2016 (1) TMI 633 - AT - Income Tax

Penalty orders passed under section 271D and 271E - in genuine transactions - Held that - It is not the case of the Revenue that assessee has introduced unaccounted money in the books of account as the very purpose of bringing in the provisions of section 269SS and 269T of the Act to curb the practice of introducing block money into books of account. The assessee has no intention to evade tax and did not make any attempt to make any liability. The transactions are between the HUF and individual. The individuals have accepted loans from HUF for purchase of property in their individual names and have reasonable cause for accepting such loans. - Thus as transactions were genuine and identity of the lender was established, there was no intention on the part of the assessee to evade tax, the cancellation of penalty was justified - Decided in favour of assessee

Issues Involved:
1. Whether the cash transactions between family members (HUF and individuals) contravene the provisions of section 269SS and 269T of the Income Tax Act.
2. Whether penalties under section 271D and 271E of the Income Tax Act are justified in the case of genuine and bona fide transactions.

Issue-wise Detailed Analysis:

1. Contravention of Section 269SS and 269T:
The appeals were filed by two assessees against the orders of the Commissioner of Income Tax (Appeals) which sustained penalties under sections 271D and 271E of the Income Tax Act. The Assessing Officer noted that the assessees, who are members of an HUF, received and repaid cash loans exceeding Rs. 20,000 from/to the HUF, thereby contravening sections 269SS and 269T. The assessees contended that the transactions were merely accommodation transactions with no revenue leakage or tax evasion, and thus, no penalties should be levied. However, the Commissioner of Income Tax (Appeals) sustained the penalties, rejecting the argument that the transactions were genuine credits and that there was no reasonable cause for accepting and repaying the loans in cash.

2. Justification of Penalties under Section 271D and 271E:
The counsel for the assessees relied on the jurisdictional High Court's decision in Smt. M.Yesodha (351 ITR 265), where it was held that no penalty is leviable under section 271D for genuine and bona fide transactions. The assessees argued that the loans were taken for the purchase of property and were genuine transactions between family members, with no intention to evade tax. The Departmental Representative supported the lower authorities' orders, citing decisions from the Madras High Court.

Upon hearing both sides, the Tribunal noted that the transactions were between HUF and individuals, and the HUF had disclosed the sale of property in its return of income. The Tribunal observed that the transactions were genuine, with no unaccounted money introduced into the books of account. The Tribunal referenced the Madras High Court's decisions in CIT Vs. Lakshmi Trust Co. (303 ITR 99) and M.Yesodha (351 ITR 265), which upheld that penalties should not be levied for genuine transactions where there is no intention to evade tax.

The Tribunal concluded that the Assessing Officer was not justified in levying penalties under sections 271D and 271E. The Tribunal emphasized that the transactions were genuine and bona fide, and the assessees had reasonable cause for accepting the loans. Therefore, the penalties were deleted.

Conclusion:
The Tribunal allowed the appeals, deleting the penalties levied under sections 271D and 271E of the Income Tax Act, and held that the transactions between the family members were genuine and bona fide with no intention to evade tax. The judgment underscores the importance of considering the genuineness and context of transactions before levying penalties.

Order Pronouncement:
The order was pronounced in the open court on 28th October 2015, allowing all the appeals of the assessees.

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