2015 (11) TMI 1370 - AT - Income Tax

Penalty u/s. 271D and 271E - numerous cash deposits and repayment was made in cash - CIT(A) deleted the penalty - Held that - There is nothing to indicate that the amount received and repayment is a loan or unaccounted for. It is entered in the accounts duly maintained by both. In fact, the purpose for which the said amount was received is also clear from the material on record and therefore, there is nothing to indicate that this amount is paid as loan or deposit. Find considerable cogency in the assessee s submission that in the absence of such material on record keeping in mind the relationship between the parties the nature of transaction coupled with the fact that the assessee was undergoing a financial difficulty. Also find that the case law relied upon by the Ld. DR is based on different facts i.e. there is no material to show the real exigency to take cash loan. However, in the case laws cited by the Ld. Counsel of the assessee there was definite sufficient cause to establish the real exigency of taking the cash loans. CIT(A) has rightly observed that assessee has demonstrated the funds were arranged in cash on urgent requirement of the business which is in accordance with commercial expediency of assessee s business which was being closed during the year as the remaining stock of cloth was being sold to clear the outstanding of the business by paying the outstanding creditors and as a result, the assessee has undergone a financial crisis, hence, Ld. CIT(A) has rightly deleted the penalty in dispute. In view of above, find no infirmity in the impugned order passed by the Ld. CIT(A) - Decided against revenue

Summary

Issues:
Appeals against penalty orders under sections 271D and 271E of the Income Tax Act, 1961 for assessment year 2009-10.

Analysis:
1. Issue 1 - Penalty under Section 271D:
The Assessing Officer (AO) imposed a penalty under section 271D for cash deposits made by the assessee's husband and subsequent cash repayments. The CIT(A) deleted the penalty, stating that the transactions were in accordance with commercial expediency and business need. The AO did not question the genuineness of the transactions during assessment. The CIT(A) emphasized that the penalty under section 271D is not automatic and requires the absence of a reasonable cause for non-compliance. The CIT(A) found that the funds were arranged in cash due to the urgent business requirement as the business was closing, and the transactions were recorded in the books, indicating commercial expediency. The CIT(A) concluded that the penalty was not warranted as there was a reasonable cause for the transactions.

2. Issue 2 - Penalty under Section 271E:
The AO initiated a penalty under section 271E for certain cash repayments made by the assessee. However, the CIT(A) also deleted this penalty, considering the nature of the transactions and the financial difficulty faced by the assessee. The CIT(A) observed that the transactions were duly recorded and there was no indication of unaccounted funds. The CIT(A) found no merit in the appeal, given the relationship between the parties, the nature of the transactions, and the financial circumstances of the assessee. The CIT(A) upheld the deletion of the penalty under section 271E based on the evidence presented and the lack of material suggesting any wrongdoing.

3. Judgment:
The Tribunal upheld the CIT(A)'s orders, dismissing the Revenue's appeals against the deletion of penalties under sections 271D and 271E. The Tribunal concurred with the CIT(A)'s reasoning, emphasizing the commercial expediency and genuine business need behind the transactions. The Tribunal found no reason to interfere with the well-reasoned decision of the CIT(A) and highlighted the absence of evidence indicating any irregularities in the transactions. The Tribunal concluded that the penalties were rightly deleted, considering the circumstances and evidence presented.

In summary, the Tribunal affirmed the CIT(A)'s decision to delete the penalties under sections 271D and 271E, emphasizing the genuine business reasons and lack of evidence suggesting any malpractice or unaccounted funds in the transactions.