“Section 273B of the Income Tax Act requires that on proof of reasonable cause, the penalty imposable u/s 271E(1) would not be imposable” – HC
Recently, the Chattisgarh High Court held that if the assessee shows reasonable cause within the meaning of Section 273B for his failure to comply with the provisions of Section 269T of the Income Tax Act, then no penalty can be imposed on him under Section 271E for violation of Section 269T of the Act.
Explaining in detail, the Court elaborated that the transaction which was bona fide and not aimed to avoid any tax liability, would constitute a reasonable cause within the meaning of Section 273B for not invoking Section 271E of the Act.
Facts of the case:
In the course of assessment in case of appellant/ assessee under Section 143(3) r/w Section 147 of the Income Tax Act, 1961, the AO held that the assessee has made repayment of loan to M/s. Tata Finance Corporation to the extent of Rs.6,71,939 in cash against the loan taken for a commercial vehicle. Hence, the AO proceeded to initiate penalty proceeding under Section 271E of the Act on the ground that repayment of loan to the extent of more than twenty thousand rupees was in violation of Section 269T of the Act. In response, the assessee submitted that due to failure on her part to pay instalments in time, the financer insisted for cash payment, and also annexed a copy of the financer's letter issued by M/s. Tata Finance Corporation. However, the AO refused to accept the explanation and imposed a penalty under Section 271E of the Act. This assessment and penalty were confirmed by the NFAC as well as the ITAT, holding that non-compliance of the provisions contained in Section 269T would invite penalty under Section 271E of the Act. Hence, the assessee approached the High Court.
Contentions of Appellant:
The counsel for the appellant submitted that the AO has accepted the transaction of repayment of loan to M/s. Tata Finance Corporation and the transaction was duly reflected in the books of account. He submitted that when none of the three authorities have recorded a finding that the transaction was not genuine, then all the three authorities have concurrently committed a grave legal error in holding that non-compliance of Section 269T of the Act would straightway result in imposition of penalty under Section 271E of the Act overlooking the provisions contained in Section 273B of the Act which clearly provides that no penalty shall be imposable on the person or the assessee for any failure referred to under Section 271E, if the assessee proves that there was reasonable cause for the said failure as the same was duly reflected in the books of account.
Contentions of Respondent:
The counsel for respondents submitted that the finding recorded by the three authorities that there is complete non-compliance of Section 269T of the Act, inviting the provisions contained in Section 271E of the Act, is the correct finding of fact based on the evidence available on record, which is neither perverse nor contrary to the record.
Observations of the Court:
Referring to the provisions of Section 269T of the Act, the Court observed that no company including a banking company, co-operative society or firm shall repay to any person any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the deposit, if the amount of deposit together with interest is more than Rs.20,000.
Observing that the language used in Section 269T of the Act is in negative, the Court noted that Section 269T provides that irrespective of the fact that there are several modes for repaying the deposit, the entities specified in Section 269T shall repay the deposit only by the modes set out therein.
Thus, the negative language used in Section 269T as also the penal consequences provided in Section 271E for non-compliance of the procedure prescribed under Section 269T leave no manner of doubt that repayment of deposit in the manner prescribed under Section 269T is mandatory, added the Court.
The Court then referred to Section 273B, which contemplates certain exigencies in which though the assessee is liable to suffer a penalty, but the penalty is not to be imposed in certain cases.
Section 273B of the Act also includes Section 271E of the Act and, as such, imposition of penalty under Section 271E of the Act for non-compliance of Section 269T is subject to the provisions contained in Section 273B of the Act, explained the Court.
Further, the Court went on to explain that no penalty shall be imposable on the person or the assessee under Section 271E for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure.
The Court found that there is no finding by the AO or the two appellate authorities that the transaction made by the assessee in breach of Section 269T was not a genuine transaction.
On the other hand, the return of the assessee has been accepted as it is and none of the authorities have recorded finding that the same was not genuine and not a bona fide transaction, added the Court.
The Court stated that all three I-T Authorities ignored the fact that the imposition of penalty merely on a technical mistake committed by the assessee, which has not resulted in any loss of revenue, would not be sustainable.
Accordingly, the cause shown by the assessee that on the insistence of M/s. Tata Finance Corporation to pay the amount of loan in cash would constitute a reasonable cause within the meaning of Section 273B, added the Court.
The decision of the Court:
In that view of the matter, the High Court allowed the appeal and quashed the order imposing penalty passed by the AO and affirmed by the appellate authorities. The Court also concluded that since the appellant has shown the reasonable cause within the meaning of Section 273B of the Act, the appellant is not liable to pay penalty under Section 271E for non-compliance of Section 269T of the Act.
Case Title: Sandeep Kaur Gill vs Union of India & Ors.
Case Number: TAXC No. 98 of 2023
Coram: Hon’ble Justice Sanjay K. Agrawal and Hon’ble Justice Deepak Kumar Tiwari
Counsel for Appellant: Advocate Arjit Tiwari
Counsel for Respondent: Advocate Ajay Kumrani
