Top Stories Loan payments made through bank transfers and not bearer Cheques: ITAT deletes penalty imposed u/s 271E of Income Tax Act [Read Order] ITAT has nullified the penalty imposed under section 271E of the Income Tax Act, 1961 citing that loan payments are executed through bank transfers rather than bearer cheques By Aiswarya Krishnadas – On January 27, 2024 9:20 pm – 2 mins read The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has nullified the penalty imposed under section 271E of the Income Tax Act, 1961 citing that loan payments are executed through bank transfers rather than bearer cheques.

The facts in brief were that during the thorough examination of the assessee’s case for the Assessment Year 2015-16, the Assessing Officer ( AO ) sourced information from Allahabad Bank. It was uncovered that on 21.03.2014, the assessee repaid Rs. 1,40, 000 to Shri S.C. Jain using a bearer cheque, a violation of Section 269T of the Income Tax Act. In the assessment order dated 29.12.2017 under section 143(3) of the Act for A.Y. 2015-16, the AO noted the potential penalty under section 271E of the Income Tax Act, 1961 ,indicating that the matter would be referred to the Additional Commissioner of Income Tax, Range -2, Ghaziabad. Subsequently, the AO initiated penalty proceedings, formally referring the matter via a letter dated 04.04.2018 to the Joint Commissioner of Income Tax. The counsel for the revenue Vivek Vardhan, argued that penalty proceedings under sections 271D and 271E are distinct from the assessment proceedings, unlike section 271(1)(c) of the Income Tax Act, 1961.

He endorsed the decision of the Commissioner of Income Tax ( Appeals ) [ CIT (A) ], affirming the imposed penalty. The grounds cited for upholding the penalty included the absence of a reasonable cause for the default that led to the penalty being imposed The two member bench of the tribunal comprising N.K Billaiya ( Account member) and Astha Chandra ( Judicial member) concluded that  the assessee contended that initiating penalty proceedings were illegal and invalid as no proceedings for A.Y. 2014-15 were pending. The CIT (A) clarified that the return for A.Y. 2014-15, filed on 12.03.2015, had been processed under section 143(1) of the Income Tax Act, 1961, and the order under section 143(1) (a) of the Income Tax Act, 1961 did not include findings by the then Assessing Officer ( AO ) regarding the applicability of section 269T of the Income Tax Act, 1961. The bench noted that the assessee contested the legality of initiating penalty proceedings under section 271E of the Income Tax Act for the Assessment Year 2014-15 before the Commissioner of Income Tax ( Appeals ) [ CIT (A) ].

The assessee contended that initiating penalty proceedings were illegal and invalid as no proceedings for A.Y. 2014-15 were pending. The CIT(A) clarified that the return for A.Y. 2014-15, filed on 12.03.2015, had been processed under section 143(1) of the Income Tax Act, 1961, and the order under section 143(1)(a) did not include findings by the then Assessing Officer ( AO ) regarding the applicability of section 269T of the Income Tax Act, 1961. The bench held that the impugned penalty was not sustainable. In the result, appeal of the assessee was allowed