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Tribunaldo not see any reason to disbelieve the submission of the assessee that the repayment was made through demand drafts as furnished in the account copies, hence, hold that there is no case for levy of penalty u/s 271E with respect to the payments made to the depositors in the case of Sri A.V.V.Subrahmanyeswara Swamy & Others and accordingly,set aside the order of the Ld.CIT(A) and delete the penalty.

Shanti Prime Publication Pvt. Ltd.

Section 271E of the Income Tax Act, 1961 – Penalty – Penalty deleted as there is sufficient and reasonable cause for repayment of the loan to the directors and shareholders

Facts:  The Addl.CIT initiated proceedings u/s 271E and called for the explanation for violation of the provision of section 269T. Assessee explained that all the payments were made through demand drafts, therefore, requested to drop the penalty u/s 271E but not being convinced with the explanation of the assessee, the Addl.CIT levied penalty u/s 271E.Being aggrieved, assessee went on appeal before Tribunal.

Held, that assessee has repaid the loans borrowed by way of self cheque withdrawal and otherwise than by crossed cheque. The assessee has frequently borrowed monies from directors and shareholders, mostly repaid by crossed cheque as per the details given by the AO, except on one occasion in each case. In all the remaining occasions, the assessee has paid the amounts by way of crossed cheque. The assessee has made the payment by self cheque and drawn the cash and paid the same to the creditors. Prima facie, the assessee has violated the provisions of section 269T , thus, it was observed that the assessee has mostly repaid the loans by way of crossed cheque and complied with the statute. The reason explained by the assessee was that it has made the payment on the request of the creditor in exceptional circumstances. The assessee also enclosed income tax returns of the creditors, wherein, it is observed that the interest payment was duly accounted and admitted as income in their hands. From this information, it was found that the transactions are genuine and duly accounted in the books of accounts of the respective persons. There is no reason to suspect the transaction. Apart from the above, all four of them are closely associated with the company, who are supporting the company frequently by advancing monies to the company. The Ld.AR relied on the decision of Hon’ble High Court of Punjab & Haryana, wherein, Hon’ble High Court held that in the case of transactions with sister concerns and between the family due to business exigencies, it is to be considered as reasonable cause u/s 273B. Therefore, it was held that there is sufficient and reasonable cause for repayment of the loan to the directors and shareholders, we cancel the penalty – SUDHA AGRO OIL & CHEMICAL INDUSTRIES LTD. Vs. ADDI. CIT [2020] 79 ITR (TRIB) 520 (ITAT-VISAKHAPATNAM)