2020 (3) TMI 716 - AT - Income Tax

Penalty u/s 271E - repayment of the loans in question in cash - default u/s 269SS - reasonable cause - HELD THAT - Provision of section 269T of the Act, which is in seriatim to section 269SS of the Act, was introduced to eliminate the proliferation of black money in the society at large and not otherwise. As per CBDT circular, noted above, the assessee should explain the reasonable cause. In the instant case, the assessee has explained the reasonable cause stating that the entire transactions took place within the relatives and friends of the family and he had made repayment of the money to the persons who were in dire need of funds on those days, in order to enable them to carry on their business. These transactions have been recorded in the books of the assessee as well as in the books of the person to whom the payment was made. This is bona fide and genuine transaction to help the relatives and friends in needy hours and there was no intention to deceive the Revenue. Provisions, of Section 273B provide that notwithstanding anything contained in the provisions of 271E of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or accountpayee demand draft, then the penalty may not be levied. If there was a genuine and bona fide transaction and if for any reason the tax payer could not get a loan or deposit by account- payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. In the instant case, the Ld. Assessing Officer ought to have considered that the payment of loan of ₹ 5,80,000/- by the assessee were undisputedly genuine and bona fide as they were reflected in the books of the recipients as well as those of the assessee. The assessee has explained the circumstances in which it was constrained to make the repayment of the loans in question in cash, therefore penalty should not be levied. Provisions of section 271E lays down conditions for imposition of penalty for repayments of loans and deposits in cash, where the amount exceeds ₹ 20,000/- in violation of section 269SS of the Act. Considering the fact that this provision is brought in for identification of source for repayment, there should not be any levy of penalty where the persons are otherwise properly identified and the transactions are genuine, because there can be no attempt to evade tax, where the identities of the persons dealt with are known. In the instant case, the repayment of advances from regular parties are identifiable and the assessee has explained the circumstances in which it was constrained to make the repayment of the loans in question in cash. That being so, the penalty imposed on repayment of advances from two persons should be deleted, hence we delete the penalty - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 271E read with Section 269T of the Income Tax Act, 1961.
2. Interpretation of the expression "any other person" in Section 269T.
3. Consideration of 'reasonable cause' under Section 273B of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Jurisdiction under Section 271E read with Section 269T of the Income Tax Act, 1961:
The appellant contended that the conditions precedent for the assumption of jurisdiction under Section 271E read with Section 269T were not satisfied. The Assessing Officer imposed a penalty of ?5,80,000 for repaying loans in cash, which was upheld by the Commissioner of Income Tax (Appeals). The Tribunal noted that the repayment of loans in cash to two individuals, Shri Bijay Guha and Shri Samarendra Sinha Babu, totaling ?5,80,000, was in contravention of Section 269T, attracting penalty under Section 271E. However, the Tribunal emphasized the legislative intent behind these sections, which was to prevent false explanations for unaccounted money.

2. Interpretation of the expression "any other person" in Section 269T:
The appellant argued that the recipients of the cash repayments were close relatives and friends, not falling under the term "any other person" as per Sections 269SS and 269T. The Tribunal considered the genuineness of the transactions, which were properly recorded in the books of accounts of both the appellant and the recipients. The Tribunal referred to the Supreme Court's judgment in A.D.I.T. vs. Kumari A. B. Shanti, which highlighted the discretionary power of authorities to not levy penalty if there was a reasonable cause for the failure to comply with the provisions.

3. Consideration of 'reasonable cause' under Section 273B of the Income Tax Act, 1961:
The Tribunal examined whether the appellant had a 'reasonable cause' for repaying the loans in cash. The appellant claimed that the repayments were made to individuals in dire need of funds, which were genuine and bona fide transactions. The Tribunal referred to the CBDT Circular No. 387, which explained the purpose of Sections 269SS and 269T to counter unaccounted cash. The Tribunal also cited the Madras High Court's decision in CIT vs. Lakshmi Trust Co., which supported the view that genuine transactions with established identities should not attract penalties. The Tribunal concluded that the appellant had a reasonable cause, as the transactions were genuine, recorded in the books, and there was no intention to evade tax.

Conclusion:
The Tribunal allowed the appeal, deleting the penalty of ?5,80,000 imposed under Section 271E. The Tribunal emphasized that penalties should not be imposed for genuine transactions where the identities of the parties are known, and there is no intention to evade tax. The judgment underscored the importance of considering the legislative intent and the presence of a reasonable cause before imposing penalties under the Income Tax Act.