1 Penalty - PowerPoint Presentation

Slide1

1

Penalty & Interest under Income-tax ActWIRC13/07/2012

CA.

Reepal

G.

Tralshawala

tralshawalareepal@gmail.com

Slide2

2

PenaltiesScheme & Object (Legislative intent)Abide LawsDeterrent EffectSlide3

3

PenaltiesPenalty u/s.271(1)(c)Concealment of particulars of income; ORFurnishing inaccurate particulars of incomeConcealment 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 Slide4

4

PenaltiesPenalty 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; orhas furnished inaccurate particulars of such income; -may direct ….. by reason of concealment of

particulars

of his income or furnishing inaccurate

particulars

of such incomeSlide5

5

PenaltiesPenalty u/s.271(1)(c)Emphasis on the word “Particulars”Disclosure of particulars of income-What particulars are required to be disclosedHow the same are to be disclosedWhen the same are required to be disclosedTo what extent are they required to be disclosedSlide6

6

PenaltiesPenalty u/s.271(1)(c)Nature of Proceedings & Burden of ProofLaw before 1964Quasi-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 provisionsSlide7

7

PenaltiesPenalty u/s.271(1)(c)Nature of Proceedings & Burden of ProofLaw from 1964 to 1976Word ‘deliberately’ deleted and Explanation addedExplanation 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-criminalSlide8

8

PenaltiesPenalty u/s.271(1)(c)Nature of Proceedings & Burden of ProofLaw from 1976 onwardsExplanation of 1964 amended5 new Explanations addedClause (B) added in 1986 in Explanation 1Explanation 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) Slide9

9

PenaltiesPenalty u/s.271(1)(c)Decision of Supreme Court in UOI v. M/s. Dharamendra Textile Processors (2008) 306 ITR 277 (SC) - larger Bench decisionExplanations indicate element of strict liabilityObject 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)Slide10

10

PenaltiesPenalty u/s.271(1)(c)Issues that arise after decision of SC in Dharamendra Textile Processor -Whether quasi-criminal or civil in natureWhether mens rea still applicableWhether levy of penalty is automaticSlide11

11

PenaltiesPenalty u/s.271(1)(c)Whether levy of penalty is automaticUOI 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)Slide12

12

PenaltiesPenalty u/s.271(1)(c)Explanation 1Initial burden of proof on assesseeAnalysis reveals-In respect of material facts to computation of total income, the assessee-

(A) – (i) fails to offer an explanation; or

(ii) explanation offered is found to be false by the AO or CIT(A) or Commissioner; or

(B) – (i) 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)Slide13

13

PenaltiesPenalty u/s.271(1)(c)Explanation 1If explanation of assessee is not found to be false - levy of penalty not justified invoking Explanation 1National 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) Slide14

14

PenaltiesPenalty u/s.271(1)(c)Explanation 2This explanation is for benefit of departmentProvides for levy of penalty in retrospectIntangible / ad hoc addition made in year 1Penalty not levied due to case of ad hoc additionIn 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)Slide15

15

PenaltiesPenalty u/s.271(1)(c)Explanation 3Prior 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 assessmentExplanation 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.234ASlide16

16

PenaltiesPenalty u/s.271(1)(c)Explanation 4Covers loss to loss casesProvision amended by Finance Act 2002, w.e.f. 1/4/2003 - clause (a) substitutedPrior 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) Slide17

17

PenaltiesPenalty u/s.271(1)(c)Explanation 5Inserted w.e.f. 1/10/1984 and discontinued w.e.f. 1/6/2007 and substituted by Explanation 5A and 271AAA w.e.f. 1/6/2007Applicable only in case of search actionPrior to deletion, the provision contained for levy of penalty in search cases where assets are found and which are acquired out of undisclosed incomeImmunity is provided from levy of penalty upon fulfillment of certain conditionsSlide18

18

PenaltiesPenalty 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; orin 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 otherSlide19

19

PenaltiesPenalty u/s.271(1)(c)Explanation 5 – issues mostly relating to third conditionThird 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)

Slide20

20

PenaltiesPenalty 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 madeSlide21

21

PenaltiesPenalty u/s.271(1)(c)Manner of earning income to be disclosedManner of deriving income to be specified in the statement recorded & not laterEven 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 justifiedSlide22

