SANJEEVKUMAR JAYANTILAL SHAH,IDAR vs. THE JT.CIT., HIMATNAGAR RANGE,, HIMATNAGAR

The assessee filed return of income for the assessment year 2014-15 on 31.10.2015 declaring total loss of Rs.24,84,405/-. The Assessing Officer passed the Assessment Order under Section 143(3) of the Income Tax Act, 1961 on 21.12.2016 thereby assessing total loss at Rs.15,61,641/-. The Assessing Officer observed that the assessee repaid the loan of Rs.22,90,148/- otherwise than by an account payee cheque/account payee bank draft/electronic clearing system through bank account in contravention to the provisions of Section 269T of the Act. The assessee repaid the loan in cash as stated by the Assessing Officer and, therefore, penalty proceedings under Section 271E of the Act were initiated by issuing notice under Section 274 read with Section 271E of the Act dated 24.05.2019. The assessee filed adjournment application but has not filed any explanation to the notice. Therefore, the Assessing Officer levied penalty of Rs.22,90,148/- under Section 271E of the Act for repayment of loan otherwise than by account payee cheque/account payee bank draft/electronic clearing system through bank account in contravention to the provisions of Section 269T of the Act.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

At the time of hearing, none appeared on behalf of the assessee despite giving several notices and the last notice was received by the assessee on 15th September, 2024. Therefore, we are proceeding on the basis of submissions made by the assessee before the CIT(A) which is quoted in paragraph no.4 of the order of the CIT(A).

The Ld. DR submitted that the CIT(A) has rightly imposed the penalty as the claim made by the assessee for making substantial repayment in cash on difference occasions does not constitute reasonable cause under Section 273B of the Act.

We have heard the Ld. DR and perused all the relevant material available on record. It is pertinent to note that the assessee has taken loan from NBFC that of Bajaj Finserve Lending and Capital First Limited as well as Future Capital Holdings Limited, Magma Fincorp Limited, Religare, Tata Capital Finance Service which are all NBFCs and this NBFCs when there is a default on the part of any party who is lending the loan demands the cash component of the repayment of EMI which is a practice. Merely stating that the claim of the assessee for making substantial repayment in cash does not constitute reasonable cause under Section 273B of the Act is not justified on the part of the CIT(A) as the assessee has demonstrated before the Assessing Officer as well as before the CIT(A) as to why the repayment was made in cash. Besides this, the penalty imposed under Section 271E of the Act is that of entire addition. Thus, looking into the present assessee’s situation, the penalty is deleted. Due to the peculiar circumstances in the present assessee’s case, we have taken this decision and the same should not be taken as precedent in any other matter.

In the result, appeal filed by the assessee is allowed.