2018 (6) TMI 1031 - AT - Income Tax

Imposition of penalty u/s 271D & 271E - Violation of provisions u/s 269-SS and 269-T on account of cash transactions - Held that - Bonafide and/or genuineness of the transactions have not been question by the lower authorities while imposing penalty u/s 271D & 271E - Identity of the parties has also been well established by the assessee which was accepted by the authorities below - cash book reflects the cash flow in regard to the said amount of ₹ 1,00,000/- it was borrowed from the father of the assessee and repaid subsequently - thus there was no finding that the assessee intended to evade tax - reliance is made in case of ANANT HIMATSINGKA VERSUS ADDL. COMMISSIONER OF INCOME-TAX, KOLKATA 2011 (11) TMI 796 - ITAT KOLKATA - hence we find that when the genuineness of the transaction has not been doubted by the lower authorities as also the importance of urgency of raising cash loan, the penalty u/s 271D & 271E ought not to have been levied - Penalty levied u/s.271D & 271E deleted - Decided in favor of assessee.

Summary

Issues involved:
Levy of penalty under sections 271-D and 271-E of the Income Tax Act for alleged violation of provisions under sections 269-SS and 269-T related to cash transactions.

Detailed Analysis:

Issue 1: Violation of Sections 269-SS and 269-T
The appeals were against orders confirming penalties imposed by the Jt.CIT under sections 271-D and 271-E for alleged violations. The assessee had borrowed a cash loan from his father for an urgent need, which was repaid later. The Jt.CIT imposed penalties despite the assessee's justifications and explanations.

Issue 2: CIT(A)'s Decision
The CIT(A) examined the submissions but denied relief, citing lack of convincing reasons. The AR argued the genuineness of the loan transaction, citing precedents. The CIT(A) upheld the penalties, emphasizing the absence of a reasonable cause for not using non-cash methods for the transaction.

Issue 3: ITAT's Consideration
The ITAT reviewed the case, noting the genuineness of transactions and the absence of tax evasion intentions. Referring to similar cases, the ITAT found no grounds for penalty imposition. The ITAT emphasized the importance of proving a reasonable cause for failing to comply with section 269-SS.

Issue 4: High Court's Decision
The High Court examined whether the ITAT erred in rejecting the Revenue's appeal. The High Court emphasized the need to show a reasonable cause to avoid penalty under section 271-D. It highlighted the importance of substantiating evidence and the genuineness of transactions to support the assessee's case.

Conclusion:
The ITAT allowed the appeals, emphasizing the importance of genuineness and reasonable cause in loan transactions. The ITAT's decision aligned with the High Court's emphasis on proving a reasonable cause to avoid penalties under the Income Tax Act. The judgments highlighted the significance of factual evidence and compliance with statutory obligations to avoid penalties, ultimately leading to the dismissal of the penalties imposed under sections 271-D and 271-E.