Interst, Penalties under various Section 13th July 2012 CA Reepal

Report
Penalty & Interest
under Income-tax Act
WIRC
13/07/2012
CA. Reepal G. Tralshawala
[email protected]
1
Penalties

Scheme & Object (Legislative intent)


Abide Laws
Deterrent Effect
2
Penalties

Penalty u/s.271(1)(c)




Concealment of particulars of income; OR
Furnishing inaccurate particulars of income
Concealment of particulars of income - meaning
hiding the particulars i.e. non-furnishing of
particulars in respect of claim made
Furnishing inaccurate particulars – meaning
fabricated / false particulars furnished i.e. claim
made on basis of wrong / incorrect particulars
3
Penalties


Penalty u/s.271(1)(c)
Analysis of provision
AO/CIT(A)/CIT - satisfied in course of any
proceedings that any person has concealed the particulars of his income; or
 has furnished inaccurate particulars of such
income;  may direct ….. by reason of concealment of
particulars of his income or furnishing inaccurate
particulars of such income

4
Penalties

Penalty u/s.271(1)(c)


Emphasis on the word “Particulars”
Disclosure of particulars of incomeWhat particulars are required to be disclosed
 How the same are to be disclosed
 When the same are required to be disclosed
 To what extent are they required to be disclosed

5
Penalties

Penalty u/s.271(1)(c)

Nature of Proceedings & Burden of Proof

Law before 1964





Quasi-criminal proceedings - language used word ‘deliberately’
Gokuldas Hari Vallabhdas (1958) 34 ITR 98 (Bom)
CIT v Anwar Ali (1970) 76 ITR 696 (SC)
Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC)
Principles laid down as under



Deliberate act / mens rea - for levy of penalty
Revenue to prove that disputed amount constitutes income
even though explanation proved to be false in assessment
proceedings - CIT v. Khoday Eswarsa & Sons (1972) 83 ITR
369 (SC)
Finding in assessment not conclusive - burden on department
to prove concealment - Anantharam Veerasinghaiah & Co. v.
CIT (1980) 123 ITR 457 (SC)
Penalty not for technical or venial breach of provisions
6
Penalties

Penalty u/s.271(1)(c)

Nature of Proceedings & Burden of Proof

Law from 1964 to 1976





Word ‘deliberately’ deleted and Explanation added
Explanation before deletion in 1976 contained wording –
‘failure to return the correct income did not arise from any
fraud or any gross or willful neglect on his part’
Amendment of 1964 provision to overcome decision of Anwar
Ali (SC) - even if explanation found to be false still no penalty
CIT v Mussadilal Ram Bharose (1987) 165 ITR 14 (SC) - laid
down certain principle considering law existing between 1964
to 1976 read with Explanation - Rebuttal to be based on
material - Explanation to be supported with evidence Explanation not to be fantastic or fanciful
Proceedings remained to be Quasi-criminal
7
Penalties

Penalty u/s.271(1)(c)

Nature of Proceedings & Burden of Proof

Law from 1976 onwards





Explanation of 1964 amended
5 new Explanations added
Clause (B) added in 1986 in Explanation 1
Explanation 1 specifically overruled Anwar Ali decision in
respect to falsity of explanation
Principles laid down in detail in T. Ashok Pai v. CIT
(2007) 292 ITR 11 (SC)
8
Penalties

Penalty u/s.271(1)(c)

Decision of Supreme Court in UOI v. M/s.
Dharamendra Textile Processors (2008) 306
ITR 277 (SC) - larger Bench decision
Explanations indicate element of strict liability
 Object of legislature is to provide a remedy for loss
of revenue
 Penalty is civil liability
 Wilful concealment not essential ingredient for
attracting civil liability
 Effect & relevance of prosecution provision in
sec.276C not considered in Dilip N. Shroff case –
291 ITR 519 (SC)

9
Penalties

Penalty u/s.271(1)(c)

