INCOME TAX ACT, 1961

Section 271E

Penalty under section 271E - Cash payment in contravention of section 269T - Lenders were otherwise properly identified and transactions were genuine -

AO noticed that total repayment of loan in cash to the tune of Rs. 5,80,000 (Rs. 1,40,000 + and 4,40,000) was made by assessee in contravention of section 269T. Accordingly, AO levied penalty under section 271E. Assessee pleaded that persons to whom such amounts were repaid were very close of its partners, who did not come within the scope of expression 'any other person' as envisaged under sections 269SS and 269T. Both the lenders were in dire need of funds on those days; since they provided financial assistance to assessee as and when needed and assessee was under obligation to repay the same.Held: Section 271E lays down conditions for imposition of penalty for repayments of loans and deposits in cash, where the amount exceeds Rs. 20,000 in violation of section 269SS . Considering the fact that this provision was brought in for identification of source for repayment, there should not be any levy of penalty where the persons are otherwise properly identified and the transactions are genuine, because there can be no attempt to evade tax, where identities of persons dealt with are known. In the instant case, repayment of advances from regular parties were identifiable and assessee had explained the circumstances in which it was constrained to make repayment of loans in question in cash. That being so, penalty imposed in the sum of Rs. 5,80,000 on repayment of advances from two persons was deleted.