GHANSHYAM DAS BIHANI,KOLKATA vs. JCIT, RANGE 34, KOLKATA, KOLKATA

This is an appeal filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 17.05.2016 confirming the penalty passed u/s 271E of the Income Tax Act, 1961 (Act) for violation of the provision of section 269T of the Act for A.Y.2011-12.

Brief facts of the case are that the assessee is an individual carrying on business of iron and steel. The AO notes that a tax evasion petition was received by the Department against the assessee due to which the assessment for the relevant assessment year was reopened. The AO noted that assessee did not file any return because he did not had any taxable income. However, in respect to the notice u/s. 148 of the Act, assessee filed e- return of income on 27.11.2012. The AO noted that as per the tax evasion petition the assessee has taken a loan of Rs.2,75,000/- from the complainant (Mrs. Rama Maheswari). The AO notes that the assessee latter claimed that he had refunded the said amount to the complainant in cash. The AO noted that the assessee had reflected the loan in the books maintained by M/s. G. D. Enterprises, the proprietary concern of the assessee. The AO noted that the assessee had repaid the amount in three installments i.e. (i) on 28.08.2010 Rs.1,10,000/-, (ii) on 04.09.2010 Rs.99,000/- and (iii) on 05.09.2010 Rs.66,000/-, thus a total amount of Rs.2.75 lacs have been paid and taking note of the repayment of the Ghanshyam Das Bihari, AY- 2011-12 amount, the civil suit filed by the creditor Smt. Rama Maheswari was closed by the Court of Civil Judge, Senior Division, 2nd Court, Alipore on 01.02.2016. Taking note of the aforesaid facts, the AO assessed the total income of the assessee at Rs.13,730/-, however, took up the matter with the JCIT, Range-34 to initiate penalty proceedings against the assessee for violation of sec. 269T of the Act. Thereafter, we note that JCIT vide order dated 29.09.2014 imposed 100% of amount repaid in cash of Rs.2.75 lacs i.e. Rs.2.75 lacs as penalty u/s. 271E of the Act. Aggrieved, the assessee preferred appeal before the Ld. CIT(A), who was pleased to confirm the same. Aggrieved, the assessee is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that assessee is an individual who was trading in iron and steel. The assessee in the relevant assessment year had no taxable income. The assessee had taken loan from Mrs. Rama Maheswari an amount of Rs.2.75 lacs which could not be returned to the said creditor within the time as agreed upon by the parties because the assessee was suffering from serious illness (neuro related disease) and business loss. The creditor Mrs. Rama Maheswari meanwhile filed a civil suit for realization of the said amount of loan and simultaneously forwarded a tax evasion petition against the assessee before the Income Tax Department. During the proceedings before the Court of civil Judge while defending the civil suit filed by the plaintiff Mrs. Rama Maheswari, we note that the assessee had withdrawn from his bank account Rs.1.10 lacs on 08.10.2010 (page 7 bank statement of assessee) and had handed over the said amount on 28.08.2010 to the creditor; and thereafter by another two instalments paid the rest of the amount. It is evident from pages 8 to 9 of the paper book which is the order of the Court of Civil Judge, Senior Division, 2nd Court, Alipore, wherein it has been stated that Mrs. Ram Maheswari has settled the dispute amicably outside the court with the assessee. The Department having received the tax evasion complaint from Mrs. Rama Maheswari acted upon it and had issued notice u/s. 148 of the Act for reopening the assessment and taking note of the fact that the amount in question has been repaid by the assessee in cash has imposed penalty u/s. 271E of the Act. According to the assessee, he was suffering from Neuro related problems and was bed ridden because of stroke which fact is evident from a perusal of medical documents of assessee filed before us; and during this period the assessee had suffered huge business loss because of which he did not had income assessable to tax. Since there was shortage of fund to run the business he had taken a loan from Mrs. Rama Maheswari. Since the loan could Ghanshyam Das Bihari, AY- 2011-12 not be paid within the time stipulated, she filed civil suit for realization of the amount as well as filed a tax evasion complaint before the Income Tax Department to put pressure on the assessee. According to the assessee, when the civil suit was pending, the assessee wanted to give cheque in installments to Smt. Rama Maheswari but she was not agreeing to the same and wanted cash instead of cheque because she was afraid that cheque would bounce taking note of the assessee’s dire financial position. Since there was civil case against the assessee, the assessee had no other alternative but to make the payment as dictated by the creditor Smt. Rama Maheswari and was forced to pay the amount in cash to her. We note that the assessee was in dire financial situation because of his Neuro problems as well as because of business loss suffered due to non-supervision of the business. The assessee when faced with the civil suit to settle the same, he did as per the direction of the plaintiff. The Plaintiff Smt. Maheswari was not ready to accept the cheque from the assessee taking note of the bad financial position of the assessee and wanted the amount in question in cash because she feared that cheque would bounce. Therefore, the assessee was forced to withdraw the amount from his bank account and squared up the debt with that of the creditor. We taking into consideration the fact that assessee was suffering from serious neuro disorder and at the same time his proprietorship concern was in financial crisis which led to business loss and meanwhile had to answer the civil suit filed by the creditor and the creditor not accepting the cheque fearing that cheque of assessee would not be honored and may get bounced, per-force had to make payment by cash to wriggle out of the suit filed against the assessee. The facts disclosed above, given rise to reasonable cause envisaged u/s. 273B of the Act. Therefore in the peculiar facts and circumstances of the case we are of the view that penalty for infraction of sec. 269 T of the Act was not warranted. We, therefore, for reasons discussed above are of the opinion that penalty ought not to have been imposed on the assessee in this case, and, therefore, we direct deletion of the same. Appeal of assessee is allowed.