IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER ITA No. 676/JP/2016 Assessment Year : 2008-09 Shri Lallu Ram Saini cuke JCIT Prop. M/s. Ratan Lal Lallu Ram Saini Vs. Bharatpur Range Sikandara, Dausa Bharatpur PAN/GIR No.: AFGPS 9079 C Appellant Respondent Assessee by: Shri P.C. Parwal , CA Revenue by :Shri R.A. Verma, Addl CIT-. DR Date of Hearing : 17/10/2016 Date of Pronouncement : 21/10/2016 ORDER PER BHAGCHAND, AM assessee has filed appeal against order of ld. CIT(A), Alwar dated 26-05-2016 for assessment year 2008-08 raising therein following grounds:- 1. ld. CIT(A) has erred on facts ad in law in confirming levy of penalty of Rs. 3,28,260/- u/s 271E of I.T. Act, 1961. 2. penalty levied by AO u/s 271E and confirmed by ld. CIT(A) is illegal and bad in law. 2 ITA No. 676/JP/2016 Shri Lallu Ram Saini vs. JCIT , Bharatpur Range, Bharatpur . 2.1 Apropos Ground No. 1 and 2 of assessee wherein brief facts of case are that assessee is engaged in business of manufacturing and trading of stone handicraft articles. survey was carried out at premises of assessee on 30-01-2008. assessee filed return of income on 16-03-2009 declaring total income of Rs. 2,76,410/-. assessment was framed by AO 31-12-2010 at income of Rs. 10,11,220/-. AO observed in assessment order that assessee filed inaccurate particulars of income for which he initiated penalty proceedings u/s 271(1)( c) of Act. It is further noted that Addl. CIT in penalty order dated 18-11-2014 u/s 271E of Act stated that reference was made by ITO, Dausa that during year assessee had made repayment of loan aggregating to Rs. 4,59,560/- in cash i.e. Rs. 3,28,260/- to M/s. Magma Shrachi Finance Ltd. and Rs. 1,31,330/- to M/s. Shri Ram Stone Cutting Industries which is in contravention to Section 269T of Act and penal provisions u/s 271E are attracted as payment of loan in this case is Rs. 20,000/- or more Therefore, Addl. CIT issued show cause notice dated 27-06-2014 for which assessee filed reply vide his letter dated 12-08-2014 and same is reproduced at pages 1 to 4 of Addl. CIT s order. Not 3 ITA No. 676/JP/2016 Shri Lallu Ram Saini vs. JCIT , Bharatpur Range, Bharatpur . satisfied with submissions of assessee, Addl. CIT imposed penalty of Rs. 4,59,560/- u/s 271E of Act on said two amounts. 2.2 Being aggrieved, assessee carried matter before ld. CIT(A) who had confirmed penalty of Rs. 3,28,260/- on account of transaction of payment of cash to M/s. Magma Finance by observing as under:- 4.7 I have considered material available on record and find that transactions of payment of money to M/s. Magma Finance in cash every month cannot be justified on any ground as both parties are in business and are bound to comply with provisions of Section 269T of I.T. Act. Further, I find that transactions of receipt/ payment of money with M/s. Shri Ram Stone Cutting Ind. have been carried out based on business requirements as party is related to appellant. Further, I find that this fact also stands proved from common stock found on date of survey and also while finalizing assessment total amount of surrender was divided equally between parties. Therefore, after considering these facts and decisions cited by appellant above, I hold that payment of Rs. 1,31,330/- to M/s. Shri Ram Stone Cutting would fall outside purview of provisions of Section 269T of I.T. Act. However, circumstances in case of repayments made to M/s. Magma Finance being different and would therefore, attract penal provisions under I.T. Act. Therefore, I confirm penalty of Rs. 3,28,260/- on account of transactions of payment of cash to M/s. Magma Finance being in violation of provisions of Section 269T of I.T. Act, out of total penalty of Rs. 4,59,560/- imposed by AO under this head. 2.3 During course of hearing, ld. AR of assessee prayed that assessee