2025 (4) TMI 288 - AT - Income Tax

Penalty imposed u/s 271E and 271D - violation of Section 269SS or 269T - HELD THAT - We find that there is a transaction between the assessee company and its sister concern. The transaction between the assessee company and its sister concern is essential to the nature of current account. It is further pertinent to mention here that Shri Sanjit Kundu is a common partner in both the firms. It is well settled that the withdrawal of addition made in the partners capital account in cash is not a violation of Section 269SS or 269T. Appeal filed by the revenue is here by dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the delay in filing the appeal by the revenue should be condoned.

2. Whether the penalty imposed under Section 271E of the Income Tax Act, 1961, for alleged violation of Section 269T, was justified.

3. Whether the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which directed the deletion of the penalty, was correct.

ISSUE-WISE DETAILED ANALYSIS

1. Delay in Filing the Appeal

- Relevant Legal Framework and Precedents: Section 253 of the Income Tax Act, 1961, governs the filing of appeals. The provision allows for condonation of delay if sufficient cause is shown.

- Court's Interpretation and Reasoning: The Tribunal examined the reasons for the delay, which included the retirement and leave of the jurisdictional assessing officer, technical glitches, and office closures due to holidays.

- Key Evidence and Findings: The Tribunal found the reasons for the delay genuine and bona fide. The Departmental Representative did not object to the condonation of the delay.

- Application of Law to Facts: The Tribunal applied the principle that cases should be decided on merits rather than technicalities and condoned the delay.

- Treatment of Competing Arguments: No objections were raised against the condonation, thus simplifying the Tribunal's decision.

- Conclusions: The delay in filing the appeal was condoned.

2. Justification of Penalty under Section 271E

- Relevant Legal Framework and Precedents: Section 269T prohibits repayment of certain loans or deposits otherwise than by an account payee cheque or bank draft. Section 271E imposes a penalty for contravention of Section 269T.

- Court's Interpretation and Reasoning: The Tribunal considered whether the transaction in question constituted a loan or deposit repayment violating Section 269T.

- Key Evidence and Findings: The Tribunal noted that the transaction was not a loan or deposit but related to reimbursement of expenses paid on behalf of a sister concern, M/s Tarai Transport Corporation, through banking channels.

- Application of Law to Facts: The Tribunal found that since the transaction was not a loan or deposit, there was no violation of Section 269T, and thus, the penalty under Section 271E was not justified.

- Treatment of Competing Arguments: The Department argued the case was different from the precedent involving M/s Tarai Transport Corporation. However, the Tribunal found the facts sufficiently similar to apply the same reasoning.

- Conclusions: The penalty under Section 271E was not justified and was correctly deleted by the CIT(A).

3. Validity of CIT(A)'s Order

- Relevant Legal Framework and Precedents: The CIT(A) relied on previous judicial pronouncements, including decisions by the ITAT, Calcutta High Court, and the Supreme Court, which had dismissed the department's appeals in similar cases.

- Court's Interpretation and Reasoning: The Tribunal reviewed the CIT(A)'s order and found it consistent with established precedents, particularly the case of M/s Tarai Transport Corporation.

- Key Evidence and Findings: The Tribunal acknowledged that the transaction was akin to a current account transaction between sister concerns with common partners, not a loan or deposit.

- Application of Law to Facts: The Tribunal applied the same legal principles as in the precedent cases, affirming the CIT(A)'s decision to delete the penalty.

- Treatment of Competing Arguments: The Department's argument that the case facts differed from the precedent was not upheld, as the Tribunal found the cases sufficiently analogous.

- Conclusions: The CIT(A)'s order was upheld, and the appeal by the revenue was dismissed.

SIGNIFICANT HOLDINGS

- The Tribunal emphasized that "the case should be decided on merit not on technical issue," leading to the condonation of the delay in filing the appeal.

- It was held that "withdrawal of addition made in the partners' capital account in cash is not a violation of Section 269SS or 269T of the Act," supporting the deletion of the penalty.

- The Tribunal concluded that the CIT(A)'s decision was in line with established legal principles and precedents, affirming the deletion of the penalty imposed under Section 271E.

- The appeal filed by the revenue was dismissed, reinforcing the principle that transactions between sister concerns with common partners, conducted through banking channels, do not violate Section 269T.