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TMI Blog2020 (3) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... case are distinguishable from the facts of the case relied upon by the revenue. Therefore, we hold that there is sufficient and reasonable cause for repayment of the loan to the directors and shareholders i.e. E.Rajeev, E.Padmapriya, E.Lakshmi and E.V.Sudhakar and hence we set aside the order of the Ld.CIT(A) and cancel the penalty levied by the Addl.CIT. Accordingly, appeal of the assessee on this ground is allowed. Repayment of deposit to A.V.V.Subrahmanyeswara Swamy and 62 persons - AO made the addition though the assessee stated that the deposits were repaid through account payee demand draft, since the assessee failed to produce the copies of demand drafts or counterfoils of the demand drafts - CIT(A) allowed relief to the extent of ₹ 20,000/- on each deposit, thus allowed ₹ 12,60,000/- and the balance penalty was confirmed - HELD THAT:- Addl.CIT has levied the penalty for non-producing the evidence for payment through demand drafts. In the instant case, the assessment was completed u/s 143(3) and the AO has completed the assessment after verification of the books of accounts and we find no adverse comment with regard to payment of loan through DDs. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank a/c of the assessee company On different dates A.V.V.Subahmanye swara Swamy 62 others 36,45,000/- Repayment of loan in cash Assessee failed to produce that the above payments were made through DDs. In the case of Sri E.Rajeev, Smt.E.Padmapriya, Smt.E.Lakshmi and Sri E.V.Sudhakar, the assessee has withdrawn cash from the bank account and repaid the amount to the creditors. In the case of Sri A.V.V.Subrahmanyeswara Swamy Others, the assessee has repaid the amount by way of crossed Demand Drafts. The Addl.Commissioner of Income Tax (in short Addl.CIT ) initiated proceedings u/s 271E and called for the explanation for violation of the provision of section 269T of the Act. The assessee explained before the Addl.CIT that the payments were genuine and all the recipients of the amounts have accounted the loan as well as the repayments in their books of accounts and filed the returns of income. The assessee further submitted before the Addl.CIT that the payment was made to the creditors on their request. In the case of A.V.V.Subramanyeswara Swamy 62 others, the assessee ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the directors and shareholders. The assessee filed a paper book and enclosed capital account copies of E.Rajeev, in page No.12 and the repayment was accounted in the account. Similarly, in the case of E.Padmapriya, the account copy was enclosed in page No.13 and the payment of ₹ 13,77,880/- was duly accounted in her account. In the case of E.Lakshmi and E.V.Sudhakar also, the amounts paid was duly recorded in the respective accounts of the creditors. Apart from the above, the assessee also paid the interest on the amounts borrowed from the above individuals which was duly credited in the respective accounts of the creditors, which is appearing in the account copy placed in paper book in page No.12 to 15. The Ld.AR further enclosed the copies of income tax returns filed by the creditors, in page No.87 in respect of E.Rajeev with statement of computation showing balance sheet and profit and loss account, in page No.94, the income tax return filed by E.Padmapriya, in page No.101, the income tax return filed by E.Lakshmi, in page No.108, the income tax return filed by E.Venkata Sudhakar(HUF). In respective accounts, the creditors have admitted the interest received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque as per the details given by the AO, except on one occasion in each case. In all the remaining occasions, the assessee has paid the amounts by way of crossed cheque. The assessee has made the payment by self cheque and drawn the cash and paid the same to the creditors. Prima facie, the assessee has violated the provisions of section 269T of the Act. Further as observed from the penalty order, out of 20 occasions, the assessee has violated the provision on four occasions at the rate of one event in the case of each lender. Thus, we observe that the assessee has mostly repaid the loans by way of crossed cheque and complied with the statute. The reason explained by the assessee was that it has made the payment on the request of the creditor in exceptional circumstances. Further the assessee also explained that E.Rajeev, E.Padmapriya, E.Lakshmi and E.V.Sudhakar are the shareholders of the company. The repayment was made on the demand of the creditor. The Ld.AR further explained and taken us to the account copies of the every creditor, from which we observe that the transactions were duly accounted in the respective accounts. The assessee also paid the interest on the borrowings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot invoking the penal provisions (as. 271D and 271E of the Act) against him. 6.1. The Ld.AR also relied on the decision of Hon ble High Court of Jharkhand in the case of OMEC Engineers Vs. Commissioner of Income Tax (supra), wherein, Hon ble High Court held that the penalty is not exigible, if there exists a reasonable cause. For the sake of clarity and convenience, we extract para No.21 and 22 of the decision of Hon ble High Court of Jharkhand which reads as under : 21. The words reasonable cause' have not been defined under the Act but they could receive the same interpretation which is given to the expression sufficient cause . Therefore, in the context of the penalty provisions, the words reasonable cause would mean a cause which is beyond the control of the assessee. Reasonable cause obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides. Before imposition of penalty under s. 271, the AO must be satisfied, not arbitrarily but judiciously, that the assessee has without reasonable cause failed to comply with the provisions. 22. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is appeal is repayment of deposit to A.V.V.Subrahmanyeswara Swamy and 62 persons amounting to ₹ 36,45,000/-. The AO made the addition though the assessee stated that the deposits were repaid through account payee demand draft, since the assessee failed to produce the copies of demand drafts or counterfoils of the demand drafts. On appeal, the Ld.CIT(A) allowed relief to the extent of ₹ 20,000/- on each deposit, thus allowed ₹ 12,60,000/- and the balance penalty was confirmed. 8. Against which the assessee is in appeal before us. During the appeal hearing, the Ld.AR submitted that all the deposits were repaid by way of demand draft, but not by cheque. Therefore, argued that there is no case for levying penalty u/s 271E of the Act. The assessee enclosed account copies of the each depositor and as per page No.86 of the paper book, the assessee also furnished the demand draft number in the account copy. The Ld.AR argued that since the amount was paid through demand draft, the Ld.CIT(A) erred in sustaining the addition, hence requested to cancel the penalty and allow the appeal of the assessee. 9. On the other hand, the Ld.DR supported the orders of the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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