In a recent decision, the Madras High Court observed that the penalty under Section 271E of the Income Tax Act, 1961 cannot be levied on repayment of loan in the absence of cash transaction.
The main grievance of the petitioner is that the petitioner-assessee-Company has advanced a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd., and M/s.Shakti Sugar Ltd., on the request of the petitioner-assessee-Company, ( since M/s. Shakti Sugar Ltd., is liable to pay Rs.14,00,00,000/- to the petitioner ) made the repayment of the said sum to three entities.
The counsel for the petitioner submitted that there was no cash transaction made by the petitioner and the same has also been clearly stated in the audited books of accounts and therefore, there is no violation of the provisions of the Income Tax Act. In spite of that, the respondent/Assessing Officer passed the assessment order imposing the penalty under Section 271- E of the Income Tax Act.
Against the said order, an appeal has been filed by the petitioner along with an application for stay, however, the respondent/Appellate Authority directed the petitioner to pay 20% of the demand. Hence, the present writ petition has been filed.
The Senior Standing Counsel for the respondent submitted that in a similar issue, the Court has already passed an order directing the respondent/Appellate authority to dispose of the appeal within a period of eight (8) weeks from the date of receipt of the order, without insisting upon any deposit.
A Single Bench of Justice Krishnan Ramaswamy observed that “This Court, prima facie is of the view that the entire penalty proceedings passed under Section 271-E of the Act is liable to be set aside. Accordingly, this Court directs the Appellate Authority concerned to to take the petitioner’s Appeal on file without insisting upon any pre-deposit and consider the issues that were discussed by this Court in this order and thereafter, shall dispose the appeal in accordance with law, within a period of eight (8) weeks from the date of receipt of a copy of this order.”
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