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TMI Blog2025 (5) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... use shown by the petitioner, for having repaid the loan in cash on instruction of the lender to arrest escalation of the interest on loan for want of liquidation, whether it can be held to be bona fide quo Section 273B of the Income Tax Act." 2. The aforesaid questions of law arise on the following factual backdrop:- 3. The appellant's assessment under Section 143 (3) read with Section 147 of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2015-16 was completed on 23-12-2017, however, in the assessment proceeding, the Assessing Officer held that the assessee has made repayment of loan to M/s. Tata Finance Corporation in that financial year to the extent of Rs. 6,71,939/- in cash against the loan taken for commercial vehicle and accordingly proceeded to initiate penalty proceeding under Section 271E of the Act on the ground that repayment of loan to the extent of more than twenty thousand rupees by the assessee is in violation of provisions contained in Section 269T of the Act, which the assessee replied on 27-12-2018 stating that due to failure on her part to pay installments in time, the financer by letter dated 5-11-2012 insisted upon her to make cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble cause shown by the assessee was not considered by the three authorities and the Assessing Officer has straightway levied penalty finding violation of Section 269T of the Act which is per se illegal and bad in law, as the order imposing penalty is discretionary and once material has been brought on record for exercising the discretion, discretion ought to have been exercised by the assessing authority which has failed to exercise judiciously and the two appellate authorities also concurrently did not notice the illegality committed by the assessing authority and affirmed the order imposing penalty mechanically rendering the order illegal and liable to be set aside. 6. Mr. Ajay Kumrani, learned counsel appearing for respondents No. 2 to 4/ Revenue, would support the impugned order and submit that the finding recorded by the three authorities that there is complete non-compliance of Section 269T of the Act inviting the provisions contained in Section 271E of the Act is the correct finding of fact based on the evidence available on record which is neither perverse nor contrary to the record and as such, the appeal deserves to be dismissed. 7. We have heard learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than by the modes set out therein. In other words, Section 269T provides that irrespective of the fact that there are several modes for repaying the deposit, the entities specified in Section 269T shall repay the deposit only by the modes set out therein. Thus, the negative language used in Section 269T as also the penal consequences provided in Section 271E for non-compliance of the procedure prescribed under Section 269T leave no manner of doubt that repayment of deposit in the manner prescribed under Section 269T is mandatory. Thus, it is mandatory under Section 269T of the Act for the persons specified therein to repay any loan/deposit together with interest, if any, exceeding the limits prescribed therein, by account payee cheque/ bank draft. 11. Consequence of non-compliance of mandatory provision contained in Section 269T of the Act is provided in Section 271E of the Act, which states as under:- "271E. Penalty for failure to comply with the provisions of section 269T.-(1) If a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out." 14. At this stage, it would be appropriate to notice Section 273B of the Act. It is a provision which contemplates certain exigencies in which though the assessee is liable to suffer penalty, but penalty is not to be imposed in certain cases. Section 273B of the Act also includes Section 271E of the Act and, as such, imposition of penalty under Section 271E of the Act for non-compliance of Section 269T is subject to the provisions contained in Section 273B of the Act and no penalty shall be imposable on the person or the assessee under Section 271E of the Act, as the case may be, for any failure referred to in the said provisions if assesse proves that there was reasonable cause for the said failure. Section 273B of the Act provides as under:- "273B. Penalty not to be imposed in certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to note that another provision, namely, section 273B of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty 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 account payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B. If there was a genuine and bona fide transaction and if for any reason the taxpayer 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." 17. Therefore, a combined reading of the provisions contained in Section 271E of the Act [which provides penalty for failure to comply with the provisions of Section 269T] and Section 273B of the Act makes it abundantly clear that if the assessee shows reasonable cause for the failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icing the provisions contained in Section 273B of the Act. There is no finding by the assessing authority or the two appellate authorities that the transaction made by the assessee in breach of the provisions contained in Section 269T of the Act, was not a genuine transaction. On the other hand, return of the assessee has been accepted as it is and the transaction reflected in the books of account during the assessment year under Section 143 (3) and none of the authorities have recorded finding that the same was not genuine and not a bona fide transaction. There is no finding of the two appellate authorities that the transaction in breach of the aforesaid provisions made by the assessee was a mala fide transaction with an object to evade the tax and aimed to avoid any tax liability. As stated earlier, all the three authorities viz., the Assessing Officer, the CIT (Appeals) and the ITAT have proceeded on the basis that breach of provisions contained in Section 269SS of the Act shall lead automatically to penal provisions contained in Section 271E of the Act and completely ignored the provisions contained in Section 273B of the Act which requires that on proof of reasonable cause, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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