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Penalty under section 271E of the Income Tax Act for cash repayments violating section 269T. Analysis: The appeal was against the penalty of Rs. 4,90,324 imposed under section 271E of the Income Tax Act for cash repayments made during the assessment year, violating section 269T. The Assessing Officer levied the penalty due to the company repaying deposits in cash, which was seen as a violation of the provisions of section 269T. The CIT(A) confirmed a portion of the penalty while deleting the balance, stating that the amount in question was considered a 'deposit' under the IT Act. The CIT(A) emphasized that the term 'deposit' in the IT Act had a specific definition, and the definition in the Companies Act was irrelevant in this context. The authorized representative argued that the company faced losses, affecting its creditworthiness, leading creditors to demand cash payments. They contended that there was a reasonable cause for the cash payments under section 273B of the IT Act, which exempts penalties for defaults with reasonable cause. The representative also highlighted that the penalty for violating section 269T should apply to cases without genuine transactions and reasonable causes. They further argued that payments to a sister concern in cash did not breach section 269T and were commercially expedient. Regarding the limitation for imposing penalties, the authorized representative pointed out that the penalty order was beyond the prescribed period under section 275(1)(c). They cited a Tribunal decision to support their argument. The Departmental Representative, however, supported the lower authorities' orders, stating that the penalty was correctly imposed within the time limit. After considering the submissions and case facts, the Tribunal found that the cash payments to a sister or closely related concern, due to common directors, were made under genuine circumstances arising from financial losses. The Tribunal agreed with the authorized representative that in cases of credibility issues, cash payments might be demanded, and cheques not accepted. They noted that the parties involved were existing taxpayers, not part of a search and seizure operation. The Tribunal referenced the CBDT's objective behind sections 269T and 269SS to prevent false explanations for unaccounted money. They concluded that the repayment made to meet urgent business needs under a bona fide belief constituted a reasonable cause under section 273B, exempting the penalty. The Tribunal cited a previous case to support their decision and subsequently canceled the penalty. In conclusion, the Tribunal allowed the appeal, setting aside the penalty of Rs. 4,90,324 imposed under section 271E of the Income Tax Act for cash repayments violating section 269T.
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