2016 (3) TMI 541 - AT - Income Tax

Penalty u/s 271E r.w.s 274 - undisclosed source of cash payment - Held that - We find that the fact that Sh. Harish Bindal and Smt. Sunita Bindal had a violent acrimonious relationship is evidence on record which has not been disputed by the Revenue. The reference to the incidents set out in the police complaint made by Smt. Sunita Bindal read out by the Ld. AR citing instances of mental and physical harassment necessitating seeking police protection and intervention has not been rebutted by the Revenue. The correctness of the same has not been assailed. In these peculiar facts and circumstances in the face of the turmoil in the family can constitute a reasonable cause. The source of cash payment on facts has been explained by the assessee and is not disputed. In these peculiar facts in the absence of any rebuttal or the evidences relied upon, we are of the view that in terms of provisions of section 273B of the Act, the assessee has successfully demonstrated the existence of a reasonable cause as envisaged by the said section. Thus accepting the explanation the penalty is directed to be quashed.- Decided in favour of assessee.

Summary

Issues:
Assessment of penalty under section 271E r.w.s 274 of the Income Tax Act, 1961 for repayment of a loan in cash. Challenge of penalty levy based on various grounds including reasonable cause.

Analysis:
1. The appeal was filed by the assessee challenging the order of CIT (A) regarding the penalty imposed under section 271E r.w.s 274 of the Income Tax Act, 1961 for repaying a loan of Rs. 13 lacs in cash to relatives. The assessee contended that the repayment was made after withdrawing funds from a bank and provided documentary evidence to support the source of repayment. The assessee argued that only section 269T was partly applicable as the relative demanded cash. The re-opening of the case was based on a tax evasion petition filed by a near relative, which the assessee claimed was an attempt to harass him.

2. The assessee submitted documents to the CIT (A) to establish reasonable cause for the cash repayment, including bank statements and details of the dispute with the relative. The assessee claimed that due to the delicate family situation and the insistence of the relative, the loan was repaid in cash to avoid further conflict. The assessee cited instances of harassment and filed a police complaint to demonstrate the strained relationship with the relative, justifying the cash repayment.

3. The Tribunal considered the evidence and submissions presented by both parties. It noted the acrimonious relationship between the assessee and the relative, supported by police complaints of harassment. The Tribunal found that the peculiar family circumstances constituted a reasonable cause for the cash repayment. The source of the cash payment was explained by the assessee and remained undisputed. Consequently, the Tribunal held that the assessee had successfully demonstrated a reasonable cause under section 273B of the Act, leading to the quashing of the penalty.

4. The Tribunal allowed the appeal of the assessee, emphasizing the presence of a reasonable cause for the cash repayment in light of the family turmoil and the delicate situation with the relative. The decision was based on the assessee's explanation, supported by documentary evidence and police complaints, which established a justifiable reason for the cash transaction. The penalty under section 271E r.w.s 274 was therefore set aside, considering the circumstances and the absence of rebuttal to the provided evidence.