2022 (12) TMI 36 - AT - Income Tax

Penalty levied u/s. 271D - contravention of provisions of section 269SS - assessee had taken loan from his brother and his mother in cash for the purpose of purchase of residential property - amount of loan or deposit so taken or accepted in cash - HELD THAT - In the case of Smt. Meera Devi Kumawat 2021 (10) TMI 967 - ITAT JAIPUR where assessee received substantial amount of cash from her husband for purchase of plot and construction of residential house on it, since repayment of said amount was not mandatory and there was no element of interest, and pooling of family funds was done by assessee due to family requirement and as she did not have any known sources of funds, no penalty could be levied u/s 271D for violation of section 269SS. In view of the decision of the jurisdictional Gujarat High Court in the case of Dr. Rajaram L. Akhani 2016 (6) TMI 1051 - GUJARAT HIGH COURT and Smt. Meera Devi Kumawat 2021 (10) TMI 967 - ITAT JAIPUR and other case laws cited above, as applicable to the facts of the case, in our view, receipt by the assessee from his mother and brother is concerned, in our view the provisions of section 269SS / 271D of the Act do not stand attracted. There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his mother/brother and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with our without interest) and therefore in view of the judicial precedents cited above, in our view provisions of section 269SS and 271D cannot be invoked for the amount - Accordingly, in the instant facts, penalty under section 271D is not liable to be levied. Appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271D for contravention of section 269SS - Whether penalty justified based on loan acceptance in cash for the purchase of residential property.

Analysis:
1. The appeal before the ITAT Rajkot involved the confirmation of a penalty levied under section 271D of the Income Tax Act, 1961. The penalty was imposed by the Assessing Officer due to the assessee accepting loans in cash from family members for the purchase of a residential property, amounting to Rs. 5,21,300.

2. The assessee argued that the loans were taken in cash for an emergency situation related to the purchase of the residential property. The assessee contended that there was no intention to evade taxes, as all details of the unsecured loan acceptance were duly declared during the assessment proceedings. However, both the CIT(A) and the Assessing Officer upheld the penalty under section 271D.

3. The ITAT considered the precedents set by various courts in similar cases. It referred to cases where acceptance of cash from family members for personal or business exigencies did not attract penalties under sections 269SS and 271D. Notably, the Gujarat High Court and other tribunals had ruled in favor of the assessee in cases involving loans from family members for urgent requirements or family needs.

4. Relying on the legal precedents and the specific circumstances of the case, the ITAT concluded that the provisions of sections 269SS and 271D were not applicable to the loan amount of Rs. 5,21,300 accepted by the assessee from family members for the purchase of the residential property. The ITAT found no evidence to establish that the amount was a loan or deposit, or that the assessee was obligated to repay it, thereby allowing the appeal and setting aside the penalty under section 271D.

5. The ITAT's decision highlighted the importance of considering the genuineness of transactions and the reasons behind accepting funds in cash when determining the applicability of penalties under the Income Tax Act. The judgment emphasized that penalties should not be imposed when there is a reasonable cause for accepting cash amounts, especially in cases involving genuine transactions for urgent needs or family requirements.

6. Ultimately, the ITAT allowed the appeal of the assessee, overturning the penalty imposed under section 271D. The decision was based on the specific facts of the case, legal precedents, and the absence of evidence indicating a violation of sections 269SS and 271D in the acceptance of loans from family members for the purchase of the residential property.

7. The ITAT's detailed analysis and reliance on legal precedents demonstrate the importance of considering the circumstances and intentions behind cash transactions in determining the applicability of penalties under the Income Tax Act, ensuring fair treatment for taxpayers in genuine situations.