2010 (2) TMI 1167 - AT - Income Tax

Summary

Issues Involved:
The appeal concerns the deletion of penalty u/s 271E of the Act by the Ld. CIT(A) for the Assessment Year 2004-05, based on the repayment of loans made other than by accounts payee cheques or demand drafts.

Repayment to M/s. Perfect Softech P. Ltd.:
The auditors noted in the Annexure J to the Form 3CD that the assessee repaid loans to M/s. Perfect Softech P. Ltd. and M/s. Enpro Telecom P. Ltd. other than by accounts payee cheques or demand drafts. The revenue argued that the penalty was justified as the payments violated Section 269T of the Act. However, the Ld. CIT(A) found that the payment to M/s. Perfect Softech P. Ltd. was by accounts payee cheque, supported by evidence from HDFC bank. The tribunal upheld the deletion of penalty for this transaction, as the cheque was issued on 01.01.2004 and cleared through the bank.

Repayment to M/s. Enpro Telecom P. Ltd.:
Regarding the payment to M/s. Enpro Telecom P. Ltd., it was revealed that both companies were connected businesses with the same address. The assessee transferred the loan from M/s. Enpro Telecom P. Ltd. to M/s. Perfect Softech P. Ltd. through book entries. The tribunal found that this transfer did not violate Section 269T as it was a bona fide transaction between connected concerns. The explanation provided by the assessee was considered genuine, and the penalty under u/s 271E was rightly deleted by the Ld. CIT(A).

Conclusion:
The tribunal upheld the decision of the Ld. CIT(A) to delete the penalty u/s 271E for both transactions, as the repayment to M/s. Perfect Softech P. Ltd. was made through an accounts payee cheque and the transfer of loan between connected concerns did not contravene Section 269T. Therefore, the appeal of the revenue was dismissed on 18th Feb., 2010.