Tribunal cancels penalties under Income-tax Act sections 271D and 271E, citing reasonable causes.

The Tribunal allowed both appeals, setting aside the penalties imposed under sections 271D and 271E of the Income-tax Act, 1961. The penalties were deleted based on the reasonable causes established by the assessee in each case. In the first appeal concerning a violation of section 269SS, the Tribunal invoked section 273B due to urgent need for payments and dispute resolution. In the second appeal related to a violation of section 269T, the Tribunal considered financial difficulties faced by the assessee and pressure from the sister concern, finding a reasonable cause for cash repayments.

---

---

Issues:
1. Penalty under section 271D of the Income-tax Act, 1961 for violation of section 269SS.
2. Penalty under section 271E of the Income-tax Act, 1961 for violation of section 269T.

Issue 1: Penalty under section 271D for violation of section 269SS:
The judgment pertains to two appeals by the assessee related to the assessment year 2006-07, challenging the penalty of Rs. 5,00,000 imposed under section 271D of the Income-tax Act, 1961. The assessee had taken a loan from its sister concern, and the Assessing Officer (AO) noticed a violation of section 269SS as the loan was not taken through A/c Payee cheque or A/c Payee Bank Draft. The assessee explained that the loan was urgently needed to settle disputes and purchase machinery, and the sister concern made direct payments to the parties involved. The AO imposed the penalty, which was confirmed in the first appeal. The Tribunal considered the circumstances, including the urgent need for payments and the resolution of disputes, and invoked section 273B, which allows waiver of penalty if a reasonable cause for non-compliance is proved. The Tribunal found a reasonable cause for the non-compliance with section 269SS and deleted the penalty under section 271D.

Issue 2: Penalty under section 271E for violation of section 269T:
The second appeal challenged the penalty of Rs. 3,70,306 imposed under section 271E for violation of section 269T. The assessee had made cash repayments to its sister concern over a period due to financial constraints. The AO imposed the penalty for non-compliance with section 269T, which was upheld by the Ld. CIT(A). The Tribunal considered the financial difficulties faced by the assessee, the pressure from the sister concern for immediate repayments, and the circumstances of the attachment of the company's assets. It found that there was a reasonable cause within the meaning of section 273B for making cash repayments instead of A/c Payee Cheques or Bank Drafts. Consequently, the Tribunal deleted the penalty under section 271E.

In conclusion, the Tribunal allowed both appeals, setting aside the penalties imposed under sections 271D and 271E of the Income-tax Act, 1961, based on the reasonable causes established by the assessee in each case.

---