By Jagdish D. Shah, Jagdish T. Punjabi
Section 271E – Penalty u/s. 271E cannot be
levied in a case where repayment is made by an account payee cheque, though in
the name of the director of the company.
FACTS
During assessment year 2004-05, the assessee
company, in the normal course of its business, advanced a sum of Rs. 15 lakh to
Shri R. Bhaskaran. The advance was given
for intended business deal by the assessee company which could not materialise
and therefore the said advance payment was returned by Shri R. Bhaskaran, in
the assessment year 2005-06, through account payee cheque in the name of the
Director of the assessee company Shri Om Prakash Kanungo instead of paying it
back directly to the assessee company.
The assessee company passed a journal entry debiting the loan account of
Shri Om Prakash Kanungo, Director of the company and credited the advance
account of Shri R. Bhaskaran.
The Assessing Officer (AO) held that the
provisions of section 269T are violated since according to him the assessee
company has received the repayment of the sum of Rs. 15 lakh advanced by it to
R. Bhaskaran in cash. He levied penalty
u/s. 271E of the Act for violation of the provisions of section 269T of the
Act.
Aggrieved, the assessee preferred an appeal
to the CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal
to the Tribunal.
HELD
The repayment is made by account payee
cheque although in the name of one of the directors of the assessee company.
The Tribunal found that there is a reasonable cause rather the payment is
through account payee cheque. In its
view, there was no violation of provisions of section 269T and consequential
penalty u/s. 271E was without any basis.
The Tribunal deleted the penalty and allowed
the appeal filed by the assessee.
