DEVINDER GUPTA & SONS (HUF),NEW DELHI vs. JCIT RANGE-30, NEW DELHI

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ITA 5394/DEL/2019Status: DisposedITAT Delhi17 January 2023AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under Section 271E should not be imposed if there is a reasonable cause for the contravention of Section 269T. Considering the facts and judicial precedents, the Tribunal cancelled the penalty.

What were the facts?

The assessee repaid a part of a loan amounting to Rs. 3,40,000/- in cash to its sister concern. The Assessing Officer initiated penalty proceedings under Section 271E for violating Section 269T, which was upheld by the CIT(A).

What were the issues?

Whether penalty under Section 271E is leviable for repayment of loan in cash to a sister concern when there is a reasonable cause and no mala fide intent.

Which sections of the Income-tax Act were involved?

Section 271E,Section 269T

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, DELHI BENCH “B” DELHI

Before: SHRI CHANDRA MOHAN GARG & SHRI PRADIP KUMAR KEDIA

For Appellant: Ms. Mansi Jain, Adv
For Respondent: Shri Kumar Pranav, Sr.DR

violation of provision of Section 269T of the Act. Consequently, the penalty proceedings were initiated and penalty was imposed under Section 271E of the Act of the equal amount vide order dated 17.08.2017 by the Joint Commissioner of Income Tax.

3.

Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) took note of the submissions made on behalf of the assessee but however confirmed the penalty for alleged contravention of Section 269T of the Act.

4.

Further aggrieved, the assessee preferred appeal before the ITAT.

5.

We have heard the parties in length and considered the submissions advanced by both the sides. It is the case of the assessee that lender DNB has not conducted any business activities since last few years and was in dire need of funds to meet certain urgent business commitment to avoid litigation. The lender is a sister concern managed and controlled by the Karta of the assessee. Thus, the assessee responded to the request of the lender and deposited cash to the tune of Rs.3,40,000/- in the bank account of the lender company which was, in turn, used to repay the advance taken by the lender from one Shri Sushanto Mukherjee. These facts are verifiable from the account of the lender. It was further submitted that the net payable amount declared to have been received from lender has been found genuine and accepted in the course of the assessment proceedings by the Assessing Officer. Several decisions were relied upon to seek relief from the clutches of penalty imposed under Section 271E of the Act in the circumstances.

6.

In the factual backdrop, we take note of the judgments rendered by the Hon’ble Gauhati High Court in the case of CIT vs. Bhagwati Prasad Bajoria HUF, (2003) 183 CTR 484 (Gauhati) wherein the Hon’ble Court took note of the object of introducing of Section 269SS as explained by the Hon’ble Supreme Court in Assistant Director of Inspection (Investigation) v. Kum. A.B. Shanthi, (2002) 255 ITR 258 (SC) and held that the legislature has given discretion to the authority in the matter of levy of penalty under Section 271D of the Act. The Hon’ble Court held that where a reasonable cause exists for transactions covered under Section 269SS, the penalty shall not be imposed merely because it is lawful to do so. Drawing parallel, same proposition would apply in the matter of provisions of Section 271E of the Act which is enacted on the similar footings.

7.

Similar proposition was echoed towards existence of reasonable cause by the Hon’ble Delhi High Court in Director of Income Tax vs. All India Deaf and Dumb Society (2006) 198 CTR 376 (Del). In the backdrop of legal position, the facts and circumstances requires to be looked at in cumulative manner to ascertain the existence of mala fide if any. 8. It is an admitted position that the assessee had taken loan from the lender in the earlier years, a part of which has been repaid during the year albeit in cash. The amount of loan has been consequently reduced. A confirmation whereof from the lender has been filed. The assessment was carried out under Section 143(3) and no question on bona fides of the transaction was raised but however the penalty was imposed mechanically.

9.

Having regard to the series of judicial precedents and the totality of the facts and circumstances noted above, we take a benign view in the matter and cancel the penalty imposed under Section 271E of the Act. The order of the CIT(A) is thus set aside and the penalty imposed is thus reversed and cancelled.

10.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 17/01/2023.

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