2004 (7) TMI 323 - AT - Income Tax

Current Account Transactions - Challenged the cancellation of penalties imposed by the Dy. CIT u/s 271E - repayment of loans/deposits exceeding Rs. 20,000 in cash to a company manager - violation of section 269T - HELD THAT - In the present cases, the source of amounts received or repaid are not in doubt. In fact, copies of the assessment orders in both the cases have been placed on our file. The same do not show that any additions on this account were made or any transaction was considered as unexplained. These provisions cannot be used for blocking the day-to-day normal transactions. Otherwise it would be very difficult for anybody to run its business. In the present cases, the amounts have been given and repaid in the normal course of assessee's business and all these transactions are bona fide. Therefore, penalty u/s 271E is not attracted in both the cases. If at all there is any fault on the part of the assessees, the same is only of technical nature and no penalty is leviable for such technical or venial default. The Revenue has failed to establish that the assessees were guilty of conduct contumacious or dishonest, or acted in conscious disregard of statutory obligations. Reliance in this regard is placed on the judgment of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT . In conclusion, the Tribunal dismissed the appeals, confirming the cancellation of penalties u/s 271E in both cases.

Summary

Issues Involved:
The judgment involves the cancellation of penalties imposed by the Dy. CIT under section 271E of the Income Tax Act in two cases for the assessment year 1994-95.

Common Issue:
The common issue raised in both appeals is the cancellation of penalties imposed under section 271E by the CIT(A) for repayment of loans/deposits exceeding Rs. 20,000 in cash to a company manager, alleged to violate section 269T of the Act.

Details of Judgment:
The AO observed that the assessees had repaid loans/deposits in cash exceeding Rs. 20,000 to the company manager, leading to penalties under section 271E. The assessees argued that the manager had a current account with the companies, and the repayments were for expenses, not loans or deposits. The CIT(A) accepted this explanation and canceled the penalties, which the Revenue appealed.

The Revenue relied on the Dy. CIT's orders for penalties, while the assessees' counsel emphasized the current account transactions and the dropping of proceedings under section 271D. The Tribunal noted that the repayments were for expenses, not loans or deposits, and the Revenue failed to prove otherwise. The Tribunal cited the purpose of sections 269SS and 269T to curb black money and concluded that the penalties were not justified as the transactions were normal business activities, not contumacious conduct. Citing the Hindustan Steel Ltd. case, the Tribunal upheld the CIT(A)'s decision to cancel the penalties.

In conclusion, the Tribunal dismissed the appeals, confirming the cancellation of penalties under section 271E in both cases.

Judgment Outcome:
The Tribunal upheld the CIT(A)'s decision to cancel the penalties imposed under section 271E, as the transactions were deemed normal business activities and not in violation of the Income Tax Act.