Issues that arise after decision of SC in
Dharamendra Textile Processor 
Whether quasi-criminal or civil in nature

Whether mens rea still applicable

Whether levy of penalty is automatic
10
Penalties

Penalty u/s.271(1)(c)

Whether levy of penalty is automatic

UOI v. Rajasthan Spinning & Weaving Mills (SC) 317 ITR 1
(SC)







Not automatic - explained the decision rendered in
Dharamendra Textile Processor
Conditions expressly mentioned in particular provision needs to
applied
Reliance Petro-products 322 ITR 158 (SC)
CIT v. MTNL (Del) – order dated 10/10/2011 – considered all
the three aforesaid SC decisions
Kanbay Software India P. Ltd. v. DCIT – 122 TTJ 721 (Pune)
ACIT v. VIP Industries Ltd. (2009) 21 DTR 153 (Mum)
Mimosa Investment Co. P. Ltd. v. ITO (2009) 28 SOT 470
(Mum)
11
Penalties

Penalty u/s.271(1)(c)

Explanation 1


Initial burden of proof on assessee
Analysis reveals
In respect of material facts to computation of total income, the
assessee

(A) –
(B) –
(i)
(i)
fails to offer an explanation; or
(ii)
explanation offered is found to be
false by the AO or CIT(A) or
Commissioner; or
offered explanation but not substantiated and also
fails to prove that the explanation is bona fide; and
(ii)
fails to show that all the facts relating to and
material for computation of total income have
been disclosed
the addition or disallowance made in computing the total income
shall be deemed to represent income in respect of which
particulars have been concealed.

Reliance Petroproducts – 322 ITR 158 (SC)
12
Penalties

Penalty u/s.271(1)(c)

Explanation 1

If explanation of assessee is not found to be false levy of penalty not justified invoking Explanation 1



National Textiles v. CIT [2001] 249 ITR 125 (Guj)
CIT v. Jalaram Oil Mills [2002] 253 ITR 192 (Guj)
CIT v. M.P. Narayanan [2000] 244 ITR 528 (Mad)
13
Penalties

Penalty u/s.271(1)(c)

Explanation 2
This explanation is for benefit of department
 Provides for levy of penalty in retrospect
 Intangible / ad hoc addition made in year 1


Penalty not levied due to case of ad hoc addition
In year 2 or subsequent years - if benefit of this
intangible addition taken against other
unaccounted investments or cash credits, etc., the
intangible addition becomes real income
 Penalty would then be levied in year 1
 Time limit taken care of by sec.271(1A)

14
Penalties

Penalty u/s.271(1)(c)

Explanation 3







Prior to amendment by Finance Act, 2002, w.e.f. 1-4-2003,
applicable only in case of new assessee if return of income
not filed before completion of assessment
Explanation not attracted in case of assessee previously
assessed to tax prior to amendment – amendment not
retrospective – CIT v. Smt. Lata Shantilal Shah (2009) 18
DTR 246 (Bom)
From AY 03-04, Explanation covers all assessees
Deemed concealment of income for non-filing of return of
income before time limit prescribed u/s.153(1) i.e.
completion of assessment
Effect - converts concealment penalty into penalty for delay
in filing return of income
Upto AY 1988-89, delay in filing return covered by
s.271(1)(a) and thereafter by levy of interest u/s.234A
Provision is over and above levy of interest u/s.234A
15
Penalties

Penalty u/s.271(1)(c)

Explanation 4





Covers loss to loss cases
Provision amended by Finance Act 2002, w.e.f. 1/4/2003 clause (a) substituted
Prior to amendment - conflicting view of Courts more
particularly after decision in CIT v. Prithipal Singh 249 ITR
670 (SC)
Law was then settled in Virtual Soft Systems Ltd. v. CIT
[2007] 289 ITR 83 (SC) (no penalty in loss to loss case)
However, this was then reversed by larger bench of SC in
CIT v. Gold Coin Health Food P. Ltd., 304 ITR 308 (SC)
(penalty justified even in loss to loss cases)
16
Penalties

