2022 (5) TMI 1572 - AT - Income Tax

Penalty u/s 271E - contravention of the provision of Section 269T - repayment of loan/deposits through account payee cheque or account payee drafts - whether assessment proceedings are necessary to levy penalty u/s 271E? - HELD THAT - As relying on SHRI MANOHAR LAL THAKRAL 2011 (1) TMI 538 - PUNJAB AND HARYANA HIGH COURT the impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed.

Summary

Issues:
Violation of Section 269T and penalty under Section 271E for repayment of loans in cash.

Analysis:
The appeals by the assessee were against orders passed under Section 271E of the Income Tax Act, 1961 for A.Ys. 2011-12 to 2016-17. The assessee, an agriculturist, repaid loans in cash to a cooperative society from sales of agricultural produce. The Assessing Officer imposed a penalty under Section 271E for contravention of Section 269T, which was upheld by the First Appellate Authority, leading to the appeal. The argument presented was that the payment was genuine, with no tax evasion, and no regular assessment was framed for the assessee. The Ld. A.R relied on a judgment by the Punjab & Haryana High Court to support the claim. The Ld. DR failed to counter these submissions.

The Tribunal considered the facts and the judgment of the Punjab and Haryana High Court, which quashed a penalty under Section 271E in a similar case. The Tribunal noted that penalty proceedings may only be initiated after a regular assessment is conducted, which was not the case here. The Tribunal found the explanation for the cash payments plausible, indicating no tax evasion and a technical default. The Tribunal upheld the deletion of the penalty, as done by the High Court, based on the absence of a regular assessment. Consequently, the penalty under Section 271E was deemed unsustainable and quashed, allowing the appeal by the assessee.

In subsequent appeals for A.Y. 2012-13 to 2016-17, the Tribunal applied the same reasoning from the lead case for A.Y. 2011-12, as no changed circumstances were presented. Therefore, the appeals by the assessee for those years were also allowed. The overall decision was pronounced in open court on 11/05/2022.