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TMI Blog2020 (3) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide that notwithstanding anything contained in the provisions of 271E of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or accountpayee demand draft, then the penalty may not be levied. If there was a genuine and bona fide transaction and if for any reason the tax payer could not get a loan or deposit by account- payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power. In the instant case, the Ld. Assessing Officer ought to have considered that the payment of loan of 5,80,000/- by the assessee were undisputedly genuine and bona fide as they were reflected in the books of the recipients as well as those of the assessee. The assessee has explained the circumstances in which it was constrained to make the repayment of the loans in question in cash, therefore penalty should not be levied. Provisions of section 271E lays down co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 5,80,000/- misconstruing the expression "any other preson" appearing in the provisions of section 269T of the Act and his purported finding reached on such tenuous premise is completely unfounded, unjustified and untenable in law. 3.FOR THAT the Ld. Commissioner of Income Tax (Appeals) Durgapur acted unlawfully in upholding the order imposing penalty u/s. 271E of the Income Tax Act, 1961 amounting to ₹ 5,80,000/- passed by the Ld. Joint Commissioner of Income Tax, Range 1- Durgapur and was remiss in not taking into consideration the 'reasonable cause' as envisaged within the scope and ambit of the provisions of section 273B of the Income Tax Act, 1961 on the facts and circumstances of the instant case and the adverse conclusion reached on that behalf is totally illegal, illegitimate and infirm in law. 3. The facts of the case which can be stated quite shortly are as follows. The assessee filed its return of income for the A.Y. 2013-14 on 19-09-2013 disclosing total income of ₹ 1,79,515/-. An assessment u/s 143(3) of I.T. Act 1961 has been made on 21/03/2016 on a total income of ₹ 2,72,280/-. The assessing officer noticed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved, the assessee is in appeal before us. 5. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee, a partnership firm, is an authorized dealer of Hindusthan Petroleum Corporation Limited which is engaged in retail trading of motor spirit and high speed diesel. During the previous year relevant to the assessment year under dispute, the assessee had repaid different amounts on various dates to two persons, namely Shri Bijay Guha in the sum of ₹ 1,40,000/- and Shri Samarendra Sinhababu amounting to ₹ 4,40,000/- aggregating to a sum ₹ 5,80,000/-. According to the ld. Assessing Officer, such repayment of the amounts to the partners had infringed the provisions of section 269T of the Income Tax Act, 1961. Ld Counsel for the assessee submits before us that the persons to whom such amounts were repaid were very close of its partners, who do not come within the scope of the expression 'any other person' as envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of loan or deposit taken or accepted. It is important to note that another provision, namely Section 273B was also incorporated which provides that notwithstanding anything contained in the provisions of Section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of Section 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the tax payer could not get a loan or deposit by account- payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power." 6. In the light of the judgment of the Hon`ble Supreme Court in the case of Kumari A. B. Shanti (supra), we note that in assessee`s case there is no question of violating the legislative intent behind the introduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ; (d) any Government company as defined in section 617 of the Companies Act, 1956; (e) such other institution, association or body or class or institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing notify in this behalf in the Official Gazette. 32.4 For the purposes of the provision, the expression banking company' shall have the meaning assigned to it in clause (a) of the Explanation to section 40A(8) of the Income-tax Act and the expression co-operative bank' shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949. The expression loan or deposit, for the purposes of the provision, would mean loan or deposit of money. 32.5 Fears have been expressed in certain quarters that the provision will adversely affect the rural sector and farmers who bring produce to mandies for sale. The prohibition contained in section 269SS is confined to loans and deposits only and does not extend to purchase/sale transactions. 32.6 Section 276DD, inserted in the Income-tax Act by the Finance Act, provides that if a person, without reasonable cause or excuse, takes or accepts any loan or deposit in cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard is a finding of fact and no question of law much less a substantial question of law would arise, we do not have any hesitation to hold that it may not be proper for this court to interfere with such a finding of fact. For all these reasons, answering the questions of law referred to us against the Revenue, the appeal stands dismissed. No costs." Therefore, when the transactions were genuine and the identity of the lenders were established and there was no intention found to evade tax, as in the instant case, the cancellation of penalty was upheld by the Hon`ble Madras High Court. 8. We note that provisions, of Section 273B of the Act provide that notwithstanding anything contained in the provisions of 271E of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or accountpayee demand draft, then the penalty may not be levied. If there was a genuine and bona fide transaction and if for any reason the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation.Penalty will not also be imposed merely because it is lawful to do so. For this we rely on the judgment of the Hon`ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State Of Orissa 83 ITR 26, wherein it was held as follows: "5. Under the Act penalty may be imposed for failure to register as a dealer : s. 9(1), r/w s. 25(1) (a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi- criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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