Penalty u/s.271(1)(c)

Explanation 5
Inserted w.e.f. 1/10/1984 and discontinued w.e.f.
1/6/2007 and substituted by Explanation 5A and
271AAA w.e.f. 1/6/2007
 Applicable only in case of search action
 Prior to deletion, the provision contained for levy
of penalty in search cases where assets are found
and which are acquired out of undisclosed income
 Immunity is provided from levy of penalty upon
fulfillment of certain conditions

17
Penalties

Penalty u/s.271(1)(c)

Explanation 5 – Immunity if



income or transaction resulting in income is recorded in the
books of account before the date of search action; or
such income is disclosed to the Chief Commissioner or
Commissioner before the date of search action; or
in the search action, disclosure is made in statement
recorded u/s.132(4) and specifying therein the manner of
earning the income disclosed and also pays tax together with
interest in respect of such income.
Above 3 conditions are not cumulative but separate
from each other
18
Penalties

Penalty u/s.271(1)(c)

Explanation 5 – issues mostly relating to third
condition


Third condition consists of 3 parts Disclosure made in statement recorded u/s.132(4);
 Manner of earning the income to be disclosed;
 Payment of tax with interest in respect of income
disclosed.
Once all the 3 conditions satisfied - immunity
available

Gebilal Kanhaialal (HUF) v. ACIT (2004) 270 ITR 523 (Raj)
19
Penalties

Penalty u/s.271(1)(c)
 Disclosure made in statement recorded
u/s.132(4);
Recording of statement only by authorised officer
as per 132(4)
 Disclosure thus only in statement u/s.132(4) & not
otherwise
 Disclosure by way of letter or statement u/s.131 immunity may not be available
 Finance Minister Speech & instruction of CBDT
dated 10/3/2003 - no disclosure - rely of evidence
 How disclosure to be made

20
Penalties

Penalty u/s.271(1)(c)
 Manner of earning income to be disclosed
Manner of deriving income to be specified in the
statement recorded & not later
 Even if manner not specified or where no such
question asked by authorised officer - immunity still
available







CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj);
CIT v. E.V. Balashanmugham [2006] 286 ITR 626 (Mad);
CIT v. Nem Kumar Jain [2006] 151 Taxman 187 (All);
CIT v. Radha Kishan Goel [2005] 278 ITR 454 (All);
Gulabrai V. Gandhi v. ACIT [2003] 84 ITD 370 (Mum)
Also refer – Indus Engg. Co. v. ACIT (Inv) 184 Taxman 269
(Bom) – passing reference made – non disclosure of manner
of earning concealed income – penalty justified
21
Penalties

Penalty u/s.271(1)(c)
 Payment of tax with interest in respect of
income disclosed
Whether to be paid immediately upon making
disclosure
 Time limit by which payment required to be made if
not immediately




Wordings used – pays tax with interest
Payment of interest suggests can be paid later
CIT v. Mahendra C. Shah [2008] 299 ITR 305 (Guj)
 Outer-limit before completion of assessment by which time
AO needs to reach satisfaction whether to levy penalty
22
Penalties

Penalty u/s.271(1)(c)
 Whether immunity available for earlier years

Explanation 5 – sub-clause (2) – immunity available
only if


Undisclosed income earned in year of search or
Earlier year if due date for filing return has not expired on
date of search action
Issue is whether immunity still available for earlier
years also




CIT v. 1) Kanhaiyalal 2) Kanhaiyalal Saruparia [2008] 299 ITR
19 (Raj)
CIT v. S.D.V. Chandru [2004] 266 ITR 175 (Mad)
CIT v. Chhabra Emporium [2003] 264 ITR 249 (Del)
ACIT v. Rupesh Bholidas Patel (2008) 16 DTR 369 (Ahd) – Not
available followed in ACIT v. Kirit D. Patel 121 ITD 159
(Ahd)(TM)
23
Penalties

