No. 7066 Of 2000, date 19-4-2001. Penalty can be imposed. In the context of penalty provisions, words “reasonable cause” would definitely mean a cause which is beyond the control of the appellant.

In the appellant’s case, the business exigencies of making cash payment to farmers for the purposes of both-honoring commitment as also to help them cannot be denied. The remand proceedings found the creditors to be genuine agriculturists and their cash transactions also to be genuine, in as much as there was a confirmation of the money having been deposited and returned. The said impugned transactions also cannot be said to have been aimed at or attempting to evade tax, thereby causing loss to revenue. In such circumstances, it can reasonably be held that the breach of the statutory provisions contained in section 269SS & 269T of the Act flowed by a bona fide belief, which is ex facie a venial breach. It may also be appreciated that the Honorable Supreme Court, while hearing the constitutionality of the provisions of section 269SS, observed that the undue hardship emanating from the said provision, perceived to be expropriatory in nature, is very much mitigated by the inclusion of section 273B (2002) 255 ITR 258. Following the judicial precedents, including that of the jurisdictional High Court of Punjab and Haryana, it is held that the imposition of penalty under sections 271D & 271E of the Act, in the circumstances, was not justified.

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