Assessee's Penalties Voided for Director Transactions: Current Account, Not Loans

The Tribunal allowed the assessee's appeals, ruling that penalties under sections 271D and 271E were unwarranted due to the nature of transactions with the director, following a precedent set by the Madras High Court. The transactions were deemed as current account dealings, not loans, leading to the deletion of penalties imposed by the AO and upheld by the CIT(A).

---

---

Issues involved: Appeal against orders of CIT(A)-VI, Kolkata for A.Yr. 2003-04 regarding penalty u/s 271D and 271E of the IT Act.

Penalty u/s 271D:
The AO imposed a penalty of Rs. 28,13,178 u/s 271D for cash loan transactions with a director, and Rs. 17,66,109 u/s 271E for repayment of the loan. The CIT(A) upheld both penalties based on the tax audit report showing cash transactions with the director. The appellant cited a Madras High Court decision to argue that the transactions were not subject to section 269D. The Tribunal, following the Madras HC decision, ruled that the transactions were not loans but current account dealings, thus deleting the penalties under sections 271D and 271E.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that penalties u/s 271D and 271E were unjustified based on the nature of transactions with the director, as per the Madras High Court precedent.

---