The Delhi bench of the Income Tax Appellate Tribunal (ITAT) agreed with the assessee’s arguments and came to the conclusion that there were relevant grounds for violating sections 269SS and 269T of the Income Tax Act, 1961.
In rejecting the penalty order, the two-judge bench of Shamim Yahya and Asta Chandra noted that they did not approve the assessee’s statement because they had assumed that failure to comply with the terms of sections 269SS and 269T would essentially have penal consequences. In our humble opinion, this assumption was not legal.
M/s. Delhi State Taxi Operators’ Co-Operative Thrift Credit & Services Society Ltd., a cooperative society that acts as the assessee, filed two appeals in response to two separate orders from the commissioner of income tax CIT(A).
The Joint Commissioner of Income Tax (JCIT) was assessed a fine of Rs. 16,71,24,134 for breaching the provisions of sections 269SS and 269T of the Income Tax Act during the Assessment Year 2013–14. This punishment was upheld by CIT (A).
The assessee argued that its default satisfied the criteria for “reasonable cause” under Section 273B of the Income Tax Act before the Joint Commissioner of Income Tax (JCIT) and the Commissioner of Income Tax (Appeals).
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The JCIT observed that the Assessing Officer’s order via sheet entry asked for a list of assessee society members from whom deposits had been accepted during the assessment proceedings. Following examination, it was found that cash deposits of Rs. 16,71,24,134 and the return of deposits of Rs. 2,01,58,524 had violated sections 269SS and 269T of the Income Tax Act, respectively.
According to the assessee, the society has a genuine belief that the deposits are made or refunded on purpose by the members and are authentic. The assessee is a cooperative group that works for the good of its members. So the assessee requested to kindly dismiss the penalty proceedings.
The validity of cash deposits and deposit repayments is not a factor when evaluating the provisions of Sections 269SS and 269T of the Income Tax Act, which were added to stop the circulation of black money, stated JCIT.
The assessee’s counsel argued that the Assessing Officer and JCIT had not proven that the provisions of Sections 269SS and 269T were deliberately and intentionally breached in order to conceal any income or avoid paying any taxes.
Additionally, it was claimed that the assessee society is based on the idea of mutuality. The money the society received from its members is a capital receipt and cannot be regarded as a loan or deposit in any way. The assessee’s business activities included accepting and repaying deposits, and the depositors were members of the assessee.
Additionally, the department’s legal representative aggressively contended that the transaction’s authenticity is not a requirement for the application of a fine. According to Sections 269SS and 269T of the Income Tax Act, cash transactions are never permitted, even in legitimate transactions. The assessee’s situation is not covered by the excluding clause.
The court observed that there was absolutely no claim made against the assessee that it had ever intended to evade paying taxes or to deceive the Revenue by accepting loans or cash deposits.
The CBDT Circular F.No. 415/6/2000-IT (Inv. I) of March 25, 2004, which acknowledged that it was a common misconception—even if false—that the provisions of Section 269SS did not apply to credit cooperative societies, and advised field officers not to impose penalties under Sections 271D and 271E arbitrarily and should keep in mind Section 273B of the Income Tax Act—was also to be noted.
According to Section 273 of the Income Tax Act, if the assessee can show that there was a reasonable basis for the failure, no penalty under Sections 271D and 271E will be imposed on the assessee.
As a result, the tribunal dismissed the appeals and removed the fine imposed under Sections 271D and 271E of the Income Tax Act.
| Case Title | M/s. Delhi State Taxi Operators’ Co-operative Thrift Credit & Services Society Ltd. Vs JCIT |
| Citation | ITA Nos. 3107 & 3108/Del/2019 |
| Date | 26.04.2023 |
| Assessee By | Shri C.S. Aggarwal, Shri Ravi Pratap Mall, Ms Pushpa Sharma, Shri Uma Shankar, Shri Sandeip S Nagar |
| Department By | Shri T. James Singson, CIT-DR |
| ITAT Delhi | Read Order |
