2016 (9) TMI 262 - AT - Income Tax

Levy of penalty u/s.271D - Held that - Since in the instant case the assessee had taken cash loan from her husband and mother-in-law which has been repaid in cash and there is no repeated transactions and the assessee has explained the reasonable cause for accepting such loans and repayment thereof in cash, therefore, in our opinion, the expression reasonable cause in section 273B for non imposition of penalty u/s.271D and 271E would have to be construed liberally. Accordingly we hold that penalty u/s.271D and 271E are not imposable in the facts of the present case. We, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty. - Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Levy of penalty under Section 271D of the Income Tax Act.
3. Levy of penalty under Section 271E of the Income Tax Act.
4. Reasonable cause for violation of Sections 269SS and 269T of the Income Tax Act.

Detailed Analysis:

1. Delay in Filing Appeals:
The assessee filed appeals with a delay of 69 days, attributing it to serious illness and medical examination for enterocolitis and abdominal pain. The Tribunal, after considering the affidavit and arguments, found a reasonable cause for the delay and condoned it, admitting the appeals for adjudication.

2. Levy of Penalty under Section 271D:
The AO levied a penalty of ?1,75,000 under Section 271D for accepting loans in cash amounting to ?45,000 from Smt. Aparna A. Joshi and ?1,30,000 from Smt. Mandar A. Joshi, violating Section 269SS. The assessee argued that the transactions were with close family members and were genuine, not intended to evade tax. The CIT(A) upheld the penalty, stating that the genuineness of the transaction does not exempt it from the ambit of Section 271D, and ignorance of law is not an excuse.

3. Levy of Penalty under Section 271E:
The AO also levied a penalty of ?2,35,000 under Section 271E for repaying loans in cash to Smt. Aparna A. Joshi, violating Section 269T. The CIT(A) upheld this penalty as well, echoing similar reasons as for the penalty under Section 271D.

4. Reasonable Cause for Violation of Sections 269SS and 269T:
The assessee contended that the transactions were genuine and due to business exigency, and there was no intention to evade tax. The Tribunal considered various judgments, including the Hon'ble Punjab & Haryana High Court in the cases of CIT Vs. Sunil Kumar Goel and CIT Vs. Saini Medical Store, which established that genuine transactions between family members, without tax evasion, constitute a "reasonable cause" under Section 273B, exempting the assessee from penalties under Sections 271D and 271E.

The Tribunal found the assessee's arguments persuasive, noting that the transactions were genuine and between close family members. The Tribunal also noted that the assessee had a bona fide belief that transactions with family members were not covered by Sections 269SS and 269T. The Tribunal concluded that the penalties under Sections 271D and 271E were not justified and directed the AO to cancel the penalties.

Conclusion:
The Tribunal allowed the appeals, condoning the delay in filing and setting aside the penalties levied under Sections 271D and 271E, directing the AO to cancel the penalties. The judgment emphasized that genuine transactions between family members, without intent to evade tax, constitute a reasonable cause for non-imposition of penalties under the Income Tax Act.