2021 (1) TMI 408 - AT - Income Tax

Penalty u/s. 271E - Cash paid towards repayment of finance obtain for purchase of trucks - The payment was made in cash on due dates to avoid the default in repayment of loan, which would effect assessee's credibility in CIBIL and to avoid penalty for default, as on that date of such payments, signed cheque books were not available with the staff - For repayment of cash of L T Finance Ltd. as submitted that the account had to be closed immediately, so as to clear the finance, obtain a NOC so as to sell a lorry - HELD THAT - Penalty in this case has to be deleted, the assessee was prevented by the reasonable cause in making the repayment of finances otherwise than by way of cheque. Even otherwise the transactions are genuine. Both the Assessing Officer as well as the Ld. CIT(A) have not doubted the genuineness of the transactions. It is also not clear whether the finance obtained is, a lease finance or hire purchase finance. The assessee has explained the urgency leading to payment of instalment in cash. The lender have confirmed this fact. It is a fact that CBIL ratings are efficiently resulting in effect on business. When the transactions were genuine, then the violation of question is only a technical and venial. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT (supra) held that no penalty can be levied when the violation is technical and venial. Penalty in question is to be deleted - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 271E of the Income Tax Act, 1961 for A.Y. 2013-14.

Analysis:
1. The appeal was filed against the penalty imposed by the Assessing Officer under section 271E of the Income Tax Act, 1961. The Commissioner of Income Tax-(A)-6, Kolkata confirmed the penalty of ?6,54,118/- on the assessee for the assessment year 2013-14.

2. The case proceeded ex-parte as neither the assessee nor a representative appeared, and no adjournment petition was filed. The case was disposed of on merits after hearing the departmental representative.

3. A delay of 41 days in filing the appeal was condoned after reviewing the petition for condonation of delay, as it was established that the assessee had a reasonable cause for the delay.

4. The penalty was imposed on the assessee for paying installments in cash towards repayment of finances obtained for the purchase of vehicles. The assessee explained the urgency for cash payments to avoid default and penalties, as cheque books were not available, and the transactions were genuine.

5. The Assessing Officer and the CIT(A) upheld the penalty for cash repayment to another finance company, despite the explanation provided by the assessee for closing the account to clear the finance and obtain a NOC for selling a vehicle.

6. The Tribunal found that the penalty should be deleted as there was a reasonable cause for making cash repayments, and the transactions were genuine. The genuineness of transactions was not in doubt, and the urgency for cash payments was justified to maintain credibility and avoid default penalties.

7. Citing the Hindustan Steel Ltd. case, the Tribunal emphasized that penalties should not be levied for technical and venial violations when transactions are genuine. The Supreme Court precedent was applied to the current case, leading to the deletion of the penalty.

8. Considering the reasonable cause for the violation and the genuine nature of transactions, the Tribunal decided to cancel the penalty, as the assessee had a valid explanation for the cash payments made.

9. Consequently, the appeal of the assessee was allowed, and the penalty under section 271E of the Income Tax Act, 1961 was canceled. The order was pronounced in the open court on January 6th, 2021.