2023 (8) TMI 1066 - AT - Income Tax

Penalty order u/s 271E - repayment of loan in cash - HELD THAT - Arun Kumar Gandhi (HUF) had purchased an agricultural land on 30.04.2010 situated at Pratapgarh, Rajasthan. Copy of the registered sale deed was filed by the assessee during the proceedings. The land was purchased in rural area. There was public holiday on 28th March. Banks were over worked being end of financial year. Therefore, in our opinion, there was reasonable cause for cash payment to HUF. In the case of assessee also HUF on the same day i.e. on 30.04.2010 had purchased agricultural land. Therefore, respectfully following case of MANOJ LALWANI. 2002 (3) TMI 6 - RAJASTHAN HIGH COURT , since there was reasonable cause, we direct the AO to delete the penalty. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
The appeal involves a penalty order u/s. 271E of the Income Tax Act for the assessment year 2011-12. The grounds of appeal raised by the assessee include the confirmation of penalty, treatment of the transaction as repayment of loan, the nature of the account between the assessee's firm and partner's HUF, the reasonable cause for the transaction, and the intention behind the cash payment.

Grounds of Appeal:
1. The assessing authorities erred in confirming the penalty u/s. 271E without considering the nature of the payment and assuming it as a loan repayment.
2. Failure to recognize the mutual, open, and current account nature between the assessee's firm and partner's HUF.
3. Disregard of the reasonable and bonafide cause u/s. 273B for the transaction.
4. Dismissal of the honest belief that the transaction did not require an account payee cheque and had no intention to breach the law.
5. Seeking leave to raise any additional grounds necessary for a just decision.

Findings & Analysis:
The key issue for consideration was the penalty u/s. 271E imposed on the assessee for a cash payment of Rs. 3,90,000 to the partner's HUF. The Assessing Officer treated this payment as a loan repayment in cash. However, upon review, it was found that the cash payment was for the purchase of agricultural land by the HUF. The transaction was necessitated by the urgency of the land purchase, with specific circumstances such as a public holiday and end-of-financial-year rush affecting banking transactions. The Tribunal referenced a relevant case law emphasizing the provision of reasonable cause u/s. 273B, which allows discretion in penalty imposition for failure to comply with certain provisions. Given the circumstances mirroring the precedent case, the Tribunal directed the AO to delete the penalty, as there was a reasonable cause for the cash payment.

Conclusion:
In line with the precedent and the provision of reasonable cause, the Tribunal allowed the appeal of the assessee, directing the deletion of the penalty imposed u/s. 271E. The decision was based on the urgent need for the cash transaction for the land purchase, aligning with the principles of reasonable cause as per the Income Tax Act.

Order:
The appeal of the assessee was allowed, and the penalty u/s. 271E was directed to be deleted by the AO. The order was pronounced on 14th August 2023.