2023 (4) TMI 1249 - AT - Income Tax

Tax Penalty Upheld for Loan Repayment Violation

Sandeep Kaur Gill Versus JCIT (Range-3) Raipur (C.G.)

The Tribunal upheld the penalty imposed by the JCIT under Sec.271E of the Income-tax Act, 1961, as the assessee failed to comply with section 269T ... Penalty u/s. 271E - non mandate of provisions of section 269T - HELD THAT:- We are of the considered view that even if the financers on account of the poor track record of the assessee were not ready and willing to receive the monthly installments towards repayment of loans from her through cheques, then she could have safely made the said repayments by way of account payee bank drafts or electronic clearing system through his bank account or any other prescribed electronic mode as provided in Rule 6ABBA of the I.T. Rules, 1962. We are unable to persuade ourselves to subscribe to the explanation of the assessee that as the financers were not ready to receive the repayment of loans from her vide account payee cheques, therefore, for the said reason she was compelled to make the said payments in cash. Also we do not find any substance in the claim of the assessee that she was unaware of the provisions of section 269T - It is a matter of fact borne from record that the assessee at the relevant point of time was availing the services of a Chartered Accountant and had got her accounts for the year under consideration audited from him. Considering the aforesaid factual position, and independent of the settled position of law that an assessee cannot be allowed to plead ignorance of law, we are even otherwise of the considered view that there is no substance and merit in the claim of the assessee that she was oblivion of the modes and manner for repayment of loans as prescribed u/s 269T of the Act. Adverting to the support drawn by the assessee from the fact that a similar penalty that was imposed in the case of her nephew, viz Shri Ajay Gill had been vacated by the CIT(A), NFAC, we are of a strong conviction that as the facts involved in every case stand on their independent footing, therefore, her aforesaid claim would be of no assistance. As the assessee had not only failed to comply with the provisions of section 269T therein rendering her liable for imposition of penalty u/s. 271E but had also failed to come forth with any reasonable cause which had prevented her to make repayment of the monthly installments of her outstanding loans in a manner other than that prescribed under law, therefore, finding no infirmity in the penalty imposed by the JCIT u/s. 271E of the Act, uphold the same. Appeal filed by the assessee is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether repayment of loans in cash, contrary to modes prescribed under section 269T of the Income-tax Act, 1961, attracts penalty under section 271E. 2. Whether the assessee had 'reasonable cause' within the meaning of section 273B to avoid penalty under section 271E for repayments made otherwise than by account-payee cheque/bank draft or electronic mode as mandated by section 269T. 3. Whether ignorance of law or reliance on financer's instruction can constitute reasonable cause to escape penalty under section 271E. 4. Whether decisions in factually different matters (e.g., cancellation of penalty in a relative's case) afford any ground to relieve the assessee from penalty in the present matter. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of penalty under section 271E for repayment in cash contrary to section 269T Legal framework: Section 269T prescribes modes for repayment of loans/deposits (account payee cheque, account payee bank draft, electronic clearing system or other prescribed electronic mode). Section 271E authorises levy of penalty for contravention of section 269T. Interpretation and reasoning: The Tribunal found as a matter of record that repayments aggregating Rs.6,71,939 were made in cash. The statutory text of section 269T contemplates multiple non-cash modes; absence of use of any prescribed mode constitutes contravention. The Tribunal rejected the assessee's contention that financier's insistence justified payment in cash because alternative prescribed modes (bank draft, electronic transfer) remained available and feasible. Precedent treatment: No contrary precedent was treated as controlling in the judgment; the Tribunal applied the statutory provisions to the undisputed facts. Ratio vs. Obiter: Ratio - Repayment of loan in cash where prescribed non-cash modes are available attracts penalty under section 271E for contravention of section 269T. Conclusion: Penalty under section 271E is sustainable where repayment was made otherwise than in the modes prescribed by section 269T. Issue 2 - Whether 'reasonable cause' under section 273B was established to negate penalty Legal framework: Section 273B permits waiver of penalty if the assessee proves that there was reasonable cause for failure to comply with the provision attracting penalty. Interpretation and reasoning: The assessee's pleaded reasons were (a) financiers demanded cash because of prior cheque dishonours; and (b) ignorance of section 269T. The Tribunal held that even if financiers refused to accept cheques, the assessee could have used other prescribed modes (account payee bank draft, electronic clearing system, or other prescribed electronic modes under rules). Thus financier's refusal to accept cheques did not establish inability to use any prescribed mode. On ignorance, the Tribunal observed that ignorance of law is not a defence; further, the assessee was professionally assisted by a Chartered Accountant who audited the accounts, undermining the assertion of ignorance. Precedent treatment: The settled legal principle that ignorance of law is no defence was applied (no specific cases cited in the text of the order as binding authority). Ratio vs. Obiter: Ratio - Mere instruction by financiers or claimed ignorance of statutory prescription does not constitute reasonable cause under section 273B when alternative compliant modes were available and professional advice was involved. Conclusion: The assessee failed to demonstrate reasonable cause; section 273B did not entitle her to relief from penalty under section 271E. Issue 3 - Validity of reliance on financier's instructions and the role of available alternative payment modes Legal framework: Compliance with section 269T requires use of any of the prescribed modes; a justification for non-use must show reasonable cause for inability to use those modes. Interpretation and reasoning: The Tribunal emphasised that the statutory scheme provides multiple alternative non-cash modes. The fact that financiers' collection agents preferred cash because of past dishonours did not preclude the assessee from using bank drafts or electronic transfers. Thus reliance on financier instruction was insufficient as a legal justification to contravene section 269T. Ratio vs. Obiter: Ratio - Third-party insistence on cash does not absolve the payer where statutory alternative modes exist and are practicable. Conclusion: Reliance on financer's instruction is not a valid defence; availability of alternatives renders the instruction immaterial for reasonable-cause analysis. Issue 4 - Relevance of relief granted in a separate, factually different case Legal framework: Principle that each case is decided on its own facts; relief in one case does not automatically determine another. Interpretation and reasoning: The Tribunal rejected the assessee's argument that penalty vacated in a relative's case should influence the present matter, emphasising that factual independence of cases deprives such comparison of value. Ratio vs. Obiter: Ratio - Factual distinctions prevent reliance on favourable orders in other proceedings as a ground for relief absent comparable facts and legal circumstances. Conclusion: The separate order in a relative's case did not assist the assessee. Overall Conclusion On the facts found, the Tribunal upheld imposition of penalty under section 271E for repayments made otherwise than in the modes prescribed by section 269T, holding that no reasonable cause under section 273B was established; therefore, the penalty was sustained.