The Pune bench of the Income Tax Appellate Tribunal (ITAT) struck downRs. 57.27 Lakh penalty under Section 271E of the Income Tax Act as there was reasonable cause on the assessee’s part for the violation.
The assessee had appealed against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year (AY) 2016-17.
Coming to the facts of the case, the assessee company engaged in the business of manufacturing and selling food products had filed its income tax returns (ITR) for the for the AY 2016-17, declaring the income as nil.
During the assessment proceedings, it was observed by the assessing officer (AO) that the assessee made repayment of loans/deposits through a mode other than account payee cheques/drafts, for which the AO referred the matter to the JCIT for the initiation of penalty proceedings for violating the provisions of Sec. 269T of the Income Tax Act.
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During the penalty proceedings, it was submitted by the assessee that provisions of Sections 269SS and 269T cannot be invoked merely on the basis of journal entities.
The JCIT levied a penalty of Rs. 57,27,410 under Section 271E of the Income Tax Act for violation of provisions of Section 269T of the Act.
Although the assessee appealed before the CIT(A), the latter upheld action of the JCIT by noting that no evidence was filed by the assessee to show that there was any bonafide reasonable cause due to which the repayment was not made through the modes provided in Section 269T of the Income Tax Act.
The assessee’s counsel contended that there was no violation of provisions of sec.269T since the security deposits were obtained through banking channels and were only adjusted towards the outstanding dues.
The bench relied on the decision of the Bombay High Court in the case of CIT (Central)-IV vs. Ajitnath Hi-Tech Builders (P.) Ltd., in which the HC canceled the penalty levied on account of ‘reasonable cause’.
The bench noted that there was a reasonable cause on the part of the assessee for such a violation. The bench directed the AO to delete the penalty under Section 271E of the Income Tax Act, 1961.
The ITAT, comprising Ashta Chandra (Judicial Member) and Rama Kanta Panda (Vice President), allowed the assessee’s appeal and set aside the impugned order.
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