2019 (11) TMI 1778 - AT - Income Tax

Penalty u/s 271D r.w.s. 269SS - loans availed from family-members - two cash loans/ gifts sums in case of mother and wife; respectively - HELD THAT - We find no reason to sustain the penalty in issue. The fact remains that the two sum(s) in question of ₹1 lakh and 1.30 lakh have come from assessee s mother and wife; respectively. Case law Commissioner of Income Tax Vs. Natvarlal Purshottamdas Parekh 2008 (2) TMI 287 - GUJARAT HIGH COURT holds that such kind of amount(s); which are mere book entry transactions on behalf of family members does not violate the provision of sec. 269SS and 269T. Hon'ble Madras high court in Commissioner of Income Tax vs. Idhayam Publications Ltd. 2006 (1) TMI 97 - MADRAS HIGH COURT also holds that such transactions between sister concerns having common directors in running account also does not attract the impugned penal provision. We take into account all these facts to conclude that the learned lower authorities have erred in penalizing the assessee on account of cash loans availed from his mother and wife in issue. The penalty in question stand deleted accordingly.

Summary

Issues Involved:
1. Imposition of penalty under section 271D of the Income Tax Act, 1961 for alleged loans availed from family members exceeding the specified limits.

Detailed Analysis:
1. The appellant challenged the penalty imposed under section 271D for accepting loans from family members exceeding the limits specified in section 269SS of the IT Act. The appellant initially claimed the amounts were cash gifts but later admitted they were cash loans. The lower authorities upheld the penalty, noting that the transactions were recorded as loans in the accounts, and the appellant failed to provide evidence to support the claim that they were gifts. The appellant's argument that transactions below Rs. 20,000 were not prohibited under section 269SS was rejected, as the law clearly states otherwise. The tribunal found that the appellant deliberately violated the provisions of section 269SS and attempted to disguise the loans as gifts, leading to the imposition of the penalty under section 271D.

2. The appellant availed cash loans from family members exceeding the specified threshold, leading to the imposition of a penalty under section 271D. The appellant argued that the loans were gifts mistakenly recorded as loans by the auditor. However, the Assessing Officer and the CIT(A) upheld the penalty, citing a motive to avoid detection without any reasonable cause. The appellant contended that the loans from family members should not attract the penalty, relying on case law that transactions between family members may not violate the relevant provisions. The tribunal agreed with the appellant, considering the nature of the transactions and the familial relationships involved, and deleted the penalty imposed under section 271D.

3. In conclusion, the tribunal allowed the appellant's appeal, overturning the penalty imposed under section 271D for availing cash loans from family members. The tribunal considered the familial relationships and the nature of the transactions in determining that the penalty was unjustified. The decision was based on the legal principles established in relevant case law, emphasizing that transactions between family members may not necessarily attract penalties under the Income Tax Act.

Judgment Summary:
The appellate tribunal overturned the penalty imposed under section 271D for availing cash loans from family members, citing the familial relationships and legal precedents that transactions between family members may not violate the relevant provisions. The tribunal found no reasonable cause to sustain the penalty and allowed the appellant's appeal, deleting the penalty imposed by the lower authorities.