Penalty u/s.271(1)(c)
 Explanation 5A







Inserted w.e.f. 1-6-2007, thus applicable to search action
conducted on or after 1-6-2007
Found to be owner of assets or
Income included in books of account
Return filed before date of search but income (whether
recorded in books or not) not disclosed therein OR
No return of income filed before date of search action & due
date expired
Deemed to be concealed income even if entries recorded in
books of account
No reasonable cause provided for delay in filing return of
income for non-levy of penalty
Analogy of Explanation 4(b) could be made for credit of payment of
advance tax / TDS etc. – however no such specific relief provided
24

Penalties
Section 271AAA


Inserted w.e.f. 1-6-2007, thus applicable to search action
conducted on or after 1-6-2007 but before 1/7/2012
Penalty at 10% of undisclosed income of specified
previous year/s – i.e. year of search or immediate prior year if
due date of filing return u/s.139(1) not expired & no return
filed (word used AO ‘may’ direct … assessee ‘shall’ pay)
Immunity given from levy of penalty @10% if




Disclosure is made in statement recorded u/s.132(4) & specifies
manner of earning such income
Substantiates the manner of earning such income
Pays tax with interest on such undisclosed income – no outer
limit – tax paid within time specified in 156 notice of demand –
immunity available – DCIT v. Pioneer Marbles & Interiors P. Ltd.
– 68 DTR 1 (Kol)
Provision of section 271(1)(c) not to apply in respect of the
years covered u/s.271AAA
Undisclosed income defined – similar to one provided in
s.158B(b) & also includes expenses found to be false
25
Penalties

Section 271AAAImmunity provision similar to provision in
Explanation 5, however with one exception
 Manner of earning income to be also substantiated
 Issue is how to substantiate and till what stage




Since case of undisclosed income, may not have any
evidence to substantiate
Substantiation may be required only in the course of
search action
Substantiation only if asked / required by search party
while recording statement u/s.132(4)
26
Penalties

271AAB


Applicable for search action initiated u/s.132
on or after 1/07/2012
(a) Penalty levied @10% of undisclosed
income (UI) of specified previous year, ifUI admitted in statement recorded u/s.132(4) and
specifies the manner of earning income;
 Substantiates the manner of earning UI; and
 On or before specified date


Pays tax, together with interest, if any, on UI and
Declare UI in the return of income furnished for specified
previous year
27
Penalties

Penalty u/s.271AAB

(b) Penalty levied @20% of undisclosed
income (UI) of specified previous year, ifUI not admitted in statement recorded u/s.132(4);
 On or before specified date



Declare UI in the return of income furnished for specified
previous year, and
Pays tax, together with interest, if any, on UI
(c) Penalty minimum @30% and maximum
@90% of UI of specified previous year, if not
covered by (a) or (b).
28
Penalties

Penalty u/s.271AAB

Specified date means

Due date of furnishing return u/s.139(1) or date
specified in 153A notice
Specified previous year means previous yearEnded before date of search but due date
u/s.139(1) not expired and no return furnished; or
 In which search was conducted

29
Penalties

Penalty u/s.271(1)(c) - General
 Return of income not filed
Penalty only if concealment of particulars or
furnishing inaccurate particulars
 Act of concealment committed with filing of return
 In survey, additional income offered – return not
due – admitted income disclosed in return filed –
no penalty


Dilip M. Shah Mum-ITAT (Unreported)

Amirchand v. ITO 49 ITD 171 (Del)
Vinod Goyal v. ACIT (2008) 115 TTJ 559 (Nag)

DCIT v. Dr. Satish B. Gupta (2010) 42 SOT 48 (Ahd)

30
Penalties

Penalty u/s.271(1)(c) – General

Revised return offering income / conditional offer – to buy peace
& avoid litigation




