2011 (5) TMI 1073 - AT - Income Tax

Penalty u/s 271D - Loans in excess of Prescibed limit - Reasonable Cause u/s 273B - Assessee received loans in cash in excess of Rs 20000 from relatives - HELD THAT - We find that the assessee has received this loan in cash from relatives and transaction between relatives is not in the character of loans or deposit attracting the provisions of section 269SS. We are of the view that the loans from relatives are in the nature of financial support within the family and this is a reasonable cause falling u/s. 273B. Accordingly, we delete the penalty levied by JCIT - Decision in favour of Assessee

Summary

Issues:
Levy of penalty under section 271D for accepting cash exceeding the prescribed limit of Rs. 20,000 from relatives.

Analysis:
The appeal before the ITAT Kolkata arose from the order of CIT(A) confirming the penalty imposed by JCIT under section 271D of the Income Tax Act, 1961. The penalty was levied due to the assessee accepting cash loans exceeding Rs. 20,000 from relatives, namely Smt. Gita Ben D Amin and Sri Narayan Bhai J Amin. The Assessing Officer initiated penalty proceedings under section 271D for violation of section 269SS. The JCIT, Range-48, Kolkata upheld the penalty, leading to the appeal before the ITAT.

The primary issue in this case was whether the cash loans received by the assessee from relatives in excess of Rs. 20,000 should attract penalty under section 271D. The ITAT considered the circumstances where the loans were received, noting that both relatives had withdrawn the amounts from their bank accounts and then advanced the cash to the assessee. The ITAT observed that the transactions between relatives were more in the nature of financial support within the family rather than formal loans or deposits, thus falling under a reasonable cause exemption provided under section 273B of the Act.

The ITAT analyzed the facts presented, including the withdrawal and subsequent advancement of cash by the relatives, and concluded that the loans from relatives did not attract the provisions of section 269SS. The ITAT emphasized that the loans were in the nature of financial assistance within the family, which warranted a lenient interpretation under section 273B. As a result, the ITAT decided in favor of the assessee, overturning the penalty imposed by the JCIT and the decision of lower authorities.

In the final judgment, the ITAT allowed the appeal of the assessee, thereby setting aside the penalty under section 271D. The ITAT's decision highlighted the familial nature of the transactions and the reasonable cause exemption provided under the Income Tax Act. The judgment serves as a precedent for cases involving penalties for cash transactions with relatives and provides clarity on the application of relevant sections of the Act in such scenarios.