2002 (4) TMI 230 - AT - Income Tax

Summary

Issues:
- Penalty imposed under section 271E of the IT Act for contravention of section 269T
- Interpretation of repayment to Sarita Rathi and Dushyant Rathi as loan or deposit
- Reliance on judicial pronouncements by the CIT(A)
- Applicability of section 269T to loan transactions
- Granting relief on grounds not raised before lower authorities

Analysis:
1. The Deputy Commissioner of Income-tax imposed a penalty under section 271E for contravention of section 269T due to alleged cash repayments to Sarita Rathi and Dushyant Rathi. The assessee argued that the repayments were for loans, not deposits, and thus not covered by section 269T. The penalty was deleted by the first appellate authority based on a judicial pronouncement and affidavits provided by the parties.

2. The Department appealed the deletion of the penalty, arguing against the reliance on a judgment by the CIT(A) that was stayed by the Supreme Court. The assessee contended that the repayments were for loans, citing a Delhi High Court decision. The Tribunal reviewed the orders and arguments presented.

3. The Tribunal noted that the CIT(A) relied on a judgment that was not operative due to a stay by the Supreme Court. The Tribunal emphasized the distinction between loan and deposit transactions under sections 269SS and 269T, highlighting that the legislative intent was to cover deposits, not loans. The Tribunal cited proposed amendments to extend the scope of section 269T to loans, further supporting the distinction.

4. The Tribunal found that the DCIT incorrectly treated loan and deposit interchangeably, contrary to legislative distinctions. As the repayments were for loans, not deposits, section 269T was deemed inapplicable. The penalty imposed under section 271E was considered unjustified and canceled based on the legislative intent and lack of evidence proving the transactions were deposits.

5. The Tribunal emphasized its authority to grant relief on grounds not raised before lower authorities, canceling the penalty under section 271E due to the inapplicability of section 269T to the loan transactions. Both departmental appeals were dismissed based on the above analysis.