22

PenaltiesPenalty u/s.271(1)(c)Payment of tax with interest in respect of income disclosedWhether to be paid immediately upon making disclosureTime limit by which payment required to be made if not immediatelyWordings used – pays tax with interestPayment 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 penaltySlide23

23

PenaltiesPenalty u/s.271(1)(c)Whether immunity available for earlier yearsExplanation 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)Slide24

24

PenaltiesPenalty u/s.271(1)(c)Explanation 5A-Inserted w.e.f. 1-6-2007, thus applicable to search action conducted on or after 1-6-2007Found 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 providedSlide25

25

PenaltiesSection 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 falseSlide26

26

PenaltiesSection 271AAA-Immunity provision similar to provision in Explanation 5, however with one exceptionManner of earning income to be also substantiatedIssue is how to substantiate and till what stageSince 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)Slide27

Penalties

271AABApplicable 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, if-UI admitted in statement recorded u/s.132(4) and specifies the manner of earning income;Substantiates the manner of earning UI; andOn or before specified date-Pays tax, together with interest, if any, on UI andDeclare UI in the return of income furnished for specified previous year

27Slide28

Penalties

Penalty u/s.271AAB(b) Penalty levied @20% of undisclosed income (UI) of specified previous year, if-UI 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, andPays 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).

28Slide29

Penalties

Penalty u/s.271AABSpecified date means-Due date of furnishing return u/s.139(1) or date specified in 153A noticeSpecified previous year means previous year-Ended before date of search but due date u/s.139(1) not expired and no return furnished; orIn which search was conducted29Slide30

30

PenaltiesPenalty u/s.271(1)(c) - GeneralReturn of income not filedPenalty only if concealment of particulars or furnishing inaccurate particularsAct of concealment committed with filing of returnIn survey, additional income offered – return not due – admitted income disclosed in return filed – no penaltyDilip 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) Slide31

31

PenaltiesPenalty u/s.271(1)(c) – GeneralRevised return offering income / conditional offer – to buy peace & avoid litigationCIT 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)

Income surrendered after detection by department, then levy of penalty justified-

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) Slide32

32

PenaltiesPenalty u/s.271(1)(c) – GeneralPenal provision – whether mandatory or discretionary -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)

Act on the basis of Legal advice / opinion – whether liable for penal provision -

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) Slide33

33

PenaltiesPenalty u/s.271(1)(c) – GeneralDebatable 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) Slide34

34

PenaltiesPenalty u/s.271(1)(c) – GeneralEstimation of GP / incomeCIT 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 GPSlide35

35

PenaltiesPenalty u/s.271(1)(c) – GeneralJurisdiction Point-Jurisdiction issue can be raised in penalty proceedings – even for first timeIf 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) Slide36

36

PenaltiesPenalty u/s.271(1)(c) – GeneralLimitation for passing penalty order – sec.275Prior to proviso inserted by Finance Act 2003, w.e.f. 1/6/2003AO 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 30/9/2011Slide37

37

Penalty u/s.271(1)(c) - some issuesReturn of income not due, whether liable to penalty – case of surveyPenalty only if concealment of particulars or furnishing inaccurate particularsAct of concealment committed with filing of returnIn 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

) Slide38

38

Penalty u/s.271(1)(c) - some issuesDisclosure of income in survey for earlier years – Revised return filed offering income - whether liable for penaltySilver 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 justifiedSlide39

39

IssuesWhether levy of penalty only on the basis of statement recorded in survey?Statement taken in survey – no evidentiary valuePaul 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)

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-

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 CBDTSlide40

40

PenaltiesSec. 271D & 271ETriggers only if provisions of sec.269SS & 269T attractedProvision 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.19,999.99Slide41

41

PenaltiesSec. 271D & 271ELevy of penalty is independent of assessment proceedingsNot necessary to initiate in assessment proceedingsACIT 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) Slide42

42

Penalties – Ss.271D & 271EAdjustment by book entries – whether provision attractedintention 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

)Slide43

43

PenaltiesSec. 271D & 271EWhether both the provisions are independent of each otherPenalty for 2 separate defaultsOne 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 applySlide44

44

PenaltiesPenalty u/s.271CIf there is reasonable cause – penalty not leviableCIT 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 beliefSlide45

Interest

Nature of interest - Is compensatory since ex-chequer deprived of legitimate dues by non-payment of tax in timeChargeability of interest – Is mandatory – no discretion to officer to not to levy interest - CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 1 (SC)

45Slide46

46

Thank You