Section 271D of the Income Tax Act
The decision most relied on for Section 271D is Navnitlal C. Javeri v. K.K. Sen (56 ITR 198), cited in 230 of the 447 judgments on BharatTax that turn on this section.
Leading authorities on Section 271D
The Supreme Court holds that circulars issued by the Central Board of Direct Taxes (CBDT) are binding on all officers and persons employed in the execution of the Income-tax Act. These circulars are binding even if they deviate from the provisions of the Act, particularly when issued to relieve hardships.
Withholding tax provisions, being machinery provisions, are not independent of the charging provisions determining an assessee's tax liability, and the taxability of foreign salary payments depends on specific facts. Additionally, penalty provisions under sections 271C and 271D are not automatic, and an assessee can be exonerated by a reasonable cause under section 273B, particularly if acting under a bona fide belief or in unsettled legal situations.
Penalty proceedings for defaults under Sections 269SS and 269T are independent of assessment proceedings; therefore, the limitation period under Section 275(1)(c) for imposing such penalties is not contingent on the completion of appellate quantum proceedings.
Journal entries for accepting or repaying loans and deposits, without any actual cash transaction, do not violate the provisions of Section 269SS or Section 269T of the Income Tax Act. Consequently, such transactions do not attract penalties under Section 271D or Section 271E.
Transactions involving the receipt or repayment of loans or deposits solely through journal entries, without actual cash movement, contravene Sections 269SS and 269T. However, penalties under Sections 271D or 271E for such contraventions are not imposable if the assessee demonstrates a reasonable cause under Section 273B, particularly when no cash has passed between parties.
The assessing officer must record explicit satisfaction in the assessment order for initiating penalty proceedings under sections like 271D, 271E, 269SS, 269T, or 269ST; a mere recommendation or information to another authority is insufficient to validate the penalty.
The date of initiation of penalty proceedings for the purpose of Section 275(1)(c) is when the Assessing Officer records a satisfaction or recommends penalty, not the later date when the Joint/Additional Commissioner of Income Tax issues the penalty notice.
A genuine personal transaction or a non-returnable transfer between family members or related entities does not constitute a 'loan' or 'deposit' under Section 269SS, and therefore, no penalty can be levied under Section 271D.
If additions made in an assessment order, which formed the basis for a penalty for concealment, are subsequently deleted, the penalty for concealment cannot survive and must be cancelled.
Judgments on Section 271D
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