TMI Blog2020 (3) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... alty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or accountpayee demand draft, then the penalty may not be levied. If there was a genuine and bona fide transaction and if for any reason the tax payer could not get a loan or deposit by account- payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. In the instant case, the Ld. Assessing Officer ought to have considered that the payment of loan of ₹ 5,80,000/- by the assessee were undisputedly genuine and bona fide as they were reflected in the books of the recipients as well as those of the assessee. The assessee has explained the circumstances in which it was constrained to make the repayment of the loans in question in cash, therefore penalty should not be levied. Provisions of section 271E lays down conditions for imposition of penalty for repayments of loans and deposits in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty to the extent of ₹ 5,80,000/- misconstruing the expression any other preson appearing in the provisions of section 269T of the Act and his purported finding reached on such tenuous premise is completely unfounded, unjustified and untenable in law. 3.FOR THAT the Ld. Commissioner of Income Tax (Appeals) Durgapur acted unlawfully in upholding the order imposing penalty u/s. 271E of the Income Tax Act, 1961 amounting to ₹ 5,80,000/- passed by the Ld. Joint Commissioner of Income Tax, Range 1- Durgapur and was remiss in not taking into consideration the 'reasonable cause' as envisaged within the scope and ambit of the provisions of section 273B of the Income Tax Act, 1961 on the facts and circumstances of the instant case and the adverse conclusion reached on that behalf is totally illegal, illegitimate and infirm in law. 3. The facts of the case which can be stated quite shortly are as follows. The assessee filed its return of income for the A.Y. 2013-14 on 19-09-2013 disclosing total income of ₹ 1,79,515/-. An assessment u/s 143(3) of I.T. Act 1961 has been made on 21/03/2016 on a total income of ₹ 2,72,280/-. The assessing officer noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,80,000/-(₹ 1,40,000 + and 4,40,000) was made by assessee during A.Y. 2013-14 which is in contravention of the provisions of section 269T of the I.T. Act 1961, which attracts Penalty u/s 271E of the I.T. Act 1961. Therefore, AO issued notice to the assessee u/s 271E of the I.T. Act 1961. In response to the notice, the assessee in his letter dated 31-08-2017 stated that the entire round of transactions took place within the relatives and friends of the family and he had made repayment of the money to the persons who were in dire need of funds on those days, in order to enable them to carry on their business. The assessee also submitted before the AO that the transactions of repayment of loan in question in the instant case are genuine and bona fide, therefore the penal proceedings u/s 271E of the I.T. Act, 1961 should not be initiated. However, the assessing officer rejected the contention of the assessee and imposed the penalty of ₹ 5,80,000/- u/s 271E of the I.T. Act 1961 for violation of provisions of section 269T of the I.T. Act 1961. 4. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before ld CIT(A), who has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 271E read with section 269T of the Act are to be considered in light of the intention of the Legislature enacting such provision. It is settled that the object of introduction of section 269SS and 269T of the Income Tax Act, 1961 is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money and if he has made some false entries in his accounts, he shall not escape by giving false explanation for the same. The essence of this philosophy was embodied through the introduction of section 269SS and 269T of the Act in the statute which was to eradicate the evil practice of making false entries in account books and later manufacturing explanations in support thereof. We note that Hon`ble Supreme Court in the case of A.D.I.T. -VS- Kumari A. B. Shanti (2002) 255 ITR 487 (SC), held as follows: The next contention was that original Section 276DD is draconian in nature as penalty imposed for violation of Section 269SS is imprisonment which may extend to two years and shall also be liable to fine equal to the amount of loan or deposit. This Section was subsequently omitted and a new Section 271D was enacted. The penalty of imprisonment was deleted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r unaccounted deposits, the Finance Act has inserted a new section 269SS in the Income Tax Act debarring persons from taking or accepting, after 30th June, 1984 from any other person, any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount of such loan or deposit or the aggregate amount of such loan and deposits is ₹ 10,000/- or more. This prohibition will also apply in cases where on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), and the amount or the aggregate amount remaining unpaid is ₹ 10,000 or more. The prohibition will also apply in cases where the amount of such loan or deposit, together with the aggregate amount remaining unpaid on the date on which such loan or deposit is proposed to be taken, is ₹ 10,000 or more. 32.3 The prohibition will, however, not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by, the following, namely: (a) Government; (b) any banking company, post office savings bank or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We note that Hon`ble Madras High Court in the case of C.I.T. -VS- Lakshmi Trust Co. [2008] 303 ITR 99 (MAD), held as follows: We have given our careful consideration to the submissions made on either side. This court in CIT v. Kundrathur Finance and Chit Co. [2006] 283 ITR 329 (Mad), following the decision of the apex court in Asst. Director of Inspection (Invst.) v. Kum. A. B. Shanthi [2002] 255 ITR 258, held that if there was genuine and bona fide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. In the instant case, the Commissioner of Income-tax (Appeals) and the Appellate Tribunal found on the facts that the transactions were genuine and the identity of the lenders was also satisfied. The Appellate Tribunal also upheld the order of the Commissioner of Income-tax (Appeals) that there was no intention on the part of the assessee to evade the tax. Once the said finding as to the genuineness of the transactions is arrived at by the Tribunal on the facts, following the decision of this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to make the repayment of the loans in question in cash. We are satisfied that the assessee was prevented by a reasonable cause from making repayment of these loans by cheque or demand draft. Our finding with regard to existence of a reasonable cause taking away an assessee from the liability to penalty under section 271D holds good even in the context of the impugned penalty under section 271E. In the circumstances, even on facts, we are of the view that this is not a fit case for the levy of penalty under section 271E. 27. Therefore, both on the question of law as well as on facts, we find that imposition of penalty under section 271E is not in order. It is therefore, cancelled. In the instant case, the Ld. Assessing Officer ought to have considered that the payment of loan of ₹ 5,80,000/- by the assessee were undisputedly genuine and bona fide as they were reflected in the books of the recipients as well as those of the assessee. The assessee has explained the circumstances in which it was constrained to make the repayment of the loans in question in cash, therefore penalty should not be levied. 9. An order imposing penalty for failure to carry out a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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