Case Law Details

Case Name : Vijayaben G. Zalavadia Vs JCIT (ITAT Ahmedabad)
Appeal Number : I.T.A. Nos. 458 to 463/Ahd/2020
Date of Judgement/Order : 11/05/2022
Related Assessment Year : 2011-12 to 2016-17

Vijayaben G. Zalavadia Vs JCIT (ITAT Ahmedabad)

The brief facts leading to the case is this that the assessee, an agriculturist had taken loan from one Berna Gamni Seva Sahakari Mandli Ltd., a cooperative society. It is relevant to mention that the assessee is a member of the said cooperative society. However, out of the sales of the agricultural produce the assessee repaid those laons of Rs. 1,42,000/- during the assessment year under consideration in cash.

The Ld. AO was of the opinion that such action of the assessee is in contravention of the provision of Section 269T and consequently penalty under Section 271E of the Act to the entire amount of Rs. 1,42,000/- was imposed against the assessee which was, in turn, confirmed by the First Appellate Authority. Hence, the instant appeal.

ITAT observed that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment order had been passed in this case, the recourse to penalty proceedings under Section 27IE were not justified.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

The bunch appeals preferred by the assessee are directed against the orders all dated 10.08.2020 passed by the Ld. CIT(A), Gandhinagar arising out of the orders passed by the ITO, Ward-4, Gandhinagar under Section 271E of the Income Tax Act, 1961(hereinafter referred to as “the Act”) for A.Ys. 2011-12 to 2016-17 respectively. All the appeals are related to the same assessee and the issue involved therein are identical. Thus, all are heard analogously and are being disposed of by a common order for the sake of convenience.

ITA No. 458/Ahd/2020 (A.Y. 2011-12)(Assessee’s Appeal) is taken as the lead case.

2. The brief facts leading to the case is this that the assessee, an agriculturist had taken loan from one Berna Gamni Seva Sahakari Mandli Ltd., a cooperative society. It is relevant to mention that the assessee is a member of the said cooperative society. However, out of the sales of the agricultural produce the assessee repaid those laons of Rs. 1,42,000/- during the assessment year under consideration in cash.

3. The Ld. AO was of the opinion that such action of the assessee is in contravention of the provision of Section 269T and consequently penalty under Section 271E of the Act to the entire amount of Rs. 1,42,000/- was imposed against the assessee which was, in turn, confirmed by the First Appellate Authority. Hence, the instant appeal before us.

Section 271E penalty cannot be Levied in absence of Regular Assessment

4. It was argued that the payment made by the assessee was not found to be ingenuine neither there was any allegation of evasion of tax by the assessee. No regular assessment was framed in respect of the assessee as submitted by the Ld. A.R which has not been controverted by the Ld. D.R. Thus, applicability of Section 269T and the consequent penalty under Section 271E is not sustainable as argued by the Ld. A.R. In support of his claim he has relied upon a judgment passed by the Punjab & Haryana High Court, in the case of CIT vs. Manohar Lal Thakral, reported in (2018) 93 com 156 (Punjab & Haryana).

5. The Ld. DR, however, has failed to controvert such submissions made by the Ld. A.R.

6. We have heard the respective parties and also perused the relevant materials available on record.

7. We find that on the identical set of facts the Punjab and Haryana High Court was pleased observe the following while upholding quashing of penalty by the Tribunal:

“3. We have heard learned counsel for the appellant.

4. The only point for consideration in this appeal is whether the assessee had contravened the provisions of Section 269T of the Act by making repayment of loan/deposits of Smt. Kusum Lata Thakral, through account payee cheque or account payee drafts to M/s. Babyloan Builders Pvt. Ltd., Gurgaon and, therefore, penalty under Section 271E was leviable.

5. The Assessing Officer had levied the penalty amounting to Rs. 11,02,6107- which has been deleted by the Tribunal. The Tribunal while deleting the penalty recorded that the return of the assessee was processed as on 31.12.2003 and the notice u/s. 274 read with section 271E of the Act was issued on 12.06.2007. Such notice was issued when there was no proceedings pending before the Assessing Officer. Relying upon Delhi High Court judgment in CIT v. Standard Brands Ltd. [20061 285 ITR 295/155 Taxman 383, the Tribunal further observed that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment order had been passed in this case, the recourse to penalty proceedings under Section 27IE were not justified. The findings recorded by the Tribunal read thus:-

“Having heard the parties and having perused the material on record, we find the grievance of the assessee to be correct. In this case, the return of the assessee was processed u/s. 143(l)(a) of the Income-tax Act, on 31.12.2003. Notice u/s. 274 read with 271E of the Act was issued to the assessee on 12.06,2007. It being a case of processing the return of income, there is no finding in the AO’s order with regard to the applicability or otherwise of section 269T of the IT Act to the assessee’s case. It was within the purview of the AO to bring the assessee’s case to scrutiny and to make regular assessment u/s. 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings u/s. 147 of the Act against the assessee. No such action was taken. Rather, the penalty was imposed on the basis of the finding in the case of assessee’s wife.”

6. No error or perversity could be shown in the aforesaid findings recorded by the Tribunal. Moreover, the assessee had taken a plea before the Assessing Officer that there was a reasonable cause for the assessee to have made direct payment of Rs. 14,02,600/- to M/s. Babyloan Builders Private Ltd., Gurgaon. It was pleaded that some of the repayments made by the assessee were inter company transfer for group housing and purchase of flat and at times payments were made after closure of banking hours. It was further submitted that the payments made were genuine and no tax evasion was involved and the default, if any, was of technical nature. The explanation being plausible one, it cannot be said that there was no reasonable cause within the meaning of Section 273B of the Act. No substantial question of law arises in this appeal.”

8. We find substances in the submissions made by the Ld. A.R. particularly after considering the order passed by the Hon’ble Punjab and Haryana High Court as cited hereinabove. In fact, on the identical set of facts the penalty under Section 271E was deleted by the Tribunal and further upheld by the Hon’ble High Court.

9. Having regard to the facts and circumstances of the case and the ratio laid down in the order passed by the Punjab and Haryana High Court we do not hesitate to hold that the impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed.

ITA Nos. 459 to 463/Ahd/2020 (A.Y. 2012-13 to 2016-17):-

10. The identical issue involved in the case has already been dealt with by us in ITA No. 458/Ahd/2020 for A.Y. 2011-12 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeals preferred by the assessee are allowed.

11. In the combined results, the appeals preferred by the assessee are allowed.

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