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2019 (3) TMI 91 - AT - Income TaxLevy of penalty u/s. 271E - violation of provisions of Section 269T - assessment completed u/s. 143(3)on returned income - Assessing Officer has held that the assessee s books of account are audited and the assessee was assisted by a tax consultant and therefore, the bonafide belief is not believable. - technical breach of provisions - HELD THAT - First two persons are the Directors of the company and their identity is proved and the genuineness of the said payment is also not doubted by the Assessing Officer. As regards the other two parties, we find that assessee had taken vehicle loans and the repayment was made in cash and therefore, the genuineness of these transactions also could not be doubted. The Co-ordinate Bench of the Tribunal in the case of Dillu Cine Enterprises (P) Ltd., Vs. Addl. CIT 2001 (9) TMI 248 - ITAT HYDERABAD-A has considered the issue of penalty leviable for technical breach of provisions where the transactions are genuine, and has held that when the transactions are not for evasion of tax/concealment of income and bonafide belief of the assessee was that it could have made the payment in cash, penalty is not automatic and the penalty levied there under u/s. 271D of the Act is not valid - Thus we are inclined to accept the contentions of assessee of bonafide belief for repayment of loans in cash and the penalty u/s. 271E of the Act is deleted. Also see M/S. MUTHOOT FINANCIERS, NEW DELHI 2015 (2) TMI 212 - DELHI HIGH COURT - Decided in favour of assessee.
Issues:
Violation of provisions of Section 269T of the Income Tax Act - Levying of penalty under Section 271E - Bonafide belief for repayment in cash - Reasonableness of assessee's explanation. Analysis: Violation of Section 269T and Penalty under Section 271E: The case involved the assessee-company engaged in the manufacture of Corrugated Boxes, which e-filed its return of income for AY 2012-13, admitting total income of 'NIL'. The Assessing Officer issued a show cause notice for the levy of penalty under Section 271E for violating the provisions of Section 269T. The assessee argued that the repayment in cash was made under a bonafide belief and cited relevant judgments to support their contentions. The Assessing Officer, however, was not convinced and levied a penalty of Rs. 12,18,059 under Section 271E. The CIT(A) confirmed the order, leading to the appeal before ITAT Hyderabad. Bonafide Belief for Repayment in Cash: The assessee contended that the loans were repaid in cash under a bonafide belief that it was permissible, as the genuineness of the transactions was not in doubt. The assessee relied on judgments to support their argument that the transactions were bonafide and not aimed at tax evasion. The Assessing Officer argued that the assessee violated Section 269T and failed to provide a satisfactory explanation. The ITAT examined the details of the loans repaid in cash, including payments to directors and reputed companies, and found that the genuineness of the transactions was not in doubt. Citing precedents, the ITAT held that the penalty under Section 271E was not applicable in this case due to the genuine nature of the transactions and the bonafide belief of the assessee. Conclusion: After considering the rival contentions and the material on record, the ITAT found that the genuineness of the payments was not doubted by the Assessing Officer. The ITAT accepted the assessee's argument of bonafide belief for repayment in cash and deleted the penalty under Section 271E. The ITAT allowed the grounds raised by the assessee and pronounced the order in favor of the appellant on 27th February 2019. This judgment highlights the importance of bonafide belief and genuineness of transactions in cases involving the violation of tax provisions, emphasizing that penalties should not be levied in situations where there is no intent to evade tax and where transactions are conducted openly and genuinely.
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