ITO, JAIPUR vs. SITA RAM KHANDEWAL, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 76/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2008-09 Cuke The ITO Shri Sita Ram Khandelwal Vs. Ward- 4(3) Prop. M/s. Shyam Surgical Jaipur E-465, Murlipura Scheeme, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFSPK1050 P vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by :Smt. Poonam Rai, DCIT-. DR fu/kZkfjrh dh vksj ls@Assessee by: Shri Vijay Goyal, CA lquokbZ dh rkjh[k@ Date of Hearing : 23/01/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31 /01/2017 vkns'k@ ORDER PER BHAGCHAND, AM The Revenue has filed an appeal against the order of the ld. CIT(A)-2, Jaipur dated 26-11-2015 for the assessment year 2008-09 raising therein following grounds:- ‘’(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the penalty of Rs. 12,45,400/- u/s 271E of the I.T. Act, 1961. (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in

2 ITA No. 76/JP/2016 ITO Ward- 4(3), Jaipur vs. Shri Sita Ram Khandelwal, Jaipur . . appreciating the fact that JCIT has clearly stated in the penalty order that assessee has paid cash loan and thus there is a violation of provision of Section 269T.’’

2.1 Apropos Ground No. 1 and 2 of the Revenue, the facts as emerges

from the order of the ld. CIT(A) is as under:-

‘’2.3 I have perused the facts of the case, the penalty order and the submissions of the appellant. In this case, the Assessing Officer received information that the assessee had received information that the assessee had paid loans to Shri Phool Chand Khandelwal in cash exceeding the limit prescribed under section 269T of the I.T. Act, 1961. Shri Phool Chand Khandelwal is the father of the assessee. It was found that the assessee had paid various amounts on different dates and hence the JCIT held that the payment was not made in urgent circumstances but such type of payments wee made on regular basis. He considered it a violation of Section 269T and levied penalty under section 271E of the I.T. Act.

In the penalty proceedings before me, the A.R. in his written submission has contended that penalty under section 271E can be levied only if the assessee has made repayment of loans on deposits in cash exceeding Rs. 20,000/-. He further submitted that there is no such finding of the Officer, who has imposed the penalty.

Further, the assessment order of Shri Phool Chand under section143(3) for the assessment year 2008-09 has been filed where assessment has been made accepting the returned income. Since, in this case money has been advanced and not accepted or repaid, the contention of the A.R. appears to be correct. The penalty under section 271E is attracted for violation of provisions of Section 269T which speaks of ‘Mode of Payment of certain loans or deposits’. In

3 ITA No. 76/JP/2016 ITO Ward- 4(3), Jaipur vs. Shri Sita Ram Khandelwal, Jaipur . . view of the above discussion, the penalty is deleted. This ground of appeal is allowed.’’

2.2 During the course of hearing, the ld. DR relied on the order of the

AO and prayed the ld. CIT(A) has erred in deleting the penalty of Rs.

12,45,400/- u/s 271E of the Act.

2.3 During the course of hearing, the ld. AR of the assessee relied on

the order of the ld. CIT(A).

2.4 I have heard the rival contentions and perused the materials

available on record. Brief facts of the assessee case are that the assessee is

an individual. During the assessment year under consideration, the

assessee had paid loans of Rs. 12,45,400/- on different dates to Shri Phool

Chand Khandelwal bearing PAN AGHPK 9415 M. It is noted that JCIT

had observed that the assessee had violated the provisions of Section

269T of I.T. Act therefore, he imposed the penalty of Rs. 12,45,400/- u/s

271 r.w.s. 274 of the Act. Being aggrieved, the assessee filed the appeal

before the ld. CIT(A) who cancelled the penalty by observing as under:-

…. Further, the assessment order of Shri Phool Chand under section143(3) for the assessment year 2008-09 has been filed where assessment has been made accepting the returned income. Since, in this case money has been advanced and not accepted or repaid, the contention of the A.R. appears to be correct. The penalty under section 271E is attracted

4 ITA No. 76/JP/2016 ITO Ward- 4(3), Jaipur vs. Shri Sita Ram Khandelwal, Jaipur . . for violation of provisions of Section 269T which speaks of ‘Mode of Payment of certain loans or deposits’. In view of the above discussion, the penalty is deleted. This ground of appeal is allowed.’’

It may be noted that penalty u/s 271E can be levied only if the assessee

has made repayment of loans or deposits in cash exceeding Rs. 20,000/-.

