2019 (6) TMI 1055 - AT - Income Tax

Penalty u/s 271D - payment made by sister concern on behalf of the assessee - HELD THAT - Since the assessee is a small trader and not maintaining journal, he has entered the transaction in cash book. The entry is in both side of cash book which means assessee has not received cash. Household expenses incurred and paid from firm have been debited to assessee's a/c and accordingly journal entry has been passed in cash book crediting the A/c of firm M/s Rambilas Shiv Kumar (Sister concern) and debiting the capital a/c of Subash Chand Nyati in which narration is given as credited to M/s Rambilas Shivkumar and debited to household expenses as such no 'money' passed from firm to the assessee. ITAT Ahemdabad in the case of ACTT vs Gujarat Ambuja Proteins Ltd. 2003 (10) TMI 248 - ITAT AHMEDABAD-B has held that where account of sister concern was credited by the assessee by journal entries on account of payment made by sister concern on behalf of the assessee, there was no no violation of the provisions of Section 269SS. The transaction between the assessee and sister concern M/s Ram Bilas Shiv Kumar was current account in nature and was not a loan or deposit and hence there is no violation of section 269SS as in the case of CIT vs ldhayam Publication Ltd. 2006 (1) TMI 97 - MADRAS HIGH COURT . Copy of account of the assessee in the books of sister concern M/s Rambilas Shivkumar clear indicate that it is a current account and as such provisions of Section 269SS/ 271D are not applicable. - Decided in favour of assessee

Summary

Issues:
- Appeal against penalty imposed under section 271D of the Income Tax Act, 1961.

Analysis:
1. The appellant challenged the penalty order under section 271D, contending that it was unlawful and should be quashed. The specific penalty amount of ?1,11,620 was disputed on legal and factual grounds, urging for its deletion in full. The appellant also sought permission to modify the grounds of appeal before the hearing.

2. The penalty was imposed for allegedly receiving a cash loan of ?1,11,620 from M/s Ram Bilas Shiv Kumar. The CIT(A) upheld the penalty, leading to the appeal before the ITAT. The appellant argued against the penalty imposition.

3. Upon review, it was revealed that the family structure involved two partners in M/s Ram Bilas Shiv Kumar, with the appellant being the brother of one partner and the son of another. The family operated jointly, sharing household expenses equally among the family members in the firm's books.

4. The Assessing Officer (A.O.) alleged that the appellant received cash loans on various dates. However, it was clarified that the expenses were not loans but joint family expenses debited equally to the family members. The appellant only made a direct payment of ?10,000 to the Post Office for purchasing NSC.

5. The appellant's cash book demonstrated that household expenses were debited equally to the family members, indicating no cash loan. The appellant, being a small trader without a journal, recorded transactions in the cash book, reflecting the nature of expenses and payments made.

6. The transactions were detailed in the cash book, showing that the appellant did not receive any cash. The expenses were debited to the appellant's account, with corresponding entries in the firm's account, clarifying the flow of funds within the family structure.

7. Citing precedents, it was established that the transactions between the appellant and the sister concern were current accounts, not loans or deposits. The nature of the accounts and the absence of a loan or deposit relationship exempted the appellant from violating the relevant sections of the Act.

8. Consequently, the ITAT found no justification for the penalty under section 271D and directed the A.O. to delete the penalty.

9. As a result, the appeal of the assessee was allowed, and the order was pronounced in open court on 20th June 2019.