1 ITXAL1053-11gr.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ttm INCOME TAX APPEAL (L) NO.1053 OF 2011 WITH INCOME TAX APPEAL (L) NO.1054 OF 2011 WITH INCOME TAX APPEAL (L) NO.1055 OF 2011 WITH INCOME TAX APPEAL (L) NO.1056 OF 2011 WITH INCOME TAX APPEAL (L) NO.1057 OF 2011 WITH INCOME TAX APPEAL (L) NO.1058 OF 2011 WITH INCOME TAX APPEAL (L) NO.1059 OF 2011 WITH INCOME TAX APPEAL (L) NO.1060 OF 2011 WITH INCOME TAX APPEAL (L) NO.1061 OF 2011 WITH INCOME TAX APPEAL (L) NO.1062 OF 2011 The Commissioner of Income Tax-I, Thane .. Appellant Vs. Mahabal Shetty .. Respondent. Mr.Suresh Kumar for the appellant CORAM : J.P. DEVADHAR & K.K. TATED, JJ. DATE : 27th SEPTEMBER, 2011. P.C. 1. In all these appeals, the questions of law raised by the Revenue is whether the ITAT was justified in deleting the penalty levied under sections 271D/271E r/w sections 269SS and 269T of the Income Tax Act. 1961. 2 ITXAL1053-11gr.doc 2. The Assessment Years involved herein are A.Y. 1996-1997 to 2002-2002. 3. The Assessee is an individual and is interalia engaged in the business of money lending. On 14.12.2000, a search and seizure action was conducted at the residential as well as business premises of the Assessee wherein incriminating documents were found and the same were seized. On a notice issued under section 158BC of the Act, the Assessee filed block return declaring undisclosed loss of Rs.1,50,00,244/-. The block return was accepted and block Assessment Order was passed without making any additions. 4. However, the Assessing Officer noticed that the Assessee had taken / accepted loans/deposits amounting to Rs.20,000/- or more otherwise than by an account payee cheque or account payee bank draft and similarly repaid deposits in excess of Rs.20,000/- otherwise than by an account payee cheque or account payee bank draft, which was in violation of the provisions of Sections 271D and 271E of the Act. Accordingly, the Assessing Officer initiated penalty proceedings and imposed penalty under sections 271D and 271E of the Income Tax Act, 1961. 5. On appeals filed by the Assessee, the CIT(A) upheld the penalty imposed under sections 271D and 271E of the Income Tax Act, 1961, however directed the Assessing Officer to compute the penalty only on the 3 ITXAL1053-11gr.doc amount exceeding Rs.20,000/-. Challenging the aforesaid order, both the Assessee as also the Revenue filed appeals before the ITAT. 6. The appeals filed by the Revenue challenging the decision of the CIT(A), in so far as it directs the Assessing Officer to quantify the penalty under sections 271D and 271E on the amount exceeding Rs.20,000/-, the ITAT by its order dated 27.08.2008 has upheld the decision of the CIT(A) by relying upon the decision of the Rajasthan High Court in the case of CIT vs. Ajanta Dyeing and Printing Mills reported in (2003) 264 ITR 505. The appeals filed by the Revenue against the order of ITAT dt.27.8.2008 have been dismissed by this Court for want of removal of office objection. Thus the orders passed by the ITAT on that aspect of the matter have attained finality. 7. As regards the appeals filed by the Assessee challenging the decision of the CIT (A) upholding the levy of imposition of penalty under sections 271D and 271E of the Act, the ITAT by the impugned order dt.25.2.2011 cancelled the penalties and allowed the appeals filed by the Assessee. Challenging the aforesaid order, the Revenue has filed these appeals. 8. Based on the decision of the CIT(A), it is contended by the counsel for the Revenue that once it is established that the Assessee has accepted or taken loans and deposits in cash in excess of Rs.20,000/- and once it is established that the Assessee has repaid the loan in excess of Rs.20,000/- in 4 ITXAL1053-11gr.doc cash, then there being violations of sections 271D and 271E of the Act, the Assessing Officer was justified in invoking sections 271D and 271E and impose penalty. 9. On perusal of the order passed by the ITAT, particularly para 20 thereof, it is seen that the Tribunal has deleted the penalty on the following grounds: (a) That the Assessee who is educated upto only 3rd standard was under the bonafide belief that he has not violated any provisions of law. (b) The Assessee had a reasonable cause for accepting the loans in cash as the same were received from creditors who were agriculturists residing in remote villages and many of them were not having bank accounts. (c) That the Assessee was not professionally managed nor professionally advised. (d) That the enquiry conducted by the Revenue in the block assessment proceedings subsequent to the search and seizure action revealed that all the transactions in question were genuine transactions. 10. The Tribunal has further held that when the transactions are genuine, then the violation of sections 269SS and 269T can at best be termed as a technical violation and in the facts of the present case, the Assessee has demonstrated that he had a reasonable cause for accepting / repaying the loan in cash in excess of Rs.20,000/- and therefore, it is not a 5 ITXAL1053-11gr.doc fit case for imposing penalty. 11. While upholding the constitutional validity of sections 269(SS), the Apex Court in the case of Asst. Director of Inspection (Investigation) vs. Kumari A.B. Shanti reported in (2002) 255 ITR 258 (SC) has held that the main object of section 269(SS) was to curb the menace of making false entries in the books and later on give explanation for the same. In the present case, the finding of fact recorded by the ITAT is that the transactions recorded were genuine and in fact the declaration made by the assessee have been accepted without making any additions in the block assessment order. Moreover, s.273B of the Income Tax Act, 1961 provides that if there is a genuine and bonafide transaction then, the Assessing Officer is vested with a discretionary power not to impose penalty. Therefore, in the facts and circumstances of the present case, the decision of the ITAT in holding that the Assessee has shown reasonable cause for not complying with the provisions of s.267SS and 269T cannot be faulted. Consequently, the decision of the ITAT in deleting the penalty cannot be faulted. 12. In the result, we see no merit in the appeals. All the appeals are accordingly dismissed. (K.K. TATED, J.) (J.P. DEVADHAR, J.)