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2020 (10) TMI 935 - AT - Income TaxPenalty u/s 271D and 271E - loans were taken and repayment were made in cash, thereby violating the provisions of section 269SS and 269T - HELD THAT - Majority of loans / deposits are taken from relatives, viz., wife, son and daughters. Bangalore Tribunal in the case of Smt.Deepika v. Addl.CIT 2017 (10) TMI 1405 - ITAT BANGALORE had held that transactions between family members would not attract penalty u/s 271D. Also in the case of Sunil Kumar Goel 2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT wherein it has been held that the family transactions would fall within the meaning of reasonable cause u/s 273B. Loans / deposits accepted from other than relatives, viz., Sri.Hiren Kumar Patel - On a query from the Bench whether there is a business understanding in writing between the assessee and Sri.Hiren Kumar Patel, the learned AR submitted in the affirmative and requested the matter may be examined by the A.O - For the imposition of penalty u/s 271D and 271E in context of transaction the assessee had with Sri.Hiren Kumar Patel, the matter is restored to the A.O. The assessee shall cooperate with the A.O. and shall not seek unnecessary adjournment. The assessee shall prove his case that the transaction he had with Sri.Hiren Kumar Patel is a business transaction and not a loan / deposit. It is ordered accordingly. Cash paid by Sri.Hiren Kumar Patel to a builder for the purchase of a flat on behalf of the assessee - passing of journal entry without actual receipt of cash - HELD THAT - Assessee had recorded in her books of account, by passing a journal entry by crediting Sri.Hiren Kumar Patel s accounts and debiting the flat purchase account. However, only the ledger account of Sri.Hiren Kumar Patel in the books of account of the assessee alone is placed on record. To understand whether it is a journal entry, the ledger account of the developer in the books of account of the assessee also needs to be perused. In absence of the same, in the interest of justice, we restore the issue to the files of the A.O. The A.O. shall examine whether the assessee in her books of account only passed a journal entry and was not in receipt of money from Sri.Hiren Kumar Patel. In view of the dictum laid down by the Hon ble Delhi High Court in the case of CIT v. Noida Toll Bridge Co. Ltd. 2003 (1) TMI 46 - DELHI HIGH COURT if the assessee had passed only a journal entry, the provisions of section 269SS would not be attracted and penalty u/s 271D.
Issues Involved:
1. Justification of penalty under section 271D of the I.T. Act. 2. Justification of penalty under section 271E of the I.T. Act. 3. Application of section 269SS and 269T of the I.T. Act. 4. Determination of whether transactions between family members constitute "reasonable cause" under section 273B of the I.T. Act. 5. Classification of transactions as loans or business transactions. Detailed Analysis: 1. Justification of Penalty under Section 271D of the I.T. Act: The primary issue was whether the CIT(A) was justified in confirming the penalty imposed under section 271D of the I.T. Act. The assessee, engaged in the business of development and building, had taken loans in cash, violating section 269SS. The ITAT had previously remanded the case to the CIT(A) to determine if the penalties were time-barred and to reconsider the merits. The CIT(A) concluded that the penalties were not time-barred and upheld the penalties, rejecting the argument that transactions with family members constituted "reasonable cause" under section 273B. 2. Justification of Penalty under Section 271E of the I.T. Act: Similarly, the issue of whether the CIT(A) was justified in confirming the penalty under section 271E for repayments made in cash was considered. The penalties were imposed for the violation of section 269T. The CIT(A) upheld these penalties as well, rejecting the argument of "reasonable cause." 3. Application of Section 269SS and 269T of the I.T. Act: The assessee argued that the provisions of sections 269SS and 269T did not apply to transactions between family members. The Tribunal referenced several cases, including Smt. Deepika v. Addl. CIT and Shri Sanmathi Ambanna v. JCIT, where it was held that transactions between family members do not attract penalties under section 271D, considering them as "reasonable cause" under section 273B. The Tribunal concluded that transactions between the assessee and his wife, son, and daughters should not attract penalties under sections 271D and 271E. 4. Determination of Reasonable Cause under Section 273B of the I.T. Act: The Tribunal analyzed whether the transactions between the assessee and his relatives constituted "reasonable cause" under section 273B. It was established that a majority of the transactions were with family members, and referencing various judicial pronouncements, the Tribunal held that such transactions do not attract penalties. Consequently, penalties amounting to ?40,22,000 under section 271D and ?14,06,761 under section 271E were deleted. 5. Classification of Transactions as Loans or Business Transactions: For transactions with non-family members, specifically with Sri. Hiren Kumar Patel, the assessee contended these were business transactions and not loans. The Tribunal restored this matter to the A.O. for verification, instructing the A.O. to examine if the transactions were indeed business-related and not loans, as claimed by the assessee. Separate Judgments: In the case of Smt. Rajeshwari Pandith, the issue was whether the penalty of ?2,93,900 under section 271D was justified. The Tribunal restored this issue to the A.O. to verify if the transactions were journal entries and not actual cash receipts, referencing the Delhi High Court's judgment in CIT v. Noida Toll Bridge Co. Ltd., which held that journal entries do not attract section 269SS. Conclusion: (i) ITA Nos. 480, 482, 487, 488, and 489/Bang/2020 (Sri. Gopal S. Pandith) were allowed. (ii) ITA Nos. 481, 483, 484, 485, and 486/Bang/2020 (Sri. Gopal S. Pandith) were partly allowed for statistical purposes. (iii) ITA No. 496/Bang/2020 (Smt. Rajeshwari Pandith) was allowed for statistical purposes. Order Pronounced: The order was pronounced on the 21st of October, 2020.
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