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Shri Ram Roop Singh, Burdwan vs. A.C.I.T., Kolkata - (Income Tax Appellate Tribunal) (06 Jan 2021)

No penalty can be levied, when the violation is technical and venial


Direct Taxation

Present is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax-(A) [CIT (A)] passed under Section 250 of the Income Tax Act, 1961 (IT Act) wherein he confirmed the penalty of Rs. 6,54,118 levied by the Assessing Officer on the assessee under Section 271E of the IT Act.

Penalty under Section 271E of the IT Act was levied on the assessee as the Assessing Officer was of the view that, the assessee had paid four installments in cash, towards the re-payment of finance taken by him from Sundaram Finance Ltd. for the purchase of lorry. Further, the AO find that, the assessee had paid in cash an amount of Rs. 1,26,118 to L & T Finance Ltd. towards repayment of finance obtain by him for purchase of trucks. The assessee explains the urgency for the payment and also submitted that the transactions were genuine. 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. Suyndaram Finance Ltd. confirming these facts situation and the letter was submitted before the revenue authorities. Regarding repayment of cash of L&T Finance Ltd., it was submitted that, the account had to be closed immediately, so as to clear the finance, obtain a NOC so as to sell a lorry. The AO rejected this explanation and levied penalty. The Learned CIT(A) agreed with the view of the Assessing Officer.

The penalty in present case has to be deleted, the assessee was prevented by the reasonable cause in making the repayment of finances otherwise than by way of cheque. Even otherwise the transactions are genuine. Both the Assessing Officer as well as the Learned CIT(A) have not doubted the genuineness of the transactions. It is also not clear whether the finance obtained is, a lease finance or hire purchase finance. The assessee has explained the urgency leading to payment of instalment in cash. The lender has confirmed this fact. It is a fact that, CBIL ratings are efficiently resulting in effect on business.

When the transactions were genuine, then the violation of question is only a technical and venial. The Supreme Court in the case of Hindustan Steel Ltd. vs State of Orissa held that, no penalty can be levied, when the violation is technical and venial. On application of law laid down by the Supreme Court to the facts of present case and as the assessee had a reasonable cause to violation of the law, present Tribunal is of the considered opinion that, the penalty in question is to be deleted. The appeal of the assessee is allowed.


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