AO should give specific finding on explanations given in the light of the case law relied upon by assessee

Authorities should give specific finding on explanation of assessee in the light of the case law relied upon. ITAT remands penalty u/s 271E for repayment of loan in cash

ABCAUS Case Law Citation:
ABCAUS 2414 (2018) 07 ITAT

The instant appeal was filed by the assessee against the order passed by the CIT(A) in confirming the levy of penalty under section 271E of the Income Tax Act, 1961 (Act) being not justified in law.

During the reassessment proceedings, the Assessing Officer (AO) noted that the assessee had made repayment of loan amount of Rs. 4 lakhs in cash, therefore, penalty under section 271E was attracted for non-compliance of the provisions of Section 269T of the Act. Accordingly, penalty proceedings under section 271E of the Act were initiated being not satisfied with the explanation of assessee the AO levied the penalty under section 271E.

The penalty order was challenged before the CIT(A). It was submitted that the repayment was made to the sister concern of the assessee-company and in earlier year, the sister concern had advanced money to the assessee-company and the opening balance as on 01.04.2004 was Rs. 95,073/- only. Therefore the assessee had made a refund of loan in cash to the extent of Rs. 95,073/- only and the rest of cash amounts were paid to sister concern in urgent need of fund. It was a genuine transaction and there were no intention to avoid or evade any tax.

The CIT(A) accepted the explanation of assessee that repayment of loan was made for a sum of Rs.95,073/- only. The CIT(A) opined that assessee had not come up with any reasonable cause for undertaking the transaction in cash. However, merely these transactions were genuinely adopted does not make the assessee’s case for waiver of the penalty. The CIT(A), accordingly, restricted the penalty to the amount of Rs. 95,073/- only and for remaining cash payment. He directed the AO to consider to impose penalty under section 271D of the Act for balance payment of cash payment.

The Tribunal observed that before the CIT(A), the assessee had relied upon several decisions . The CIT(A) instead of deciding the above submissions of the assessee had summarily rejected that for genuine transaction, the assessee could not ask for waiver of the penalty. However, several case laws supported the claim of the assessee in this regard.

The Tribunal further observed that the assessee had pleaded that in case of urgent need of the sister concern, the balance amount was paid to them. Therefore, this itself could have disclosed that assessee might have any reasonable cause in this regard but no evidence in support of the same had been filed before the authorities below. In the the facts and circumstances of the the authorities below should have given a specific finding on the explanation of assessee in the light of the case law before them.

The Tribunal opined that one more opportunity may be given to the assessee to prove its case if there was any reasonable cause for making cash payment to the sister concern through evidence and material on record.

Accordingly, the ITAT set aside the order of the CIT(A) to the extent of restricted penalty with a direction to re-decide the appeal of assessee for the limited purpose to verify if assessee had genuinely entered into transaction with its sister concern and its effect on penalty, whether assessee has any reasonable cause for failure to comply with the provisions of Law and whether the case Laws relied upon by the assessee were applicable to the facts and circumstances of the case.

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