2018 (1) TMI 1533 - AT - Income Tax

Penalty u/s 271D and 271E - transactions between family relatives - whether not covered by the provisions of section 269SS and 269T? - addition U/s 69A - HELD THAT - Coordinate Bench of the Kolkata Tribunal in the case of Sri Mansur Ali Laskar 2011 (12) TMI 732 - ITAT KOLKATA for A.Y 2007-08 dated 30.12.2011 (supra) wherein the Bench has considered, Niece, Uncle, Aunty, Wife of brother, Wife s Sister and Counsin sister as a part of family members. In the assessee s case under consideration the transaction with sister-in- law and Nephew should also be considered as a part of family members. There is no difference between Wife s sister and Sister-in law and if Niece is part of family member then Nephew should also be part of family member. The definition of relatives include husband, wife, brother, sister, sister-in law, Niece and Nephew etc. as per the list given in para 6 of this judgment. The transactions between these family members are neither loans nor deposit and purely a family system and purely a family requirement to help each other in the needy hours, for example medical help, education help and expenses to run the family. That is, one member of the family helps to other member in the needy hours, such as during medical treatment, education, marriage or some other family needs. Therefore, respectfully following the judgment of the Coordinate Bench, we are of the view that transaction between Sister-in -law and Nephew(family members) did not fall in the definition of loan. Therefore, penalty for accepting loan and repaying loan u/s 271D and 271E should not be levied.- Decided in favour of assessee.

Summary

Issues:
Appeals against penalty orders under sections 271D and 271E of the Income Tax Act, 1961 for Assessment Year 2005-06.

Analysis:
The appeals were filed by the assessee against orders passed by the CIT(A) upholding penalties imposed by the Assessing Officer. The Assessing Officer had imposed penalties under sections 271D and 271E due to violations of sections 269SS and 269T of the Income Tax Act. The penalties were related to the acceptance and repayment of loans exceeding ?20,000 in cash without prior notice to the Department. The CIT(A) partially allowed the appeal, considering certain family members as part of the family unit and deleting the penalty up to a certain amount. However, the CIT(A) upheld the penalty on the remaining sum due to the failure of the assessee to establish a reasonable cause.

The assessee, dissatisfied with the CIT(A) order, appealed before the ITAT Kolkata Bench. The assessee argued that based on a previous judgment by the ITAT Kolkata regarding family members, sister-in-law and nephew should also be considered part of the family unit, thereby exempting the penalties under sections 271D and 271E. The ITAT Kolkata Bench, after careful consideration, agreed with the assessee's argument. Referring to the previous judgment that included niece, uncle, aunt, wife of brother, wife's sister, and cousin sister as family members, the ITAT held that sister-in-law and nephew should also be considered family members. The ITAT further noted that transactions between such family members were not considered loans or deposits but rather part of a family system to help each other in times of need.

The ITAT relied on the judgment of the Coordinate Bench in the case of Sri Mansur Ali Laskar, which had been approved by the Hon'ble Kolkata High Court. The ITAT concluded that transactions between sister-in-law and nephew, being family members, did not constitute loans, and therefore, the penalties under sections 271D and 271E should be quashed for the Assessment Year 2005-06 in both appeals filed by the assessee. As a result, the appeals were allowed, and the penalties were set aside.