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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA no.5280/Mum./2015 (Assessment Year : 2010–11) Neco Harmony 253, Abhay Niwas Station Road, Wadala ……………. Appellant Mumbai 400 014 PAN – AAFFN4088A v/s Asstt. Commissioner of Income Tax Circle–17(2), Piramal Chamber ……………. Respondent Lal Baug, Parel, Mumbai 400 012 Assessee by : Ms. Dindle Hariya Revenue by : Shri Vishwas Jadhav Date of Hearing – 03.11.2016 Date of Order – 11.11.2016
O R D E R PER SAKTIJIT DEY, J.M.
Aforesaid appeal of the assessee is directed against order dated 9th October 2015, passed by the learned Commissioner (Appeals)–32, Mumbai, confirming penalty imposed of ` 1,50,000 under section 271E of the Act for the assessment year 2010–11.
Briefly the facts are, in course of assessment proceedings the assessing officer noticing that in the relevant previous year assessee had repaid loans in cash on different dates amounting to ` 95,000 and ` 55,000 to two different persons, initiated proceeding for imposition
2 Neco Harmony of penalty under section 271E alleging violation of provisions contained under section 269T of the Act. During the penalty proceedings, in response to the show cause notice issued by the assessing officer, assessee submitted its explanation objecting to the imposition of penalty on the following reasons:– i) The two persons to whom cash payments were made are the wives of two of the partners of the firm. ii) Assessee was under an impression that provisions of section 269T are applicable only when each repayment in cash is ` 20,000 or more. iii) The concerned ladies urgently required money for personal and household purposes, hence, payments were made otherwise than through banking channel. iv) It is a genuine transaction.
The assessing officer however was not convinced with the explanation of the assessee. He observed, as the assessee had repaid the loan in cash violating the provisions of section 269T, it is liable to be visited with penalty under section 271E. Accordingly, he passed an order imposing penalty of Rs. 1, 50, 000. Being aggrieved of the penalty imposed assessee preferred appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals), however, confirmed the penalty imposed under section 271E.
3 Neco Harmony 4. Learned Authorised Representative submitted, the payments made in cash were towards interest and not repayment of loan. Therefore, provisions of section 269T would not apply. She further submitted, each cash payment of interest on various dates is less than Rs. 20,000, hence, there is no violation of section 269T. He submitted, the persons to whom payments were made are close relatives of the partners and the payments were made due to a urgent need. Therefore, there being a reasonable cause for making payments in cash, no penalty should be imposed.
The learned Departmental Representative relied upon the observations of the CIT (Appeals) and assessing officer.
We have considered the submissions of the parties and perused the materials on record. Though, it may be a fact as per the conditions imposed under section 269T any payment in cash towards repayment of loan, deposits and interest in excess of ` 20,000 is prohibited and if there is any violation of the aforesaid conditions, a person making such payment is liable to be visited with penalty under section 271E of the Act, however, the penalty imposable is not automatic. This is evident from the provisions contained under section 273B of the Act. If a person making payment contrary to the conditions imposed proves that there was a reasonable cause for failure to comply to the provisions of the Act, the assessing officer is obliged under the act not 4 Neco Harmony to impose any penalty. Therefore, the reasonableness of assessee’s explanation for failure to comply with the conditions imposed needs to be appreciated. In the present case assessee has explained that it was under a bonafide impression that provisions of section 269T are not applicable to payment of interest and further the said provision applies to each individual cash payment exceeding ` 20,000 and not the aggregate of cash payments. It is the plea of the assessee that the cash payments were made due to urgent personal needs of the wives of the partners. There is nothing on record to suggest that the aforesaid explanation submitted by the assessee lacks bonafide or unreasonable. Rather, explanation of the assessee, if considered in the context of facts on record certainly gives an impression that there was a reasonable cause for the assessee to make cash payments to the persons concerned. In the aforesaid view of the matter, we are of the considered opinion that imposition of penalty in the present case is not justified. Therefore, we delete the penalty imposed under section 271E of the Act.
In the result assessee’s appeal is allowed. Order pronounced in the open Court on 11.11.2016