2017 (10) TMI 1321 - AT - Income Tax

Penalty u/s 271D - acceptance of loan or deposit in contravention of section 269SS - money given by the wife to husband assessee - Held that - In the instant case, the wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. This transaction was not for commercial use. The amount directly received by the husband. i.e the assessee, was to the extent of ₹ 17.000 only and the balance amount of ₹ 26.000 was given by payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no interest element was involved and there was no promise to return the amount with or without interest. By taking the liberal view and applying the golden rule of interpretation, the assessee had a reasonable cause within the meaning of section 273B. Therefore, the penalty should be deleted.- decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under section 271D of the Income Tax Act for accepting cash loan exceeding the limit.

Analysis:
The appeal was filed by the Assessee against the CIT(A)'s order confirming the penalty imposed by the AO under section 271D of the Income Tax Act, 1961. Section 271D prohibits acceptance of loans or deposits in cash exceeding a specified limit. The Assessee, who is the wife of a sole proprietor, received cash deposits from her husband for purchasing a property in her name. Subsequently, the funds were returned to her husband through a bank transfer, leaving a balance in her account. The authorities held that this constituted acceptance of a cash loan in violation of section 269SS, warranting penalty under section 271D.

The Assessee contended that the transaction between spouses does not fall under the purview of section 269SS, citing a precedent from ITAT Kolkata. The Tribunal in the referenced case clarified that the legislation does not apply to transactions between spouses unless for commercial purposes. In the present case, the money transferred by the wife to the husband for a joint family venture did not involve an interest element or a promise of repayment, thus not constituting a loan. The Tribunal emphasized the importance of interpreting the law liberally in family transactions to avoid disrupting family harmony.

The Tribunal found the facts of the present case akin to the precedent, ruling that the penalty under section 271D was unjustified. Considering the nature of the transaction between the spouses and the absence of a loan or interest element, the penalty was deemed unwarranted. Therefore, the Tribunal allowed the appeal, canceling the penalty imposed under section 271D.

In conclusion, the Tribunal set aside the penalty imposed on the Assessee under section 271D, emphasizing the exemption of family transactions from the purview of the legislation when not for commercial purposes. The decision highlighted the importance of interpreting tax laws in a manner that upholds family harmony and mutual trust, especially in transactions between spouses.