Income surrendered after detection by department, then levy of
penalty justified



CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC)
Ramnath Jagannath v. State of Maharashtra [1984] 57 STC 46, 51
(Bom)
CIT v. Amalendu Paul (1984) 145 ITR 439 (Cal)
CRN Investments (P.) Ltd. v. CIT [2008] 300 ITR 342 (Mad)
CIT v. Mahabit Prasad Bajaj [2008] 298 ITR 109 (Jharkhand)
Jyoti Laxman Konkar v. CIT [2007] 292 ITR 163 (Bom) – case of
survey where revised return of income was filed after detection by
survey party
Income surrendered without detection by dept.- no penalty


Shree Nirmal Commercial Ltd. v. CIT [2008] 218 CTR 581 (Bom)
CIT v. Ashok Taker [2008] 170 Taxman 471 (Del)
31
Penalties

Penalty u/s.271(1)(c) – General

Penal provision – whether mandatory or discretionary 



Act on the basis of Legal advice / opinion – whether liable for
penal provision 


CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570 (SC)
CIT v. P. Natarajan [2004] 266 ITR 219 (Mad)
Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC)
T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC)
Dilip N. Shroff v. JCIT [2007 291 ITR 519 (SC)
Disallowance of expenses – whether penalty justified




CIT v. Ajaib Singh & Co. [2002] 253 ITR 630 (Punj. & Har.)
CIT v. Goyal Gases (P.) Ltd. [2000] 241 ITR 451 (Delhi)
J.K. Jajoo v. CIT [1990] 181 ITR 410, 412 (MP)
CIT v. Nepani Biri Co. Trust [1991] 190 ITR 402, 403 (All)
32
Penalties

Penalty u/s.271(1)(c) – General

Debatable issue – not a ground for levy of penalty 






Devsons P. Ltd. v. CIT [2010] 329 ITR 483 (Del)
CIT v. Harshvardhan Chemicals & Minerals Ltd. [2003] 259
ITR 212 (Raj.)
CIT v. Ram Singhani Dall Mills [2002] 254 ITR 264 (MP)
Chandrapal Bagga v. ITAT [2003] 261 ITR 67 (Raj.)
CIT v. Calcutta Credit Corporation (1987) 166 ITR 29 (Bom)
ACIT v. Porrittis & Spencer (A) Ltd. (2008) 22 SOT 281 (Del)
Disallowance of deductions – partly or wholly



CIT v. International Audio Visual Co. 288 ITR 570 (Del)
CIT v. Nath Bros. Exim International Ltd. 288 ITR 670 (Del)
CIT v. Caplin Point Laboratories Ltd. 293 ITR 524 (Mad)
33
Penalties

Penalty u/s.271(1)(c) – General

Estimation of GP / income
CIT v. Ample Properties Ltd. [2011] 335 ITR 460
(Mad)
 CIT v. Sangur Vanaspati Mills Ltd. [2008] 303 ITR
53 (P & H) – SLP rejected [2009] 308 ITR (St.) 18
 Harigopal Singh v. CIT (2002) 258 ITR 85 (P&H)
 CIT v. Kailash Crockery House (1999) 235 ITR 544
(Pat)
 Rajan H. Shinde v. DCIT (2006) 103 ITD 360
(Pune)(TM) – case of search however material
found not specifically showing discrepancy in GP

34
Penalties

Penalty u/s.271(1)(c) – General

Jurisdiction Point

Jurisdiction issue can be raised in penalty proceedings – even
for first time
If assessment not valid for any reason however not
challenged – same can be challenged for ground of levy of
penalty and only for deletion of penalty & not for quashing
assessment itself






ACIT v. Smt. Surinder Kaur (2009) 18 DTR 38 (Luck)/120 TTJ
618 – case of assessment u/s.153A
Tide Water Marine International Inc. v. DCIT (2005) 96 ITD 406
(Del) – case of reassessment
Union of India v. Rai Singh Dal Singh 88 ITR 200 (SC)
CIT v. Dumravan Cold Storage & Refrigerators Services 97 ITR
137 (Pat)
CIT v. Hotel Highland Park (2000) 246 ITR 130 (J&K)
Sambha R. Dalwati v. ITO 34 ITD 183 (Ahd)
35
Penalties

