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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’
Before: SHRI N.V. VASUDEVAN & SHRI INTURI RAMA RAO
Per Shri Inturi Rama Rao, A.M. : This appeal is filed by the assessee directed against the order of Learned Commissioner of Income Tax (Appeals), Gulbarga dt.11.12.2017 confirming the levy of penalty under Section 271E of the Income Tax Act,
1961 (in short 'the Act') of Rs.3,75,000 for the Assessment Year 2012-13.
The assessee raised the following grounds of appeal :
“1. In this case the assessee being individual has repaid the cash to his own HUF out of business need in normal course. There was no intention to avoid taxes. Both the firms are regularly assessed to income tax. When it is the case of providing temporary funds from one business to another business of the same person it does not amount to transaction of loan or deposit and therefore, it is outside the purview of section 269T of the Act.
Similarly for the purposes of the return of amount by cash to the sister concern under a bona fide belief that the transaction with sister concerns is not in violation for similar reasons in the absence of any evidence to the contrary cannot be disbelieved. Further had no intention of concealment of income.”
2. Briefly stated the facts are as under :
2.1 The assessee is an individual and filed the return of income for Assessment Year 2012-13 on 23.9.2012 declaring a total income of Rs.8,25,700. The assessment was completed by ITO, Ward 1, Bagalkot.
The Assessing Officer completed the assessment under Section 143(3) of the Act vide order dt.22.10.2014 assessing the income of assessee at Rs.11,48,325. The Assessing Officer noticed that the assessee had repaid loans in cash to M/s. Jyoti Trading Company which is stated to be closely related to assessee-firm. The particulars of repayment of loan are given below :
Date of repayment Amount of repayment Mode of payment 20.2.2012 Rs.1,25,000 Cash 28.3.2012 Rs.1,25,000 Cash 30.3.2012 Rs.1,25,000 Cash Total Rs.3,75,000 On noticing the above fact, the Assessing Officer issued show cause notice dt.5.7.2016 proposing to levy of penalty under Section 271E of the Act for alleged violation of Section 269T of the Act. In response to the show cause notice, the assessee submitted that M/s. Jyoti Trading Company is a proprietary concern of M/s. Manoj Bhavarlal Dhoot HUF in which the assessee is the Karta. It is contended that the repayment of loan was made in cash under bona fie that the provisions of Section 269T are not attracted as an individual and HUF of which individual is a coparcener is not distinct person and due to the business exigency.
Reliance is placed on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Sunil Kumar Goel in & 778 of 2008. The Assessing Officer after considering the above submissions held that the ratio of the decision was not applicable as the Hon'ble High
Court had deleted the penalty, considering the reasonable cause in the said case and he further held that the decision of the Bangalore Bench of Tribunal in the case of Addl. CIT Vs. D Sudhakar & Anr 19 DTR (Bang)(Trib) 276 is also not applicable as the decision was also rendered considering explanation that there is reasonable cause. Thus the Assessing Officer proceeded to levy penalty of Rs.3,75,000 under Section 271E of the Act as there was no reasonable cause for repaying the loan in cash vie order dt.20.10.2016. Being aggrieved, the assessee preferred appeal before the learned CIT (Appeals) who by the impugned order also confirmed the order of the Assessing Officer on the ground that the assessee had failed to explain and prove the business exigency in repaying the loan in cash. Being aggrieved the assessee is in appeal before us.
The learned counsel for the assessee vehemently contended that there was no violation of provisions of Section 269T, in as much as, the repayment of loan is between individual and HUF, and HUF & individual cannot be treated as a different individual under general law. It is only under Income Tax Act that for assessing income, both are treated as differently but in general law both are treated as one entity. In support of his contention, he relied on plethora of decisions as follows :
CIT Vs. Balaji Traders 303 ITR 312 (Mad) 2. Chandra Cement Ltd. Vs. DCIT 68 TTJ 35. 3. CIT Vs. Bhagwati Praad Bajoria – HUF 263 ITR 487 4. CIT Vs. Natvarlal Purshottama Parekh 303 ITR 5 (Guj) 5. Vir Sales Corporation Vs. ACIT 50 TTJ 130 (Ahd) 6. CIT Vs. Manoj Lalwani 269 ITR 590 (Jai)
On the other hand, the learned Departmental Representative placed reliance on the orders of authorities below.
We have heard the rival submissions and perused the material on record. The only issue in the present appeal is whether the penalty under provisions of Section 271E is leviable having regard to the fact that the transactions are between individual and HUF. No doubt the law settled to the extent that an individual and HUF of such individual cannot be treated as a different entities under general law, it is only under the provisions of Income Tax Act, there are two different assessments are made. There is a common control of fund and therefore there are no two distinct entities warranting levy of penalty under Section 271E and therefore it cannot be said that there is a repayment of loan from one
Section 269T of the Income Tax Act, since very nature of the transaction is not in the nature of loan, the question of establishing reasonable cause does not arise.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on the 23rd day of May, 2018.