raised finance of Rs. 5.00 lacs on 7-04-2007 against 4 ITA No. 676/JP/2016 Shri Lallu Ram Saini vs. JCIT , Bharatpur Range, Bharatpur . purchase of Crane from M/s. Magma Shrachi Finance Ltd. This amount was repayable in monthly instalment alongwith interest. monthly instalment was paid in cash to representative of finance company against receipts issued by him who used to visit premises of assessee every month for collection of instalment. ld. AR further submitted that payment could not be made by cheque as finance company did not accept outstation cheque which constitute reasonable cause u/s 273B of Act and therefore, no penalty should be levied on such amount. Conclusively, ld. AR prayed for deletion of levy of penalty confirmed by ld. CIT(A) u/s 271E of Act. 2.4 ld. DR relied on orders of lower authorities. 2.5 I have heard rival contentions and perused materials available on record. It is noted from records that assessee had made repayments of loans of Rs. 4,59,560/- i.e. Rs. 3,28,260/- to M/s. Magma Shrachi Finance Ltd. and Rs. 1,31,330/- to M/s. Shri Ram Stone Cutting Industries for which Addl. CIT observed that it is violation of provisions of Section 269T of Act and thus he imposed penalty of Rs. 4,59,560/- In first appeal, ld. CIT(A) confirmed penalty of Rs. 3,28,260/- only in case of M/s. Magma Shrachi Finance Ltd. on account of transactions of payment by cash by assessee. It is noted 5 ITA No. 676/JP/2016 Shri Lallu Ram Saini vs. JCIT , Bharatpur Range, Bharatpur . from ledger account of assessee (page 1 of paper book of assessee) that assessee had raised loan of Rs. 5.00 lacs from M/s. Magma Shrachi Finance Ltd. on 7-04-2007 and subsequently assessee used to pay instalments every month in cash to representative of finance company who issued receipts for taking cash payment from parties. submissions of ld. AR of assessee reveals that payment could not be made by cheque as finance company did not accept outstation cheque. It is also noted that assessee has filed copies of cash receipts issued by representative of M/s. Magma Shrachi Finance Ltd. which is filed at pages 2 to 8 of paper book. assessee had submitted bifurcation of total amount of Rs. 3,28,260/- paid to M/s. Magma Shrachi Finance Ltd. which comprises of Rs. 41,418/- in respect of payment of interest and Rs. 2,86,842/- in respect of repayment of loan amount. During course of hearing, ld. AR of assessee relied on order of ITAT Gauhati Bench in case of Addl.CIT vs. Smt. Prahati Baruah 133 Taxman 74 (Maz) wherein it is held that introduction of section 269T and section 271E in statute is to prevent proliferation of black / unaccounted money deposited with banks and other persons by introducing system of repayment through account 6 ITA No. 676/JP/2016 Shri Lallu Ram Saini vs. JCIT , Bharatpur Range, Bharatpur . payee cheques and drafts and, thus, to ensure that identity of payee is established. Where identity of lender to whom repayment had been made was known to department and genuineness of loan transaction was not in doubt, it could not be said that breach of law, if any, was deliberate and default, if any, could be said to be technical default for which no penalty would be leviable. Hence, in view of above deliberations and case law cited (supra), I direct AO to delete penalty of Rs.3,28,260/- imposed u/s 271E of Act. Thus appeal of assessee is allowed. 3.0 In result, appeal of assessee is allowed. Order pronounced in open court on 21/10/2016 Sd/- (Bhagchand) Accountant Member Jaipur Dated:- 21/10/2016 Mishra Copy of order forwarded to: s 1. Appellant- Shri Lallu Ram Saini, Dausa 2. Respondent- JCIT, Bharatpur Range, Bharatpur 3. Dr CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 676/JP/2016) By order, Assistant. Registrar Lallu Ram Saini v. JCIT, Bharatpur Range, Bharatpur