2019 (4) TMI 209 - AT - Income Tax

Penalty u/s 271D - acceptance of cash by appellant from its (HUF) - scope expression any other person appearing in s. 269SS - appellant himself as well as the Karta of his own H.U.F i.e. Ranjit Roy (HUF)have control of funds - HELD THAT - The acceptance of the financial accommodation from Ranjit Roy (HUF) by the assessee does not fall within the purview of provisions of s. 269SS of the Act as the appellant is acting in a dual capacity being the appellant himself as well as the Karta of his own H.U.F i.e. Ranjit Roy (HUF) and there being common control of funds with the assessee. Thus there is no infringement of the provision of s. 269SS of the Income Tax Act, 1961. We note that the approach of the AO in resorting to levy of the impugned penalty in the sum of ₹ 4,50,000/- is thoroughly unfounded in the circumstances and based on unconnected considerations not relevant to the issue in dispute which is untenable in law and accordingly, such specious action in that respect cannot survive for judicial scrutiny and the ld. Commissioner (Appeals) was absolutely wrong in upholding such impugned levy in a preposterous manner without appreciating the facts and circumstances of the instant case in the proper perspective and acted beyond the pale of law - appeal of the assessee is allowed

Summary

Issues:
- Appeal against penalty order u/s 271D of the Income Tax Act, 1961 for assessment year 2011-12.

Analysis:
1. Background: The appeal challenges the penalty of ?4,50,000 imposed by the Assessing Officer u/s 271D of the Act, which was confirmed by the ld. CIT(A).

2. Factual Scenario: The assessee received ?4,50,000 from the funds of Ranjit Roy (HUF) during the relevant year, with a total outstanding amount of ?8,00,000. The Assessing Officer alleged a violation of section 269SS and imposed the penalty.

3. Legal Arguments: The appellant contended that the payments were genuine, confirmed by the payee, and accounted for in books. The appellant, acting in dual capacity as himself and Karta of his H.U.F, argued that the transactions did not fall under the purview of section 269SS.

4. Precedents & Interpretation: The Tribunal noted that the expression "any other person" in section 269SS refers to those not closely connected with the assessee. Transactions with closely related persons like family members may not attract penalty under section 271D if the genuineness is established.

5. Judicial Review: The Tribunal found the penalty imposition unfounded as the funds were received from a closely connected entity. Citing a precedent, the Tribunal ruled that accepting funds from parents for business expediency did not attract penalty under sections 271D and 269SS.

6. Decision & Precedent: Relying on a Co-ordinate Bench judgment, the Tribunal canceled the penalty under section 271D, following a similar case where penalty was deleted due to funds received from parents for business needs.

7. Conclusion: The Tribunal allowed the appeal, canceling the penalty imposed under section 271D of the Income Tax Act, 1961, based on the interpretation of closely connected transactions and business expediency.

This detailed analysis of the judgment showcases the legal arguments, factual background, precedent references, and the ultimate decision of the Appellate Tribunal in canceling the penalty under section 271D.