2020 (12) TMI 45 - AT - Income Tax

Penalty imposed u/s 271D and 271E - availing and re paying loan otherwise than by an account payee cheque/demand draft in violation of the provisions contained under section 269SS and 269T - reasonable cause for the assessee to receive and re pay loan through journal entries - HELD THAT - Hon'ble Jurisdictional High Court in CIT v/s Ajitnath High Tech Builders Pvt. Ltd. Ors., 2018 (2) TMI 603 - BOMBAY HIGH COURT held that, since, prior to the decision in Triumph International Finance India Ltd. 2012 (6) TMI 358 - BOMBAY HIGH COURT which was rendered on 12th June 2012, there was reasonable cause for the assessee to receive and re pay loan through journal entries because of various decisions of the Tribunal holding that receipt and re payment of loan through journal entries would not come within the purview of section 269SS and 269T of the Act, the non compliance to the provisions of section 269SS and 269T of the Act would certainly be a reasonable cause under section 273B of the Act for non imposition of penalty under section 271D and 271E. In the facts of the present appeal, admittedly, the availing and re payment of loan through book entries was prior to 12th June 2012. Therefore non compliance to the provisions of section 269SS and 269T of the Act was due to a reasonable cause. Hence, imposition of penalty under section 271D and 271E of the Act in the facts of the present appeals is unjustified. Accordingly, we delete the penalty imposed under section 271D and 271E - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty under section 271D and 271E of the Income Tax Act, 1961 for the assessment year 2007-08.

Analysis:
The appellate tribunal heard appeals challenging penalties imposed under sections 271D and 271E of the Income Tax Act, 1961. The case involved an assessee, a resident company, who availed and repaid loans through book entries during the relevant financial year. The Assessing Officer initiated penalty proceedings as the transactions were not conducted through account payee cheques or demand drafts, allegedly violating sections 269SS and 269T of the Act. The assessee did not provide an explanation but sought adjournment, leading to the imposition of penalties. The first appellate authority partially reduced the penalty under section 271D but upheld the penalty under section 271E. Upon further appeal, the tribunal noted that the assessee had submitted written explanations and evidence, demonstrating that loans exceeding ?20,000 were transacted via account payee cheques. The tribunal found no discrepancy in the amounts but raised concerns about the timing of entries in the ledger account compared to the bank statement. Despite this, the tribunal held that rejecting the claim solely based on suspicion without proper inquiry was unjustified.

Furthermore, the tribunal analyzed whether loan transactions through book entries, without cash involvement, could trigger sections 269SS and 269T of the Act. Referring to relevant case law, the tribunal cited a decision stating that such transactions would indeed fall under the Act's provisions. However, a subsequent ruling clarified that prior to a specific judgment date, there was reasonable cause for non-compliance due to varying tribunal decisions. As the transactions in this case occurred before the critical judgment date, the tribunal deemed the penalties unjustified, following the precedent set by the higher court. Consequently, the tribunal deleted the penalties imposed under sections 271D and 271E, allowing the assessee's appeals.