2017 (5) TMI 1669 - AT - Income Tax

Penalty u/s. 271D r.w.s. 269SS - Cash received from mother - whether taking cash from mother/parent out of business expediency can attract penalty u/s. 271D r.w.s. 269SS - HELD THAT - Assessee being a layman was not aware of the provisions of the Act as such, the default, if any, was attributable to ignorance of statutory provisions of the act. The assessee s case finds support from the decision of the Delhi Tribunal in the case of Farrukhabad Investment (I) Ltd. V. JCIT (2002 (3) TMI 216 - ITAT DELHI ) where the professional auditors, experts in the field of taxation, did not point out any violation of S. 269SS it was held that it would be too much to expect from the assessee to know these provisions and as such the penalty imposed was deleted considering ignorance to be a reasonable cause . In the instant case also, the auditors did not point out any violation of S. 269 SS of the Act. In view of the above, we are of the considered opinion that this is not a fit case in which penalty u/s. 271D can be levied. The penalty so imposed by the Assessing Officer and sustained by the learned CIT(A) is hereby deleted. Therefore, the appeal of the assessee is allowed

Summary

Issues:
- Imposition of penalty under section 271D read with section 269SS of the Income-tax Act, 1961 based on acceptance of temporary financial accommodation from mother.

Detailed Analysis:

1. Imposition of Penalty under Section 271D and 269SS:
- The appeal was filed against the order upholding the penalty imposed under section 271D read with section 269SS of the Income-tax Act, 1961. The main contention was that the penalty was not applicable as the assessee accepted a temporary financial accommodation of ?7.80 lacs from his mother for business expediency. The counsel argued that taking cash from a parent out of business necessity should not attract the penalty.

2. Legal Precedents and Arguments:
- The counsel referred to a coordinate bench decision in a similar case where it was held that transactions between family members for business expediency may not attract penalties under the Act. The decision highlighted that the assessee's need for funds and the source of the money, in this case, the parent, were crucial factors in determining the applicability of the penalty. The argument was supported by various legal precedents emphasizing ignorance of statutory provisions and reasonable cause as factors to consider in penalty imposition.

3. Decision and Rationale:
- The Tribunal found the facts of the current case similar to the precedent cited and noted the absence of any new evidence or legal changes presented by the revenue. Consequently, the Tribunal decided to follow the earlier decision and canceled the penalty imposed under section 271D of the Act. The judgment emphasized the importance of business expediency, family transactions, and the need for funds as justifications for the assessee's actions, leading to the allowance of the appeal.

4. Outcome:
- Ultimately, the Tribunal allowed the appeal of the assessee, citing the similarity of the case to previous judgments and the lack of new evidence or legal arguments to warrant a different decision. The penalty under section 271D was canceled, and the appeal was granted in favor of the assessee.

This detailed analysis showcases how the Tribunal considered legal precedents, arguments regarding business expediency and family transactions, and the lack of new evidence to make a decision in favor of the assessee, ultimately leading to the cancellation of the penalty imposed under the Income-tax Act.