Appeal Success: Penalties under Section 271E Income Tax Act quashed due to lack of regular assessment

The Tribunal allowed the assessee's appeal against the penalty imposed under Section 271E of the Income Tax Act for repayment of loans in cash, citing a lack of regular assessment and no evidence of tax evasion. Relying on a judgment by the Punjab & Haryana High Court, the Tribunal found the cash payments justified as a technical default, leading to the penalty's deletion. Subsequent appeals for other assessment years were also allowed based on the same reasoning. The penalty under Section 271E was deemed unsustainable and quashed, resulting in a favorable outcome for the assessee in all appeals.

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Issues:
Violation of Section 269T and penalty under Section 271E for repayment of loans in cash.

Analysis:
The appeals by the assessee were against orders passed under Section 271E of the Income Tax Act, 1961 for A.Ys. 2011-12 to 2016-17. The assessee, an agriculturist, repaid loans in cash to a cooperative society from sales of agricultural produce. The Assessing Officer imposed a penalty under Section 271E for contravention of Section 269T, which was upheld by the First Appellate Authority, leading to the appeal. The argument presented was that the payment was genuine, with no tax evasion, and no regular assessment was framed for the assessee. The Ld. A.R relied on a judgment by the Punjab & Haryana High Court to support the claim. The Ld. DR failed to counter these submissions.

The Tribunal considered the facts and the judgment of the Punjab and Haryana High Court, which quashed a penalty under Section 271E in a similar case. The Tribunal noted that penalty proceedings may only be initiated after a regular assessment is conducted, which was not the case here. The Tribunal found the explanation for the cash payments plausible, indicating no tax evasion and a technical default. The Tribunal upheld the deletion of the penalty, as done by the High Court, based on the absence of a regular assessment. Consequently, the penalty under Section 271E was deemed unsustainable and quashed, allowing the appeal by the assessee.

In subsequent appeals for A.Y. 2012-13 to 2016-17, the Tribunal applied the same reasoning from the lead case for A.Y. 2011-12, as no changed circumstances were presented. Therefore, the appeals by the assessee for those years were also allowed. The overall decision was pronounced in open court on 11/05/2022.

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