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Income Tax Appellate Tribunal, BENCH : COCHIN
Before: SMT. BEENA PILLAI & Ms. PADMAVATHY S.
O R D E R
Per Padmavathy S, Accountant Member:
This appeal is against the order of CIT(A),NFAC, Delhi dated 10.5.2022 for AY 2013-14. The assessee raised the following grounds:-
“1. Imposition of penalty u/s. 271E on advances/loans given by the assessee to other persons is unwarranted. 2. Imposition of penalty u/s. 271E on loans repaid by the assessee to disclosed person due to unavoidable circumstances is unwarranted.”
SP No.56/C/2022 & Page 2 of 8 2. The assessee is an individual. During the course of assessment proceedings for AY 2013-14, the AO noticed that the assessee has made the following cash payments towards loan and therefore was of the view that the assessee has violated the provisions of 269T:-
15-11-2012 Thomas 3, Clevedon Lodge, CASH 2,50,000 Mathew 87, Augustus Road, Southfield, SW 196 AS, London 18-12-2012 Thomas 3, Clevedon Lodge, CASH 1,50,000 Mathew 87, Augustus Road, Southfield, SW 196 AS, London 23-01-2023 Raju Thomas Therezhath House, CASH 4,40,000 Chempu P.O., Vaikom – 686 141. 10-11-2012 Santha Raju Therezhath House, CASH 1,60,000 Petta Tripunithura – 682 301. 07-02-2013 Santha Raju Therezhath House, CASH 1,20,000 Petta Tripunithura – 682 301.
The AO issued a show cause notice initiating penalty proceedings u/s. 271E. The assessee submitted that there was a compulsion from loan creditors for repayment of the loan as the loan creditors were residing in London and on their arrival in India, they required money immediately. The AO did not accept the submissions of the assessee and held that the assessee has violated the provisions of section 269T without sufficient cause and therefore levied a penalty u/s. 271E on the entire amount of Rs.11,20,000.
SP No.56/C/2022 & Page 3 of 8 4. On further appeal, the CIT(Appeals) upheld the penalty levied. Aggrieved, the assessee is in appeal before the Tribunal.
The ld. AR submitted that out of the 6 transactions, 3 transactions as listed below are not loan repayments but are fresh loans given by the assessee during the FY 2012-13:-
The ld. AR therefore submitted that the provisions of section 269T which deals with mode of repayment is not applicable to the above transaction since these are fresh loans given by the assessee during the year under consideration. With regard to the loans repaid for the rest of the transactions, the ld. AR submitted that the loans were received by account payee cheque (page 14 of PB) which is disclosed fully in the audited accounts together with opening balance of SP No.56/C/2022 & Page 4 of 8 Rs.50,000. An amount of Rs.2,50,000 was repaid through account payee cheque (page 15 of PB) and only the balance of Rs.4,00,000 was repaid in cash. The ld AR contended that considering these facts, it is evident that there is no black money transaction in this deal and there is no intention to evade tax. Accordingly, the ld. AR submitted that invoking penalty is not warranted. The ld. AR further submitted that the loan creditor was in urgent need of funds as he was finishing the transaction of purchase of house and therefore the assessee was forced to repay the amount in cash as per the requirement of the loan creditor. This, according to the ld. AR, was a sufficient cause for the repayment of loan in cash and therefore the penalty is not warranted. The ld. DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the material on record. Before proceeding further, let us look at the provisions of section 269T and 271E which read as under:-
“Mode of repayment of certain loans or deposits43. 269T. No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if— (a) the amount of the loan or deposit together with the interest, if any, payable thereon, or (b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co- operative bank or, as the case may be, the other company or SP No.56/C/2022 & Page 5 of 8 co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits, is twenty thousand rupees or more: Provided that where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid : Provided further that nothing contained in this section shall apply to repayment of any loan or deposit taken or accepted from— (i) Government; (ii) any banking company, post office savings bank or co- operative bank; (iii) any corporation established by a Central, State or Provincial Act; (iv) any Government company45 as defined in section 617 of the Companies Act, 1956 (1 of 1956); (v) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.” “Penalty for failure to comply with the provisions of section 269T. 271E. (1) If a person repays any 64 [loan or] deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the [loan or] deposit so repaid.”
SP No.56/C/2022 & Page 6 of 8
(2) Any penalty imposable under sub-section (1) shall be imposed by the 66[Joint] Commissioner.]”
With regard to the four transactions as listed in the earlier part of this order, the ld. AR’s contention is that they are not pertaining to repayment of loan, but fresh loans given during the year under consideration. In this regard, our attention was drawn to the balance sheet of the assessee as of 31.3.2013 together with schedule of deposits and advances in pages 6 & 9 of PB. From the plain reading of the above provisions of section 269T, it is clear that the section is applicable for repayment of loan and not for fresh loans. Therefore, it is important to verify based on facts whether the above listed loans are repayments or fresh loans in order to decide the applicability of violation u/s. 269T in assessee’s case. We therefore remit the issue back to the AO to examine the submissions of the assessee and decide in accordance with law.
With regard to the amount of loan repaid to Mr. Thomas Mathew, we notice that the transactions to the extent of receipt of loan and part repayment has been done through Federal Bank. The assessee had repaid the loans to the extent of Rs.4 lakhs in cash. During the course of hearing, the ld. AR submitted that the object of section 269T is explained by the CBDT in its order No.345 dated 28.6.1982 that the intention is to counter the proliferation of black money and accordingly submitted that in assessee’s case the transactions are done through
SP No.56/C/2022 & Page 7 of 8 proper banking channel primarily and for the reason that a part of the transaction happened in cash cannot warrant invoking the penalty. The ld. AR also explained the reason for repayment in cash since the loan creditor was in urgent need of money for finishing the work of his house which according to the ld. AR is sufficient reason. It is noticed from the assessment order that the AO has not considered the transaction individually in order to conclude that there was no sufficient cause. It is further noticed that all the transactions are considered together for the purpose of concluding that there is a violation u/s. 269T. We therefore remit this transaction also back to the AO for fresh examination based on evidence and circumstances of the case and decide in accordance with law.
In view of our decision in the appeal, the SP filed by the assessee is dismissed as infructuous.
In the result, the appeal by the assessee is allowed for statistical purposes and the SP of the assessee is dismissed.
Pronounced in the open court on this 20th day of January, 2023.