The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that Income Tax Penalty under section 271E of Income Tax Act 1961 could not be imposed mechanically.
Assesee Devinder Gupta & Sons an Hindu Undivided Family and has made a repayment of a part of loan during the year under consideration to one of its sister concerns namely, M/s. DNB Properties Pvt. Ltd. (DNB) In the course of the assessment proceedings, the assessee furnished confirmation of the lender as required by the Assessing Officer. The Assessing Officer noted that the act of repayment of loan in cash is in violation of provision of Section 269T of the Act. Consequently, the penalty proceedings were initiated and a penalty was imposed under Section 271E of the Income Tax Act 1961.
Section 269T of the Income Tax Act 1961 prohibits a person from repaying the deposit or loan otherwise than by a bank draft of an account payee or through the electronic clearing system of a bank account.
Section 271E of the Income Tax Act 1961 If an individual repay any loan or amount or deposit or specified advance against the provision of the section 269T of Income Tax Act 1961,he shall be liable to pay penalty.
The assessee preferred appeal before the Commissioner of Income Tax Appeal. But CIT (A) confirmed the penalty for alleged contravention of Section 269T of the Income Tax Act 1961.Against the order assesee filed appeal before ITAT.
Mansi Jain counsel for the assessee submits that the lender was a sister concern managed and controlled by the Karta of the assessee. The net payable amount declared to have been received from the lender has been found genuine and accepted in the course of the assessment proceedings by the Assessing Officer.
Kumar Pranav, Counsel for the revenue confirmed the decision of the lower authorities.
After considering the contentions of the both parties the division bench of ITAT comprising Pradip Kumar Kedia, (Accountant Member ) and Chandra Mohan Garg, (Judicial Member) allowed the appeal filed by the assessee and deleted the penalty imposed by the assessing officer under section 271E of the Income Tax Act 1961.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
