2020 (7) TMI 392 - AT - Income Tax

Penalty u/s. 271D - violation of section 269SS - father using the money of his son - HELD THAT - The explanation of the assessee was that his son who earns income from truck plying has given the money for safe keeping with him and when there was an urgent necessity to pay the creditors to run his proprietorship business, the assessee had used this money and reflected it as loan from his son. A father using the money of his son cannot be termed as loan given by the son to the father/assessee. When the father needs money or son needs money, the money given between the family members cannot be termed as loan or advances even though for purpose of accounting it is shown as loan. It is a settled law that the nomenclature in the account books cannot determine the nature of transaction. Since the Ld. JCIT has noted from the ledger account of the son Shri Saurabh Agarwal that the money has been given by the son to the father and that have been used by the father for tiding over urgent business requirement cannot be termed as loan/advance, so it cannot attract the penalty u/s. 271D of the Act, therefore, we direct deletion of the penalty as imposed by the Ld. JCIT and confirmed by the Ld. CIT(A). Therefore, appeal of assessee is allowed.

Summary

Issues:
Appeal against penalty imposed under section 271D of the Income-tax Act, 1961 for violation of section 269SS of the Act.

Analysis:
The appeal was filed by the assessee against the penalty imposed under section 271D of the Income-tax Act, 1961 for contravention of section 269SS of the Act. The JCIT noted that the assessee had taken a cash loan from his son, which was reflected as a loan in the books of account. However, the JCIT found no supporting evidence to substantiate this claim. The JCIT observed cash transactions between the son and father, totaling to &8377; 1,55,000, which violated section 269SS. The CIT(A) confirmed the penalty, noting the absence of the assessee during the appeal hearing and his repeated adjournment requests. The CIT(A) dismissed the appeal without considering the explanation provided by the assessee. The assessee argued that the cash received from his son was not a loan but money for safekeeping, used in business exigencies. The Tribunal held that transactions between family members, even if recorded as loans, do not necessarily constitute loans for legal purposes. The Tribunal found that the money transferred from son to father and used for business needs did not qualify as a loan under section 269SS, thus directing the deletion of the penalty.

Conclusion:
The Tribunal allowed the appeal of the assessee, overturning the penalty imposed under section 271D of the Income-tax Act, 1961. The Tribunal emphasized that transactions labeled as loans in account books may not always meet the legal criteria for loans, especially in family contexts. The judgment highlighted the importance of substantiating claims and distinguishing genuine loans from intra-family fund transfers to avoid penalties under tax laws.