Case Law Details
Shri Sankaranarayanan R. Sundar Raj Vs ITO (ITAT Chennai)
In a noteworthy verdict, the Income Tax Appellate Tribunal (ITAT) Chennai has overturned a penalty imposed under Section 271E on Sankaranarayanan R. Sundar Raj. The assessee’s cash payment towards a defaulted EMI instalment, following a cheque bounce, was deemed a ‘reasonable cause’ under Section 273B, thereby leading to the deletion of the penalty.
Analysis:- The case revolved around an addition of Rs. 5 Lacs as unexplained money under Section 69A, representing cash paid by the assessee towards the settlement of a vehicle loan with M/s Mahindra & Mahindra Financial Services Ltd. However, the ITAT partly accepted the assessee’s claim and deleted the addition of Rs. 4.50 Lacs. Despite this, penalty proceedings were initiated against the assessee under Section 271 E for violating Section 269T, culminating in the imposition of a Rs. 5 Lacs penalty.
Interestingly, the ITAT acknowledged that the assessee, facing a financial crisis and defaulting on EMI payments, had paid the loan in cash due to the financier’s insistence, following a bounced cheque. This circumstance was seen as a ‘reasonable cause’ under Section 273B, leading to the deletion of the penalty.
Conclusion:- This ruling by the ITAT Chennai provides significant insights into the interpretation of ‘reasonable cause’ under Section 273B in the context of cash payments for defaulted EMIs. It serves as a precedent for similar cases, where defaulters opt for cash settlements due to financial difficulties and insistence from financiers, reinforcing the nuanced understanding required in penalty proceedings related to the violation of tax laws.
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