2023 (8) TMI 1066 - AT - Income Tax

Tribunal Orders Deletion of Penalty for Cash Payment Due to Urgent Land Purchase, Citing Reasonable Cause Under Income Tax Act.

M/s Arun Pulvarising Industries Versus ACIT, Chittorgarh, Rajasthan

M/s Arun Pulvarising Industries Versus ACIT, Chittorgarh, Rajasthan - TMI Issues Involved:The appeal involves a penalty order u/s. 271E of the Income Tax Act for the assessment year 2011-12. The grounds of appeal raised by the assessee include the confirmation of penalty, treatment of the transaction as repayment of loan, the nature of the account between the assessee's firm and partner's HUF, the reasonable cause for the transaction, and the intention behind the cash payment.Grounds of Appeal:1. The assessing authorities erred in confirming the penalty u/s. 271E without considering the nature of the payment and assuming it as a loan repayment.2. Failure to recognize the mutual, open, and current account nature between the assessee's firm and partner's HUF.3. Disregard of the reasonable and bonafide cause u/s. 273B for the transaction.4. Dismissal of the honest belief that the transaction did not require an account payee cheque and had no intention to breach the law.5. Seeking leave to raise any additional grounds necessary for a just decision.Findings & Analysis:The key issue for consideration was the penalty u/s. 271E imposed on the assessee for a cash payment of Rs. 3,90,000 to the partner's HUF. The Assessing Officer treated this payment as a loan repayment in cash. However, upon review, it was found that the cash payment was for the purchase of agricultural land by the HUF. The transaction was necessitated by the urgency of the land purchase, with specific circumstances such as a public holiday and end-of-financial-year rush affecting banking transactions. The Tribunal referenced a relevant case law emphasizing the provision of reasonable cause u/s. 273B, which allows discretion in penalty imposition for failure to comply with certain provisions. Given the circumstances mirroring the precedent case, the Tribunal directed the AO to delete the penalty, as there was a reasonable cause for the cash payment.Conclusion:In line with the precedent and the provision of reasonable cause, the Tribunal allowed the appeal of the assessee, directing the deletion of the penalty imposed u/s. 271E. The decision was based on the urgent need for the cash transaction for the land purchase, aligning with the principles of reasonable cause as per the Income Tax Act.Order:The appeal of the assessee was allowed, and the penalty u/s. 271E was directed to be deleted by the AO. The order was pronounced on 14th August 2023.