2017 (8) TMI 1697 - AT - Income Tax

Penalty u/s 271(E) - violation of provisions of section 269SS 269T - assessee submitted before the CIT (A) that transactions between husband and wife, and between father and son are not considered for the purpose of section 269SS and section 269T because they are not other Person as mentioned in section 269T - Assessee held transaction of loan which has a commercial identity cannot be transposed between a relation of husband and wife - HELD THAT - We are of the view that the transaction between husband and wife does not fall in the definition of any other person , that is, the transaction between closely related person like husband and wife, father son etc. They would fall outside the scope of section 269T of the Act. Therefore, in our opinion, a transaction of loan which has a commercial identity cannot be transposed between a relation of husband and wife. Therefore, considering the factual position, we are of the view that the penalty imposed by the Assessing Officer u/s. 271E and confirmed by the Ld. CIT(A) needs to be deleted. Accordingly, we delete the penalty. - Decided in favour of assessee.

Summary

Issues:
1. Penalty imposed under section 271E of the Income Tax Act for cash transactions of loan between husband and wife violating section 269T.
2. Interpretation of the term "any other person" in section 269T of the Act.
3. Applicability of provisions of section 269T to transactions between closely related persons like husband and wife.

Analysis:
1. The appellant's appeal challenged the penalty imposed under section 271E of the Income Tax Act for cash transactions of loans with the appellant's wife, which were considered to violate section 269T. The Assessing Officer noted cash transactions of loans between the appellant and his wife, leading to the penalty imposition. The CIT(A) confirmed the penalty, disregarding the appellant's argument that transactions between husband and wife are not covered under section 269T. The appellant cited judgments to support this argument, but the CIT(A) upheld the penalty.

2. The term "any other person" in section 269T was a crucial point of contention. The appellant argued that transactions between closely related individuals, such as husband and wife, should not be considered under this provision. The appellant contended that the term "any other person" should not include relatives, as per the legislative intent. However, the CIT(A) disagreed, stating that the term encompasses a spouse as well, with no exceptions made for family relationships. This interpretation led to the confirmation of the penalty under section 271E.

3. The Tribunal, after considering the arguments presented, held that transactions between closely related persons, like husband and wife, do not fall within the scope of section 269T of the Act. The Tribunal emphasized that a transaction of loan with a commercial identity cannot be treated as violating section 269T when it involves closely related individuals. Relying on precedents and the specific relationship between the appellant and his wife, the Tribunal concluded that the penalty imposed under section 271E should be deleted. Consequently, the appellant's appeal was allowed, and the penalty was removed.