2014 (4) TMI 557 - AT - Income Tax

Penalty u/s 271E of the Act Repayment of loan made in cash Held that - The assessee had taken loan from his father in the earlier financial years through cheques - The re payment of a loan in cash clearly violates the provisions of section 269T and, accordingly, penal provisions under section 271E, are triggered - the assessee had submitted that the re payment of loan in cash was under the circumstances when his father was in urgent need of cash for the purpose of his medical treatment which he was undergoing at that time - no corroborative evidence was given, only a letter of confirmation was filed by the father reiterating the same cause - the confirmation letter from the father cannot be completely brushed aside, especially when the transaction is between a very close relationship i.e., father and son thus, the penalty levied u/s 271E cannot be sustained in view of the reasonable cause, as envisaged in section 273B thus, the order of the CIT(A) set aside Decided in favour of Assessee.

Summary

Issues:
1. Challenge to penalty under section 271E for repayment of loan in cash to father.

Analysis:
The appellant, an individual engaged in business, challenged a penalty of Rs. 1,15,000 under section 271E for repaying a loan to his father in cash. The Assessing Officer initiated penalty proceedings as the repayment contravened section 269T. The appellant explained the cash repayment was due to his father's urgent medical treatment. The Commissioner (Appeals) upheld the penalty citing lack of documentary evidence. The appellant argued for penalty deletion under section 273B due to reasonable cause. The appellant's counsel presented bank statements and a letter from the father confirming the urgent need for cash. The Departmental Representative supported the penalty citing non-compliance with section 269T and lack of evidence for reasonable cause.

The Tribunal considered the loan repayment in cash a violation of section 269T triggering penalty under section 271E. To waive the penalty, the appellant needed to prove a "reasonable cause" under section 273B, indicating a genuine belief beyond their control. The Tribunal evaluated the situation where the father needed immediate cash for medical treatment. Despite the lack of corroborative evidence, the father's confirmation letter was deemed significant due to the close family relationship. Therefore, the Tribunal concluded that the penalty could not be sustained due to the reasonable cause as per section 273B, setting aside the Commissioner (Appeals) order and allowing the appellant's appeal.