Section 271E, 269T of Income Tax Act, 1961— Penalty u/s 271E— The only issue involved in the present appeal relates to whether imposition of penalty u/s.271E of the Act is justified on the facts of the case. Admittedly, in the present case, loans were repaid in cash. Provisions of Section 273B of the Act provides that no penalty u/s.271E of the Act can be levied in case, when it was proved that there was reasonable cause in the violation of provisions of Section 269T of the Act.

Therefore the issue that requires for adjudication is whether explanation offered by the assessee in response to show cause notice is reasonable or not. The explanation of the assessee is that it was forced to repay the loan in cash on account of business expediency to meet the working capital limits of one the business concern in which he is interested; cannot be considered to be valid explanation for repayment of loan in cash. The fact that assessee accepted loan in cash and repaid the loan in cash goes to prove that there is active collusion with the lender in evading the taxes.

In the absence of survey proceedings conducted in the premises of Shri. A. Kannan, this transaction would not have come to light. Further, what can be a valid explanation for acceptance of loan in cash, cannot a valid reason for repayment of loan in cash. Reliance placed by the Authorised Representative on the decision of Co-ordinate Bench in assessee’s own case for deletion of penalty for violation of provisions of Section 269SS of the Act does not hold good. Similarly, the ratio decision of Hon’ble Punjab and Haryana High Court in the case of Manohar Lal Thakral (supra) cannot be accepted having regard to the cogent reading of provisions of Section 269T and 275A of the Act. It is clear that the completion of assessment proceedings is not a condition precedent for initiation of penalty proceedings u/s.269T. Thus, we do not find any reason to interfere with the orders of the lower authorities. Hence, we confirm levy of penalty u/s.271E of the Act.[SHRI. P. SUNDARAMURTHY VERSUS THE JOINT COMMISSIONER OF INCOME TAX, PONDICHERRY RANGE, PONDICHERRY.] [2019] 16 ITCD Online (40) [ITAT CHENNAI]