HARSHADRAI CHATURDAS PATEL,KOLHAPUR vs. JCIT, RANGE-2, KOLHAPUR

Briefly stated, the facts of the case are that the assessee repaid certain unsecured loans during the year otherwise than through account payee cheque / account payee demand draft. The AO tabulated six separate loans to two parties, namely, A.S. Kushale, Prop. Shri Ranjeetsingh A. Kusale - Rs.7,00,000 and Ram Ganga Adat Dukan, Prop. Sou. Malutai Dattatraya Patil - Rs.5,00,000. On being called upon to explain as to why the assessee contravened the provisions of section 269T of the Act, the assessee submitted that the amounts were initially repaid through crossed cheques to the creditors in the last week of March, 2013. However, the creditors contacted the assessee for cancelling the crossed cheques as they were Adat agents and wanted to buy jiggery from agriculturists before 31.03.2013, for which cash was required on urgent basis. This led to the cancellation of crossed cheques by the assessee and converting them into bearer cheques. Not convinced, the AO imposed penalty u/s 271E of the Act, for Rs.12,00,000, which came to be affirmed in the first appeal.

We have heard both the sides through Virtual Court and gone through the relevant material on record. The facts of the case apropos the issue are the assessee repaid Rs.12,00,000 to two Adat firms initially by means of crossed cheques. Such cheques were issued in the last week of March, 2013. The parties approached the assessee for cancellation of crossed cheques and issuance of bearer cheques because they wanted to make payments to their agriculturist creditors on urgent basis. Copies of such cheques, initially crossed, have been placed on record. This reason was stated before the AO as well, who without controverting the same, proceeded to impose the penalty. Section 273B of the Act states that no penalty should be imposed under certain sections, including section 271E of the Act, if there is a reasonable cause for the default. As the default in terms of section 269T of the Act was actually committed by the assessee, but in the given circumstances of the case, the reason for such a default can be categorized in the realm of `reasonable cause‟, thereby, bringing the case within ambit of section 273B of the Act. We, therefore, order to delete the penalty in terms of section 271E read with section 273B. 4. In the result, the appeal is allowed. Order pronounced in the Open Court on 14th August, 2020.