2017 (10) TMI 1405 - AT - Income Tax

Penalty u/s 271D - loan accepted in cash in violation of the provisions of Section 269SS - loans in question had been taken by the Assessee from her mother, from the HUF in which she was a member and Karta of the HUF in his individual capacity - Held that - The daughter and member of the HUF have given money for certain specific purpose. The source and genuineness of the loan has been accepted by the AO. The cash loans in question therefore cannot be said fall within the mischief of Sec.269SS of the Act as near relatives cannot be said to be Other person within the meaning of Sec.269SS of the Act. In any event in the circumstances of the case, there was reasonable cause for accepting loans in cash. In the case of M.Yeshodha (2013 (2) TMI 211 - MADRAS HIGH COURT) held that transaction of loan between father in law and daughter in law in cash cannot be subject matter of levy of penalty u/s.271D of the Act. Thus we are of the view that imposition of penalty u/s.271D of the Act cannot be sustained. - decided in favour of assessee

Summary

Issues:
Appeal against penalty imposed under Section 271D of the Income Tax Act, 1961 for accepting cash loans exceeding the limit set by Section 269SS.

Detailed Analysis:
1. The assessee challenged the penalty imposed by the Assessing Officer and confirmed by the CIT (Appeals) under Section 271D of the Act for accepting cash loans exceeding the limit specified in Section 269SS.

2. The assessee argued that the transactions were between close relatives and not strictly loans, as they were for investment purposes and not for commercial use. The assessee believed there was no breach of law and cited various judicial pronouncements to support the claim.

3. The Tribunal referred to the decision in the case of Dr.B.G.Panda vs DCIT, where it was held that transactions between husband and wife for joint ventures or family purposes do not attract penalties under Section 271D. Similar rulings were cited from other cases like ACIT Vs. Vardaan Fashion and ITO v. Tarlochan Singh.

4. The Tribunal emphasized that the intention of the Legislature was not to penalize genuine transactions among family members. It noted that penalties should be interpreted in favor of the taxpayer, especially in cases of ambiguity.

5. Relying on decisions like CIT v. Sunil Kumar Goel and M.Yeshodha, the Tribunal concluded that the penalty under Section 271D could not be sustained in the present case due to the genuine nature of the transactions between the assessee and close relatives.

6. Consequently, the Tribunal allowed the appeal of the assessee and directed the deletion of the penalty imposed under Section 271D of the Income Tax Act, 1961.

This detailed analysis of the judgment highlights the key arguments, legal principles, and precedents considered by the Tribunal in arriving at the decision to allow the appeal and cancel the penalty imposed on the assessee.