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2017 (7) TMI 1331 - AT - Income TaxPenalty u/s 271D - assessee had obtained unsecured loan from his daughter - assessee has submitted that in this case the transaction is in between father and unmarried daughter and therefore, section 269SS has no application - HELD THAT - The entire transaction was done in between Corporation bank and his daughter Smt. P. Shilpa and in turn, the amount was received by the assessee, is a genuine transaction, the Assessing Officer has also not doubted about the transaction. We find that when assessee is carrying business for himself and on behalf of his daughter who was not yet married. For the purpose of business, assessee s daughter obtained loan, for which assessee stood guarantor. The loan amount was received by the assessee through her daughter. It is also a fact that assessee has not paid any interest to his daughter. This transaction is only in between father and his unmarried daughter. Therefore, in our opinion, section 269SS has no application to the facts of the present case. - Decided against revenue
Issues Involved:
1. Legality of the penalty imposed under Section 271D of the Income Tax Act, 1961. 2. Applicability of Section 269SS to the transactions between the assessee and his daughter. 3. Examination of the bonafide nature of the transactions and reasonable cause for non-compliance with Section 269SS. Detailed Analysis: 1. Legality of the Penalty under Section 271D: The primary issue was whether the assessee was liable for a penalty under Section 271D for accepting a loan of ?18 lakhs in cash from his daughter, which allegedly violated Section 269SS of the Income Tax Act, 1961. The Assessing Officer (AO) initiated penalty proceedings under Section 271D, concluding that the assessee had violated Section 269SS by accepting a loan exceeding ?20,000 in cash. Consequently, the AO levied a penalty of ?18 lakhs. 2. Applicability of Section 269SS: The assessee argued that the transaction between him and his daughter did not attract the provisions of Section 269SS, asserting that the transaction was bonafide and involved no unaccounted money. The Commissioner of Income Tax (Appeals) [CIT(A)] agreed with the assessee, noting that the transaction was genuine, involving a loan from a nationalized bank in the daughter's name, for which the assessee stood as guarantor. The CIT(A) held that Section 269SS did not apply to this transaction and canceled the penalty. 3. Examination of the Bonafide Nature and Reasonable Cause: The Tribunal examined whether the transaction was conducted under a bonafide belief and if there was a reasonable cause for non-compliance with Section 269SS. The Tribunal noted that the assessee's daughter, who was a student at the time, had obtained a loan from Corporation Bank, and the assessee managed the funds on her behalf. The Tribunal emphasized that the transaction was between close family members (father and unmarried daughter) and was conducted without any interest payment, indicating a bonafide nature. The Tribunal referenced several cases to support its decision: - Bh. Harshavardhana Raju vs. Addl. CIT: The Tribunal upheld the CIT(A)'s decision, recognizing the bonafide belief and reasonable cause in family transactions, thus negating the penalty under Section 271D. - G. Narasinga Rao vs. JCIT: The Tribunal emphasized that in family transactions, the bonafide of the assessee should not be doubted, especially when the transactions are genuine and for business exigencies. - Dr. Dutta Siva Sankara Rao vs. ACIT: The Tribunal acknowledged that transactions between close relatives conducted under a bonafide belief should be given the benefit of Section 273B, which provides relief from penalties if a reasonable cause is established. The Tribunal concluded that Section 269SS did not apply to the facts of the present case, as the transactions were genuine and conducted between close family members under a bonafide belief. Therefore, the penalty under Section 271D was not justified. Judgment: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to cancel the penalty imposed under Section 271D. The Tribunal held that the transactions between the assessee and his daughter were genuine, conducted under a bonafide belief, and did not attract the provisions of Section 269SS. The appeal filed by the Revenue was dismissed, and the order was pronounced in the open Court on July 31, 2017.
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