Penalty u/s.271(1)(c) – General

Limitation for passing penalty order – sec.275

Prior to proviso inserted by Finance Act 2003, w.e.f. 1/6/2003



AO could have waited until disposal of appeal by ITAT
Outer limit was six months from the end of the month in which order of CIT(A) or
Tribunal is received by CC / CIT
After insertion of proviso




Outer limit of passing penalty order –
 Before expiry of FY in which proceedings initiated; or
 If appeal preferred – within one year from the end of FY in which the CC /
CIT receives order passed by CIT(A) (on or after 1-6-2003)
Applicable to date of passing order and not with respect to particular assessment
year
No more to wait till outcome of Tribunal appeal – is one view
CIT(A) order passed after 1-6-03 – served on CC on 8-8-03, penalty order passed
on 31/3/05 time-barred
 Tarlochan Singh & Sons (HUF) v. ITO (2008) 114 TTJ 82 (Asr)
 Similar view - Naresh Kumar Gupta v. ITO (2009) 20 DTR 565 (Del)–CIT(A)
dismissed quantum appeal as time-barred (delay not condoned) – held
assessment order not subject matter of appeal
Proviso only clarifies if no appeal preferred to Tribunal but if appeal preferred to
Tribunal, then proviso does not override main provision and thus time limit is
available from passing of Tribunal order – CIT v. Mohair Inv. & Tdg P. Ltd. (Del) –
order dated 30/9/2011
36
Penalty u/s.271(1)(c) - some issues

Return of income not due, whether liable to
penalty – case of survey
Penalty only if concealment of particulars or
furnishing inaccurate particulars
 Act of concealment committed with filing of return
 In survey, additional income offered – return not
due – admitted income disclosed in return filed –
no penalty



CIT v. SAS Pharmaceuticals [2011] 335 ITR 259 (Del)
Dilip M. Shah Mum-ITAT (Unreported)

Amirchand v. ITO 49 ITD 171 (Del)
Vinod Goyal v. ACIT (2008) 115 TTJ 559 (Nag)

DCIT v. Dr. Satish B. Gupta (2010) 42 SOT 48 (Ahd)

37
Penalty u/s.271(1)(c) - some issues

Disclosure of income in survey for earlier years –
Revised return filed offering income - whether
liable for penalty



Silver Palace v. ITO [1999] 68 ITD 550 (Pune) – held
no discrepancy found in survey and revised return
filed on assurance of officers that no penalty would
be levied – penalty deleted
CIT v. V. Narashima Prasad [2001] 250 ITR 852 (Kar)
– held, no substantial question of law arises –
Tribunal given finding that assessee had not
concealed particulars of income
Jyoti Laxman Konkar v. CIT [2007] 292 ITR 163
(Bom) – held, discrepancy detected during survey –
original return filed dishonestly – revised return filed
out of compulsion after detection during survey – levy
of penalty justified
38
Issues

Whether levy of penalty only on the basis of statement recorded in
survey?

Statement taken in survey – no evidentiary value






Disclosure made in statement and then retracted, how far valid for
levy of penalty?
No material found in survey – income offered in return then
enhanced disclosure made by revised return – no penalty


Paul Mathew & Sons v. CIT [2003[ 263 ITR 101 (Ker)
CIT v. S. Khader Khan Sons [2008] 300 ITR 157 (Mad)
Unitex Products Ltd. v. ITO [2008] 22 SOT 429 (Mum)
DCIT v. Premsons (2010) 130 TTJ 159 (Mum)
Dilip Yeshwant Oak v. ACIT (2011) 138 TTJ 559 (Pune)
DCTI v. Bhanwarlal Mahnedra Kumar Soni (2011) 138 TTJ 381 (Jodh)
Instruction of CBDT – no confession statement to be recorded in
search/survey proceedings- rely only on evidences gathered

M/s. Rupa Prop. & Securities P. Ltd. v. ACIT, ITA No.2700/Mum/2010,
AY 2007-08, Bench ‘D’, order dated 22/9/2010 – Held, no addition
merely on basis of statement without any evidence – confession not to
be recorded as per instructions of CBDT
39
Penalties

Sec. 271D & 271E


Triggers only if provisions of sec.269SS & 269T
attracted
Provision introduced as a deterrent from explaining
unaccounted cash found as representing cash loans or
deposits, etc.



