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Income Tax Appellate Tribunal, KOLKATA BENCH (D
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi]
Per P.M. Jagtap, Vice President
This appeal filed by the assessee is directed against the order of Ld. CIT(A) - Asansol dated 13.02.2018 whereby he confirmed the penalty of Rs. 2,95,000/- imposed by the AO u/s 271E of the Income- tax Act, 1961.
The assessee in the present case is a partnership firm which is engaged in the business of contracting. During the course of assessment proceedings u/s 143(3) for the assessment year 2012-13, it was found by the AO that the assessee had repaid loan amounting to Rs. 2,95,000/- to M/s. SREI Equipment Finance Ltd. in cash violating the provisions of section 269T of the Income tax Act, 1961. The AO, therefore, initiated penalty proceedings u/s 271E and in reply to the show-cause notice issued by the AO during the course of the said
Assessment Year: 2012-13 M/s. Dhameja Mining proceedings, the following written explanation was offered by the assessee. “The assessee firm has purchased an excavator (Machinery) by agreement with SREI (Financer) and agreed to pay the amount by EMI. Copy of Agreement and repayment schedule enclosed herewith for your honour's kind perusal. The firm has failed to pay repay as per agreed schedule during the financial year 2012-13 due to weak financial position of firm. In the meantime field officer of the Finance Company met the partners of the firm and pressed hard for lump sum payment of Rs. 2,95,000/- otherwise the company would take repossession of the financial machinery due to default by the assessee firm in repayment of loan as per agreed schedule. Inspite of repeated request by the partner of the firm that he would pay the amount of Rs. 2 lacs ninety five thousand by a/c payee cheque after depositing the cash into Bank a/c of the firm, he did not agree & collected Rs. 2,95,000/- in cash. The default was committed only because the agent of the firm had insisted to repay the amount of loan in cash in gross violation of the terms of agreement as mentioned in point no. 2.14 of the agreement under place & mode of payment by the customer (Xerox copy of the agreement & money receipts is enclosed herewith).
As per terms of agreement SRE/ Infra.Fin.Ltd. could repossess the machinery till the complete recovery of the loan. Therefore, the Partner of the firm had to pay the part repayment of the finance by way of cash on bonafide belief that no future complication would be, arisen in his case. In this connection I would like to submit the documents in support that the finance company has gone in arbitral tribunal of the ld. Sole arbitration for recovery of the financed amount. Your honour is therefore requested to consider the case of the assessee firm considering the fact that default was not wilful and this default was committed due to adamant attitude of the finance company and drop the penalty proceedings u/s 271E of the I.T. Act, 1961.”
The above explanation offered by the assessee was not found acceptable by the AO. According to him, the assessee had enough time to repay the amount of loan in equal monthly instalments but he failed to do so and made one time repayment of loan amounting to Rs.
Assessment Year: 2012-13 M/s. Dhameja Mining 2,95,000/- on 30.12.2011. He, therefore, held that there was a clear infringement of provision of section 269T by the assessee and proceeded to impose a penalty of Rs. 2,95,000/- u/s 271E of the Act.
The penalty imposed by the AO u/s 271E was challenged by the assessee in the appeal filed before the Ld. CIT(A) and the explanation offered before the AO during the course penalty proceedings was reiterated on behalf of the assessee before the Ld. CIT(A). The Ld. CIT(A) however did not accept the same in the absence of any evidence produced by the assessee to substantiate its claim that M/s. SREI had insisted on repayment in cash which compelled the assessee to repay the loan in cash. He accordingly confirmed the penalty of Rs. 2,95,000/- imposed by the AO u/s 271E of the Act. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
We have heard both the sides and also perused the relevant material available on record. It is observed that the assessee had taken a loan from M/s. SREI Equipment Finance Ltd. for purchase of machinery and there was delay on the part of the assessee in repayment of the said loan. As a result of the said delay, recovery proceedings were initiated by M/s. SREI Equipment Finance Ltd. against the assessee and when the assessee was willing to pay the outstanding amount after mobilising the fund, M/s. SREI Equipment Finance Ltd. insisted for payment in cash. As pleaded on behalf of the assessee before the authorities below as well as before the Tribunal, the repayment of loan in cash was made under these compelling
Assessment Year: 2012-13 M/s. Dhameja Mining circumstances and there was thus a reasonable cause for non- complying with the requirement to section 269T. The Ld. CIT(A) did not accept this explanation of the assessee as a reasonable cause on the ground that the assessee had enough time to repay the amount of loan in equal monthly instalments. We are unable to subscribe to this view taken by the Ld. CIT(A). As explained by the assessee during the course of appellate proceedings before the Ld. CIT(A), the delay in repayment of loan to SREI was due to weak financial position and this was the reason why the assessee could not repay the loan as per the agreed schedule. Had the assessee was in a position to repay the amount of loan in equal monthly instalments as per the agreed schedule, SREI could not have insisted for cash payment and the question of default u/s 269T would not have arisen. The weak financial position of the assessee resulted in default and delay in repayment of loan by the assessee and since this position was duly supported by the fact that the matter was referred to arbitral Tribunal, we are of the view that the insistence of repayment of loan in cash by SREI was natural corollary and the same constituted a reasonable cause for the repayment of loan in cash by the assessee in violation of section 269T. Keeping in view all these facts and circumstances of the case, we are of the view that it is not a fit case to impose penalty u/s 271E and cancelling the said penalty imposed by the AO and confirmed by the Ld. CIT(A), we allow this appeal of the assessee.
Assessment Year: 2012-13 M/s. Dhameja Mining
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 15th February, 2019.