2021 (11) TMI 346 - AT - Income Tax

Penalty u/s 271E - violation of the provisions of section 269T - amount of loan was reduced by way of passing the journal entry - immunity under provisions of section 273B - HELD THAT - As there appears no dispute with respect to the accounting entries made by the assessee in the accounts which has reduced the loan liability by ₹25 lakhs stood in the name of Shri Milap Jadeja. However, we find that the genuineness of the transaction was not accepted by the learned CIT (A) - CIT (A) held that there was no documentary evidence filed by the assessee justifying that the assessee has purchased any piece of land. On the strength of the principles laid down in the case of CIT vs. Bombay Conductors Electricals Ltd 2008 (2) TMI 114 - GUJARAT HIGH COURT the assessee cannot be given the immunity from the penalty provisions as specified under provisions of section 271E of the Act. It is for the reason that the genuineness of the transaction has not been proved by the assessee by filing the necessary details in establishing the fact that the adjustment entry was made by the assessee for the purchase of the land. In the absence of, the necessary details we are not able to persuade ourselves with the contention of the learned AR for the assessee. Entries were duly reflected by the assessee in accounts of the parties involved in the impugned transaction of loan and purchase of the land. In our considered view, the genuineness of the transactions for the purchase of land cannot be proved without filing the necessary details. However, in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee to prove the genuineness of the transaction. If it is proved, there will not be any penalty under the provisions of section 271E of the Act. Accordingly, we are setting aside the issue on hand the file of the AO for fresh adjudication as per the provisions of law. Hence the ground of appeal of the assessee is allowed for the statistical purposes.

Summary

Issues:
The judgment involves the confirmation of penalty under section 271E of the Income Tax Act, 1961 for alleged violation of section 269T of the Act.

Detailed Analysis:

Issue 1: Confirmation of Penalty under Section 271E:
The assessee reduced a loan liability by passing journal entries in the books of accounts, amounting to ?25 lakhs, which the Assessing Officer (AO) considered a violation of section 269T of the Act. The AO imposed a penalty under section 271E for the same. The Commissioner of Income Tax (Appeals) - CIT(A) upheld the penalty, leading to the appeal before the Appellate Tribunal. The Tribunal considered the argument that repayment through journal entries is a valid mode of payment, citing judicial precedents. The Tribunal analyzed the transaction details and found discrepancies in proving the genuineness of the land purchase, leading to the non-acceptance of the explanation by the CIT(A). The Tribunal emphasized the necessity of providing documentary evidence to support transactions. Despite reflecting entries in accounts, the Tribunal noted the lack of conclusive evidence for the land purchase. Consequently, the Tribunal set aside the issue for fresh adjudication to allow the assessee an opportunity to establish the genuineness of the transaction to avoid penalty under section 271E.

Conclusion:
The Appellate Tribunal allowed the appeal for statistical purposes, setting aside the penalty under section 271E and providing the assessee with an opportunity to prove the genuineness of the transaction. The judgment highlights the importance of substantiating transactions with documentary evidence to avoid penalties under tax laws.