2020 (1) TMI 253 - AT - Income Tax

Penalty u/s 271E/271D - accepting loans in cash - HELD THAT - As decided in SMT. DEEPIKA, VERSUS ADDL. COMMISSIONER OF INCOME TAX, RANGE 5, BANGALORE. 2017 (10) TMI 1405 - ITAT BANGALORE the daughter and member of the HUF have given money for certain specific purpose. The source and genuineness of the loan has been accepted by the AO. The cash loans in question therefore cannot be said fall within the mischief of Sec.269SS of the Act as near relatives cannot be said to be Other person within the meaning of Sec.269SS of the Act. In any event in the circumstances of the case, there was reasonable cause for accepting loans in cash. We, set aside the orders of the Ld.CIT(A) and cancel the penalties levied u/s. 271E/271D - Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty under Section 271D for accepting a loan via bearer cheque.
2. Penalty under Section 271E for repaying a loan in cash.

Detailed Analysis:

1. Penalty under Section 271D for accepting a loan via bearer cheque:

The assessee filed an E-return declaring an income of ?3,45,800 for AY 2014-15. During scrutiny, the AO noticed that the assessee accepted a loan of ?50,000 via bearer cheque on 13/03/2013, violating Section 269SS of the Income Tax Act, 1961. The Additional Commissioner of Income Tax initiated penalty proceedings under Section 271D. The assessee explained that the loan was accepted due to exceptional circumstances for making payments to Bharat Petroleum Corporation Ltd. (BPCL). However, the AO was not convinced and levied a penalty of ?50,000.

Upon appeal, the CIT(A) upheld the penalty, rejecting the argument that the loan was accepted due to business expediency. The assessee further appealed to the Tribunal, arguing that the loan was taken from his father, a transaction within the family, and was necessary for urgent business needs. The Tribunal noted that both entities involved were proprietary concerns of father and son, and the transactions were duly recorded in the books of accounts. The Tribunal found that there was no unaccounted cash transaction and that the relationship between father and son did not attract the imposition of penalty under Section 271D. Citing the case of Smt. Deepika vs. ACIT, the Tribunal held that penalties under Section 271D are not applicable in transactions between near relatives.

2. Penalty under Section 271E for repaying a loan in cash:

The assessee repaid a loan of ?4,00,000 in cash on 13/04/2013 to Industrial Protection Force (IPF), violating Section 269T of the Act. The payment was directly deposited into the bank account of IPF. The Additional Commissioner initiated penalty proceedings under Section 271E. The assessee argued that the payment was made into the bank account and not directly to the father, and the transaction was recorded in the books of accounts. The CIT(A) upheld the penalty, rejecting the explanation.

On further appeal, the assessee reiterated that the repayment was made from daily collections and directly deposited into IPF's bank account, not as a cash payment to his father. The Tribunal observed that both entities were proprietary concerns of father and son, and the transactions were duly accounted for. The Tribunal found that there was no suppression of income or unaccounted cash transactions. Referring to the case of Smt. Deepika vs. ACIT, the Tribunal concluded that penalties under Section 271E are not applicable in transactions between near relatives.

Conclusion:

The Tribunal held that the penalties levied under Sections 271D and 271E were unsustainable. The Tribunal set aside the orders of the CIT(A) and canceled the penalties, allowing the appeals of the assessee. The Tribunal emphasized that the transactions between father and son did not attract penalties under Sections 271D and 271E, and cited relevant judicial precedents to support its decision.