Delhi ITAT Penalty Order U/S 271E Mechanically Invalid

Income Tax Penalty under section 271E of the Income Tax Act 1961 can not be charged mechanically, the Delhi bench of Income Tax Appellate Tribunal (ITAT) recently carried.

Assesee Devinder Gupta & Sons, a Hindu Undivided Family, has repaid a portion of a debt to one of its sister companies, M/s. DNB Properties Pvt. Ltd. (DNB), during the year under review. The assessee provided the lender’s confirmation throughout the assessment procedures as the Assessing Officer had requested. The Assessing Officer pointed out that paying back a loan in cash is against Section 269T of the Act’s provisions. As a result, Section 271E of the Income Tax Act 1961 was invoked, and a penalty was subsequently issued.

A person cannot return a deposit or loan in any other way than via a bank draft made out to the account payee or through the electronic clearing system of a bank account, according to Section 269T of the Income Tax Act of 1961.

Section 271E of the Income Tax Act 1961 states that If someone violates the provisions of Section 269T of the Income Tax Act of 1961 by repaying a loan, deposit, or specified advance, they will be penalized.

Before the Commissioner of Income Tax Appeal, the assessee chose to appeal. However, CIT (A) acknowledged the fine for allegedly violating Section 269T of the Income Tax Act of 1961. Assessee appealed the ruling before ITAT.

According to Mansi Jain, the assessee’s attorney, the lender was a sibling company that the assessee’s Karta managed and controlled. The Assessing Officer has determined that the net payable amount reported as having been received from the lender is real and has approved it during the assessment process.

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The decision of the lower authorities was affirmed by Kumar Pranav, Counsel for the Revenue.

The division bench of the ITAT, composed of Chandra Mohan Garg, a judge, and Pradip Kumar Kedia, an accountant, took into account the arguments made by both parties before allowing the appeal filed by the taxpayer and erasing the fine levied by the assessing officer in accordance with section 271E of the Income Tax Act of 1961.