INCOME TAX ACT, 1961

Section 271E

Penalty under section 271E - Contravention of provision of section 269T - Leviability - Payments being genuine and duly accounted for in books of account--Mere technical violation and no loss to Revenue

AO found that assessee-company repaid loans and advances received from its directors and shareholders otherwise than by crossed cheque. Accordingly, he levied penalty under section 271E for violation of provision of section 269T. Assessee submitted that all the payments made by it were genuine and all the creditors accounted the loans as well as the repayments in their books of account and also filed returns of income. It was further submitted that the payment were made to the creditors otherwise than by crossed cheque on their request and thus, requested to drop the penalty. Held: There was no dispute that the transactions were between mutually/closely associated persons, i.e., directors and shareholders of assessee-company. Even though the loans were repaid otherwise than by crossed cheque but, the transactions were duly reflected in the books of accounts. Further, the interest paid on such loans was also allowed by the AO. Further, the assessee demonstrated that transactions were genuine with relevant documents. It was a mere technical violation and there was no loss to the Revenue. Therefore, there was sufficient and reasonable cause for repayment of loans to the directors and shareholders otherwise by crossed cheque and hence, the penalty levied under section 271E was deleted.

REFERRED : CIT v. Sunil Kumar Goel (2009) 183 taxman 0053 (P&H) : 2009 TaxPub(DT) 1514 (P&H-HC) and Omec Engineers v. CIT (2008) 169 taxman 0158 (Jhar) : 2007 TaxPub(DT) 1505 (Jhar-HC).

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 271E

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