2009 (9) TMI 1005 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT(A) erred in cancelling the penalty u/s 271D for contravention of section 269SS.
2. Whether the assessee could justify the contravention of section 269SS.

Summary:

Issue 1: Cancellation of Penalty u/s 271D for Contravention of Section 269SS

During the assessment proceedings for AY 2005-06, the Assessing Officer (AO) noticed that the assessee accepted loans in cash, contravening section 269SS of the Income-tax Act, 1961. The Additional CIT imposed a penalty of Rs. 7,47,408 u/s 271D. The assessee contended that the transactions were with relatives who were agriculturists from a village without banking facilities, and thus, the transactions were not loans or deposits but bona fide and genuine. The CIT(A) accepted the assessee's explanation, noting that the transactions were between family members, who were agriculturists, and banking facilities were not available. The CIT(A) concluded that the transactions could not be termed as loans or deposits and thus did not contravene section 269SS, directing the deletion of the penalty.

Issue 2: Justification for Contravention of Section 269SS

The Revenue appealed against the CIT(A)'s decision. The Tribunal examined the provisions of section 269SS and the nature of the transactions. It was noted that the transactions lacked conditions typical of loans or deposits, such as repayment terms or interest rates. The Tribunal found no evidence to rebut the CIT(A)'s findings that the transactions were not loans or deposits. Additionally, the Tribunal referenced the distinction between loans and deposits, emphasizing that the transactions were not for the benefit of the borrower but were family transactions without tax evasion intent. The Tribunal also cited precedents where bona fide transactions between family members were not penalized under similar circumstances. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Conclusion:

The Tribunal concluded that the transactions in question were bona fide and genuine, involving family members without any intent of tax evasion. Therefore, the provisions of section 269SS were not attracted, and the penalty u/s 271D was rightly cancelled by the CIT(A). The appeal by the Revenue was dismissed.

Order Pronounced in Open Court on 11th September, 2009.