Law:

Section:

Section 271E, read with section 273B, of the Income-tax Act, 1961 - Penalty - For failure to comply with section 269T - Assessment year 2003-04 - Whether where loan/deposit has been repaid by debiting account through journal entries, it must be held that assessee has contravened provisions of section 269T - Held, yes - Assessee was engaged in share trading business - It had taken loan from Investment Trust of India - During relevant assessment year, it had transferred some shares to said trust - Instead of repaying loan and receiving sale price of shares, both parties agreed that said amount, i.e., loan and sale consideration be set off in their respective books by making journal entries - Whether assessee had repaid loan/inter-corporate deposit in contravention of provisions of section 269T - Held, yes - Whether, however, in absence of finding to effect that repayment of loan/deposit was not a bona fide transaction and was made with view to evade tax, no penalty under section 271E could be imposed for contravening provisions of section 269T - Held, yes [In favour of assessee] Words and phrases : Expression 'reasonable cause', as occurring in section 273B of the Income-tax Act, 1961 Circulars and Notifications : Circular No. 345, dated 28-6-1982 FACTS The assessee-company was engaged in business of shares, stock broking, investment and trading in shares and securities. It filed its return declaring loss. The assessment was completed wherein it was found that assessee had accepted a loan/inter corporate deposit of Rs. 4,29,04,722 from Investment Trust of India. During relevant assessment year, it had transferred shares held by it to Investment Trust of India for Rs. 4,28,99,325. Instead of repaying loan and receiving sale price of shares, both the parties had decided that said amount be set off in respective books of account by making journal entries and balance be paid by account payee cheques. However objections was raised by audit report regarding repayment otherwise than by an account payee cheque or draft. Thereupon the Assessing Officer passed an order under section 271E imposing penalty upon the assessee for violating the provisions of section 269T. On…

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