It is also notable that for repayment of loan, the assessee firstly must have

accepted the loan and then he should have made payment of these loans

in cash. It is noted from the penalty order that the assessee has made the

loans and not repayment of loans. There is no finding of the JCIT that the

assessee has made repayment of loans in cash exceeding Rs. 20,000/-. It

is also noteable that the law prohibits the acceptance of deposits or loans

in cash exceeding Rs. 20,000/- by Section 269SS and repayment of

deposits and loans in cash exceeding Rs. 20,000/- by Section 269T of the

Act. It is also noted that on similar type of issue the ITAT (SMC) Jaipur

Bench in the case of Lallu Ram Saini vs. ITO (ITA No. 676/JP/2015 for

the assessment year 2008-09 vide order dated 21-10-2016) had deleted

the penalty u/s 271E of the Act by observing as under:-

‘’2.5 I have heard the rival contentions and perused the materials available on record. It is noted from the records that the assessee had made repayments of loans of Rs. 4,59,560/- i.e. Rs. 3,28,260/- to M/s. Magma Shrachi Finance Ltd. and Rs. 1,31,330/- to M/s. Shri Ram Stone

5 ITA No. 76/JP/2016 ITO Ward- 4(3), Jaipur vs. Shri Sita Ram Khandelwal, Jaipur . . Cutting Industries for which the Addl. CIT observed that it is a violation of provisions of Section 269T of the Act and thus he imposed a penalty of Rs. 4,59,560/- In first appeal, the ld. CIT(A) confirmed the penalty of Rs. 3,28,260/- only in the case of M/s. Magma Shrachi Finance Ltd. on account of transactions of payment by cash by the assessee. It is noted from the ledger account of the assessee (page 1 of the paper book of the assessee) that the assessee had raised a loan of Rs. 5.00 lacs from M/s. Magma Shrachi Finance Ltd. on 7- 04-2007 and subsequently the assessee used to pay the instalments every month in cash to the representative of the finance company who issued the receipts for taking the cash payment from the parties. The submissions of the ld. AR of the assessee reveals that the payment could not be made by cheque as the finance company did not accept the outstation cheque. It is also noted that the assessee has filed the copies of the cash receipts issued by the representative of M/s. Magma Shrachi Finance Ltd. which is filed at pages 2 to 8 of the paper book. The assessee had submitted the bifurcation of the total amount of Rs. 3,28,260/- paid to M/s. Magma Shrachi Finance Ltd. which comprises of Rs. 41,418/- in respect of payment of interest and Rs. 2,86,842/- in respect of repayment of loan amount. During the course of hearing, the ld. AR of the assessee relied on the order of ITAT Gauhati Bench in the case of Addl.CIT vs. Smt. Prahati Baruah 133 Taxman 74 (Maz) wherein it is held that the introduction of section 269T and section 271E in the statute is to prevent proliferation of black / unaccounted money deposited with banks and other persons by introducing the system of repayment through account payee cheques and drafts and, thus, to ensure that the identity of the payee is established. Where the identity of the lender to whom repayment had been made was known to the department and the genuineness of the loan transaction was not in doubt, it could not be said that the breach of law, if any, was deliberate and the default, if any, could be said to be a technical default for which no penalty would be leviable. Hence, in view of the above deliberations and the case law cited (supra), I direct the AO to delete the penalty of

6 ITA No. 76/JP/2016 ITO Ward- 4(3), Jaipur vs. Shri Sita Ram Khandelwal, Jaipur . . Rs.3,28,260/- imposed u/s 271E of the Act. Thus the appeal of the assessee is allowed.’’ Respectfully following the decision of ITAT (SMC), Jaipur Bench in the case of Lallu Ram Saini vs. JCIT (supra) and also in view of the observations of the ld. CIT(A) on the issue in question, I find no reason to interfere with the order of the ld. CIT(A) in deleting the penalty of Rs. 12,45,400/- u/s 271E of the Act. Thus the appeal of the Revenue is dismissed. 3.0 In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 31/01/2017. Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31 /01/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- The ITO, wed 4(3), Jaipur izR;FkhZ@ The Respondent- Shri Sita Ram Khandelwal, Jaipur 2. 3. vk;dj vk;qDr¼vihy½@ CIT(A). vk;dj vk;qDr@ CIT, 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 76/JP/2016 ) 6. vkns'kkuqlkj@ By order,

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