2024 (10) TMI 1086 - AT - Income Tax

Penalty u/s 271E - cash repayment of a loan - violation of provisions of section 269T - AR pleaded that the cash was not deposited by the assessee but by the successful bidder in the auction and since the penalty was initiated after a period of nine (9) years it is barred by limitation - HELD THAT - It is an admitted fact that the assessee has failed in repayment of loan to M/s. Mahindra Mahindra Financial Services Pvt. Ltd., and thereafter M/s. Mahindra Mahindra Financial Services Pvt., Ltd., auctioned the car during the impugned assessment year. It is also an undisputed fact that the successful bidder in the auction has admitted the cash payment of loan to M/s. Mahindra Mahindra Financial Services Pvt., Ltd., directly into the bank account. Further, the B-Register of Andhra Pradesh Transport Department submitted by the Ld.AR also disclosed that auction budder becomes owner of the car from 10.04.2013. Since the cash payment was not by the assessee, but by the bidder directly to M/s. Mahindra Mahindra Financial Services Pvt., we are of the considered view that assessee cannot be penalised for deposit of cash which was made by a successful bidder during the auction. Appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271E of the Income Tax Act for cash repayment of a loan.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the penalty imposed under section 271E of the Income Tax Act for cash repayment of a loan. The Assessing Officer levied the penalty after the assessee paid an amount in cash towards repayment of a loan, violating section 269T of the Act. The assessee explained the circumstances, but the penalty was still imposed. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeal before the ITAT.

The main contention was whether the cash repayment by the successful bidder in an auction, not by the assessee, constituted a violation of section 271E. The Authorized Representative argued that the penalty was unjustified as the cash was deposited by the successful bidder, not the assessee, and that the penalty was time-barred. On the other hand, the Departmental Representative relied on the decisions of the revenue authorities.

After considering the arguments and evidence, the ITAT found that the successful bidder, not the assessee, made the cash payment towards the loan directly to the financial services company. The ITAT observed that the cash payment was not a violation by the assessee but by the bidder in the auction. Therefore, the ITAT directed the Assessing Officer to delete the penalty, allowing the grounds raised by the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, ruling in favor of deleting the penalty imposed under section 271E of the Income Tax Act for the cash repayment of the loan.