ITAT Upheld Penalty as Poor Track Record of Clearance of Cheque Isn’t Valid Reason to Make Repayment in Cash

Case Details: Kamaljeet Kaur Gill vs. Joint Commissioner of Income-tax - [2023] 157 taxmann.com 446 (Raipur-Trib.)

Judiciary and Counsel Details

• • Ravish Sood, Judicial Member & Arun Khodpia, Accountant Member
  • Amit M Jain, Adv. for the Appellant.
  • Satya Prakash Sharma, Sr. DR for the Respondent.

Facts of the Case

The assessee had made repayment of loans taken to finance buses in cash. The assessee contended that she had made cash payments for two reasons. Firstly, her repayment record was abysmal as the cheques were not honoured on several occasions. Therefore, the financers had insisted upon her to make repayment of the monthly loan instalments in cash. Secondly, she had also remained ignorant of the provisions of section 269T.

Thus, the assessee claimed that there was a reasonable cause for not making payments through cheques, and no penalty was liable to be imposed on her. However, the Joint Commissioner imposed penalty on the assessee under section 271E for repaying the loans in contravention of the mode prescribed under section 269T.

On appeal, the CIT(A) also confirmed the penalty so imposed. Aggrieved by the order, the assessee filed an instant appeal before the Raipur Tribunal.

ITAT Held

The Tribunal held that Section 269T contemplates the prescribed modes for repayment of a loan exceeding the specified amount, including account payee cheque, account payee bank draft, use of the electronic system through a bank account, and other electronic modes as may be prescribed.

Considering the various repayment methods outlined in section 269T, if the lenders were hesitant to accept monthly loan instalments from the assessee via cheques due to her poor track record, she could have securely executed the repayments using account payee bank drafts or electronic clearing systems through her bank account. Alternatively, she could have opted for any other authorized electronic mode specified in rule 6ABBA.

The assessor’s explanation, stating that she had to make cash payments because the lenders were unwilling to accept loan repayments through account payee cheques, was unsatisfactory.

Further, no substance was found in the assessee’s claim that she was unaware of the provisions of section 269T. The assessee was availing the services of a chartered accountant and had her accounts audited by him. Considering the aforesaid factual position, and independent of the settled position of law that an assessee cannot be allowed to plead ignorance of the law, it was concluded that there was no substance and merit in the claim of the assessee that she was oblivion of the modes and manner for repayment of loans as prescribed under section 269T.

Accordingly, the penalty under section 271E was upheld.

List of Cases Referred to

• • Sandeep Kaur Gill v. Jt. CIT [IT Appeal No. 63 (RPR) of 2022, dated 28-4-2023] (para 10).