2011 (11) TMI 796 - AT - Income Tax

Penalty u/s 271D for violation of provisions of section 269SS - Held that - We are of the view that the transaction between son in law and father in law for giving a support and help as contended by Ld. Counsel and not denied by revenue in law was not a loan or deposit in stricter sense of section 269SS of the Act and it was only a financial support. Even it is not the allegation that the father in law of assessee has charged any interest on the above loan and hence this is merely a financial support to son in law by his father in law. Once this is the position the transaction does not fall in the ambit of section 269SS of the Act. Accordingly these appeals of the assessee are allowed.

Summary

Issues Involved:
Levy of penalty under section 271D of the Income Tax Act for violation of provisions of section 269SS in Assessment Years 2003-04 and 2004-05.

Analysis:

Issue 1: Levy of Penalty under Section 271D
The appeals by the assessee arose from separate orders of CIT(A), Central-1, Kolkata confirming the penalty imposed by Addl. CIT under section 271D for contravention of section 269SS. The penalties were imposed for receiving cash loans in violation of the Act. The facts leading to this issue included a search and seizure operation in the GKB group of cases, where the assessee received cash loans from relatives, specifically from the father-in-law. The Assessing Officer initiated penalty proceedings under section 271D for these cash transactions. The appellant contended that these transactions were not loans but financial support, citing reasonable cause under section 273B. The Tribunal analyzed precedents where transactions among family members or sister concerns were held not to violate section 269SS. The Tribunal concluded that the transactions in question were financial support and not loans, thus not falling under the purview of section 269SS. Consequently, the appeals of the assessee were allowed.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the cash transactions in question were financial support and not loans, thus not violating the provisions of section 269SS. The judgment emphasized the distinction between loans and financial support, citing precedents where similar transactions were deemed not to attract penalties under the Act.