Penalty u/s 271E deleted when loan was paid in cash to avoid default effecting CIBIL score

Penalty u/s 271E deleted when loan was paid in cash to avoid default effecting CIBIL score as signed cheque books were not available with staff

ABCAUS Case Law Citation
ABCAUS 3439 (2021) (01) ITAT

Important case law relied referred:
Hindustan Steel Ltd. vs State of Orissa reported in (1972) 083 ITR 0026 (SC)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the penalty u/s 271E the Income Tax Act, 1961 (the Act) levied by the Assessing Officer (AO).

In this case, penalty u/s 271E of the Act was levied by the Assessing Officer was of the view that the assessee had paid four instalments in cash, towards the re-payment of finance taken by him from a two Private Finance Companies (NBFCs) for the purchase of trucks.

The assessee explain the urgency for the payment and also submitted that the transactions was genuine.

Loan was paid in cash to avoid default effecting CIBIL score

With respect to one NBFC, it was submitted that the payment was made in cash on due dates to avoid the default in repayment of loan, which would effect assessee’s credibility in CIBIL and to avoid penalty for default, as on that date of such payments, signed cheque books were not available with the staff. The Finance Company also confirmed those facts and situation by submitting a letter before the AO.

Loan was paid in cash to close account immediately and obtain NOC 

The AO rejected this explanation and levied penalty. The CIT(A) agreed with the view of the Assessing Officer.

The Tribunal opined that penalty had to be deleted as the assessee was prevented by the reasonable cause in making the repayment of finances otherwise than by way of chequse.

The Tribunal pointed out that even otherwise the transactions were genuine. Both the Assessing Officer as well as the CIT(A) have not doubted the genuineness of the transactions.

The Tribunal also observed that the assessee had explained the urgency leading to payment of instalment in cash, lenders had confirmed this fact and it is a fact that CBIL ratings are efficiently result in effect on business.

The Tribunal also pointed out that when the transactions were genuine, then the violation of question was only a technical and  venial. The Hon’ble Supreme Court had held that no penalty can be levied when the violation is technical and venial.

Accordingly, applying for proposition laid down by the Hon’ble Supreme Court and as the assessee had a reasonable cause to violation of the law, the Tribunal deleted the penalty and allowed the appeal in the favour of the assessee.

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