2013 (10) TMI 1327 - AT - Income Tax

Penalty under 271D and 271E - accepting of loans and repayment of loans in cash have resulted in violation of the provisions of law stated in Sections 269SS and 269T - CIT(A) deleted the penalties levied under Section 271D - Held that - In the present case all the transactions have been duly recorded in the books of the creditor as well as in the books of the assessees. The loans accepted by the assessees have been merged in the business finance of the assessees reflecting in their books of account. The funds required for repayment of loans were also generated out of the business as reflected in their books of account. The details of the parties are available on record. The assessees as well as lenders are all regularly assessed to income-tax. The identity of the parties are beyond doubt. The factum of loan and repayments are beyond doubt. The genuineness of the transactions is also not in doubt. It is also established by the assessees that there existed similar emergency for repaying the loan in cash as the emergency which prompted them to take loans in cash. Therefore this is a case where there is a reasonable cause for the assessees to repay the loans in cash. In such circumstances it is to be seen that the violation of Section 269T is technical. Therefore we find that the Commissioner of Income Tax (Appeals) ought have deleted the penalties levied under Section 271E when in fact for good reasons he was deleting the penalties levied under Section 271D. - Decided in favour of assessee.

Summary

Issues:
Penalties under Sections 271D and 271E for accepting and repaying loans in cash, Reasonable cause for non-compliance with Sections 269SS and 269T, Judicial discretion in imposing penalties.

Analysis:

1. Penalties under Sections 271D and 271E:
The case involved penalties under Sections 271D and 271E of the Income-tax Act, 1961, due to accepting and repaying loans in cash, violating Sections 269SS and 269T. The Commissioner of Income Tax (Appeals) examined each transaction and found reasonable cause for accepting loans in cash, leading to the deletion of penalties under Section 271D. However, he upheld the penalties under Section 271E for repaying loans in cash, as it violated Section 269T.

2. Reasonable Cause for Non-Compliance:
Section 273B provides that penalties under Sections 271D and 271E can be avoided if a reasonable cause is proven for non-compliance with Sections 269SS and 269T. The assessees argued that the cash transactions were due to urgent business needs and creditor demands, justifying the acceptance and repayment of loans in cash. The Commissioner of Income Tax (Appeals) accepted the reasonable cause for accepting loans in cash but not for repaying in cash, leading to a discrepancy in his decision.

3. Judicial Discretion in Imposing Penalties:
The judgments in Hindustan Steel Ltd. v. State of Orissa and Assistant Director of Inspection (Investigation) v. Kum. A.B. Shanthi were referenced to highlight the judicial discretion required in imposing penalties for non-compliance with statutory obligations. The Tribunal found that the circumstances of the case, including proper record-keeping and genuine transactions, justified deleting the penalties under Section 271E, aligning with the principles outlined in the judgments.

In conclusion, the Tribunal allowed the appeals filed by the assessees, deleting the penalties levied under Section 271E for all cases. The decision was based on the reasonable cause shown for the cash transactions, the absence of adverse circumstances, and the proper recording of loan transactions in the books of both parties. The judgment emphasized the importance of judicial discretion and consideration of all relevant circumstances in imposing penalties for non-compliance with statutory obligations.