ITAT Rules in Favor of Assessee, Cancels Penalties under Income Tax Act

The Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer to delete penalties imposed under sections 271E and 271D of the Income Tax Act, 1961. The ITAT ruled in favor of the assessee, holding that payments made through journal entries did not violate the relevant sections (269T and 269SS). Previous tribunal decisions supporting this interpretation led to the deletion of the penalties amounting to Rs. 5,29,83,400 under section 271E and Rs. 3,45,13,627 under section 271D for the assessment year 2005-06.

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Issues involved: Appeals against penalty levied u/s 271E and u/s 271D of the Income Tax Act, 1961 for the assessment year 2005-06.

Issue 1: Penalty u/s 271E

The assessee's appeal was against the confirmation of a penalty of Rs. 5,29,83,400 imposed by the Addl. CIT, Central Range-6 u/s 271E. The Assessing Officer found a violation of section 269T as an amount was repaid without an account payee cheque or draft. The assessee argued that similar cases were decided in their favor by the Tribunal. The ITAT held that the payment was made through a journal entry and not in violation of section 269T. Relying on previous decisions, the ITAT directed the AO to delete the penalty under section 271E.

Issue 2: Penalty u/s 271D

The appeal was against the confirmation of a penalty of Rs. 3,45,13,627 levied u/s 271D for accepting loans through journal entries, contravening section 269SS. The assessee contended that journal entries did not violate section 269SS. The ITAT noted that previous decisions by the Tribunal supported the assessee's position that journal entries do not breach section 269SS. Consistently with the earlier rulings, the ITAT directed the AO to delete the penalty imposed under section 271D.

Separate Judgement: No separate judgment was delivered by the judges.

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