ADI (Inv.) v. Kum. A.B. Shanthi [2002] 255 ITR 258 (SC) – on
constitutional validity – held valid – but discussed in detail the
objects of provisions and as to the reasonable cause
Also for debarring cash transactions in order to
unearth evasion of tax
Provision attracted if loan or deposit accepted or
repaid in cash in excess of Rs.19,999.99
40
Penalties

Sec. 271D & 271E


Levy of penalty is independent of assessment
proceedings
Not necessary to initiate in assessment proceedings



ACIT vs. Vinman Finance & Leasing Ltd. (2008) 115 ITD 115
(VISK.) (TM)
Covered by sec.273B
Existence of reasonable cause / bona fide belief –
penalty not attracted (genuineness, identity, business
exigency, not for tax evasion, etc)




Eetachi Agencies 248 ITR 525 (Bom)
CIT v. Lakshmi Trust Co. [2008] 303 ITR 99 (Mad)
Karnataka Ginning & Pressing Factory v. JCIT (2001) 77 ITD
478 (Mum)
ITO v. Prabhulal Sahu [2006] 99 TTJ 177 (Jd)
41
Penalties – Ss.271D & 271E

Adjustment by book entries – whether provision
attracted


intention to curb cash transactions i.e. unearthing of black
money by curbing transactions made in cash
Book entries do not contain actual movement of funds but
merely adjusts accounts inter-se parties concerned






CIT v. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260 (Del)
CIT v. Govind Kumar (2002) 253 ITR 103 (Raj)
CIT v. Natvarlal Purshottamdas Parekh [2008] 303 ITR 5 (Guj.)
CIT v. Bombay Conductors & Electricals Ltd. [2008] 301 ITR
328 (Guj)
ACIT v. Jag Vijay Auto Finance (P) Ltd. (2001) 78 ITD 378 (Jp.)
- Held that where amount wad deposited through bank by
transfer voucher, there is no violation of section 269SS; object
of section is to counter the device of taking unaccounted cash
or unaccounted deposit
However, contrary view taken by Bombay HC in CIT v. Triumph
International Finance (I) Ltd. 345 ITR 270 (Bom)
42
Penalties

Sec. 271D & 271E

Whether both the provisions are independent
of each other

Penalty for 2 separate defaults




One for acceptance in cash
Second for repayment in cash
Thus, provisions attract independently and even if
case of cycle with the same party
Cash directly deposited in bank account of
party – whether case covered by provisions

Sri Renukeswara Rice Mills v. ITO [2005] 93 ITD
263 (Bang) – fulfils the object of s.40A(3) –
provisions similar, hence ratio would apply
43
Penalties

Penalty u/s.271C

If there is reasonable cause – penalty not
leviable
CIT v. M/s. Eli Lilly & Co. (India) P. Ltd. (SC)
(2009) 178 Taxman 505 (SC)
 DCIT v. SMS India Ltd. (2006) 7 SOT 424 (Mum)
 ITO v. Muthoot Financiers (2006) 103 ITD 108
(Kochi) – also on ground of bona fide belief

44
Interest

Nature of interest -

Chargeability of interest –
Is compensatory since exchequer deprived of legitimate dues by non-payment of
tax in time
Is mandatory – no
discretion to officer to not to levy interest - CIT v. Anjum
M.H. Ghaswala (2001) 252 ITR 1 (SC)
45
Thank You
46

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