Case Note & Summary
The Revenue appealed against the order of the Income Tax Appellate Tribunal, Bangalore, which had set aside the penalty imposed under Section 271E of the Income Tax Act, 1961. The penalty was originally imposed by the Additional Commissioner of Income Tax and confirmed by the Commissioner of Income Tax (Appeals) for the assessment year 2005-06. The brief facts are that the respondent assessee had repaid certain advances/loans in cash to M/s Annapoorneshwari Investments (AI) and M/s Adarsh Enterprises (AE) amounting to Rs.14.6 crores and Rs.0.12 crores respectively. According to the Revenue, this repayment in cash violated Section 269T of the Act. A notice dated 20.6.2008 was issued to the assessee to explain why penalty under Section 271E should not be imposed. The assessee contended that the amounts repaid were not loans taken by the assessee but were advances received from AI and AE, and thus Section 269T did not apply. The Tribunal accepted this contention and set aside the penalty. The High Court, after hearing the parties, held that Section 269T applies only to repayment of loans or deposits taken by the assessee. Since the advances repaid were not loans taken by the assessee, there was no violation of Section 269T, and consequently, no penalty under Section 271E could be imposed. The court dismissed the Revenue's appeal, affirming the Tribunal's order.
Headnote
A) Income Tax - Penalty under Section 271E - Repayment of Advances - Section 269T, Section 271E, Income Tax Act, 1961 - The issue was whether repayment of advances in cash by the assessee to third parties, which were not loans taken by the assessee, attracts penalty under Section 271E for violation of Section 269T. The court held that Section 269T applies only to repayment of loans or deposits taken by the assessee, and not to repayment of advances received from others. Since the advances were not loans taken by the assessee, no penalty could be imposed. (Paras 1-4)
Issue of Consideration
Whether the repayment of advances/loans in cash by the assessee to M/s Annapoorneshwari Investments and M/s Adarsh Enterprises, which were not loans taken by the assessee but advances received from them, attracts penalty under Section 271E of the Income Tax Act, 1961 for violation of Section 269T.
Final Decision
The High Court dismissed the Revenue's appeal, holding that Section 269T applies only to repayment of loans or deposits taken by the assessee. Since the advances repaid were not loans taken by the assessee, there was no violation of Section 269T, and no penalty under Section 271E could be imposed. The order of the Tribunal was affirmed.
Law Points
- Section 269T applies only to repayment of loans or deposits taken by the assessee
- not to repayment of advances received from others
- Penalty under Section 271E cannot be imposed for repayment of advances that were not loans taken by the assessee
