2019 (10) TMI 238 - AT - Income Tax

Levy of penalty u/s.271E - repayment of the loan in cash - reasonable cause in the violation of provisions of Section 269T - whether explanation offered by the assessee in response to show cause notice is reasonable or not? - HELD THAT - The explanation of the assessee is that it was forced to repay the loan in cash on account of business expediency to meet the working capital limits of one the business concern in which he is interested; cannot be considered to be valid explanation for repayment of loan in cash. The fact that assessee accepted loan in cash and repaid the loan in cash goes to prove that there is active collusion with the lender in evading the taxes. In the absence of survey proceedings conducted in the premises of Shri. A. Kannan, this transaction would not have come to light. Valid explanation for acceptance of loan in cash, cannot a valid reason for repayment of loan in cash. Reliance placed by the Authorised Representative on the decision of Co-ordinate Bench in assessee s own case for deletion of penalty for violation of provisions of Section 269SS of the Act does not hold good. Similarly, the ratio decision in the case of Manohar Lal Thakral 2011 (1) TMI 538 - PUNJAB AND HARYANA HIGH COURT cannot be accepted having regard to the cogent reading of provisions of Section 269T and 275A of the Act. It is clear that the completion of assessment proceedings is not a condition precedent for initiation of penalty proceedings u/s.269T. Thus, we do not find any reason to interfere with the orders of the lower authorities. Hence, we confirm levy of penalty u/s.271E - Decided against assessee.

Summary

Issues:
Levy of penalty under section 271E of the Income Tax Act, 1961 for Assessment Year 2009-2010.

Detailed Analysis:

1. Grounds of Appeal:
The appellant challenged the order of the Commissioner of Income Tax (Appeals) confirming the penalty under section 271E of the Act. The grounds of appeal included contentions regarding the legality, justification, and reasons for the penalty imposition, as well as arguments related to the applicability of various provisions of the Act.

2. Brief Facts:
During survey proceedings, it was discovered that the appellant had repaid loans in cash, leading to the issuance of a show cause notice for penalty under section 271E. The appellant argued that the cash transactions were necessitated by business requirements to enhance credit facilities. The Assessing Officer, however, found the explanations unsatisfactory and imposed the penalty.

3. Arguments Before CIT(A):
The appellant appealed to the CIT(A), who upheld the penalty citing the failure to provide evidence of lender insistence on cash repayment and the precedence of certain judgments. The CIT(A) emphasized that mens rea was not essential for penalty imposition under section 271E.

4. Arguments Before ITAT:
The appellant further appealed to the ITAT, contending that previous tribunal decisions favored the appellant's position, emphasizing business exigencies for cash transactions. Additionally, the appellant argued that penalty initiation without regular assessment proceedings was impermissible, citing relevant case law.

5. ITAT Decision:
The ITAT analyzed the issue of penalty imposition under section 271E, focusing on the reasonableness of the appellant's explanation for cash transactions. The ITAT found the business exigencies argument insufficient, considering the active collusion with the lender in tax evasion. The ITAT rejected the reliance on previous tribunal decisions and the cited case law, upholding the penalty under section 271E.

6. Conclusion:
Ultimately, the ITAT dismissed the appeal, confirming the levy of the penalty under section 271E of the Act for the Assessment Year 2009-2010. The decision was based on the finding that the appellant's explanation for the cash transactions did not constitute a valid reason to avoid the penalty, given the circumstances of the case and the provisions of the Act.