2011 (10) TMI 591 - AT - Income Tax

Summary

Issues involved: Appeal against cancellation of penalty u/s 271E for repayment in cash exceeding Rs. 20,000.

Summary:

Issue 1: Cancellation of penalty u/s 271E
The appeal was filed by the Revenue against the cancellation of penalty of Rs. 16,05,040/- levied u/s 271E for repayment in cash exceeding Rs. 20,000. The AO levied the penalty under section 271E as there was a violation of section 269T of the Act. However, the ld. CIT(A) cancelled the penalty after considering that the repayment in cash was due to advances from customers for booking of office, shops, and flats. The assessee provided sufficient material to support that the repayment was on account of advances received against bookings. The Tribunal also relied on a previous decision in a similar case. The Tribunal noted that the repayment was not a loan or deposit but a business transaction, exempt from section 269T.

Issue 2: Interpretation of loan or deposit
The Tribunal analyzed the definition of "loan or deposit" u/s 269T and the explanation provided. The assessee demonstrated through financial statements and confirmations from parties that the repayment was from advances received for business purposes, not falling under the definition of loan or deposit. The CBDT circular clarified that section 269T applies to loans and deposits only, not business transactions like advances received and repaid by the assessee.

Issue 3: Reasonable cause for cash repayment
Even if there was a cash repayment, the Tribunal held that penalty u/s 271E is not automatically leviable if there is a reasonable cause. The repayment in cash for business transactions, based on commercial expediency, amounted to a bona fide belief of the assessee, which is a reasonable cause as per section 273B. The Revenue failed to provide evidence that the money received was a deposit or loan. Therefore, the Tribunal confirmed the order of the ld. CIT(A) and dismissed the appeal filed by the Revenue.

In conclusion, the Tribunal upheld the cancellation of the penalty u/s 271E, considering the nature of the transaction as business advances and not falling under the purview of section 269T. The appeal filed by the Revenue was dismissed.