2002 (12) TMI 195 - AT - Income Tax

Summary

Issues Involved:
1. Violation of Section 269SS.
2. Justification for recording statements u/s 131.
3. Ownership and disclosure of Bank Account.
4. Imposition and reduction of penalty u/s 271D.
5. Applicability of Section 273B.

Summary:

1. Violation of Section 269SS:
The assessee admitted to taking loans of Rs. 50,000 and Rs. 20,000 in cash from his wife on 27th Jan., 1993, and 20th Feb., 1993, respectively. The Dy. CIT imposed a penalty of Rs. 70,000 u/s 271D for violating Section 269SS, which prohibits accepting loans or deposits of Rs. 20,000 or more in cash.

2. Justification for Recording Statements u/s 131:
The assessee contended that the ITO was not justified in recording statements of the appellant and his wife u/s 131, and any adverse inference drawn was not justified. The CIT(A) concurred with the Dy. CIT in drawing adverse inferences from these statements.

3. Ownership and Disclosure of Bank Account:
The assessee argued that the Bank A/c No. 2121 with Bank of Baroda belonged to him and was disclosed in his assets, thus negating the need for a loan from this account. The CIT(A) did not accept this contention.

4. Imposition and Reduction of Penalty u/s 271D:
The CIT(A) reduced the penalty from Rs. 70,000 to Rs. 35,000, acknowledging the transaction's genuineness but noting the assessee's shift in stance regarding the loan's nature. The Department appealed against this reduction, while the assessee appealed against the sustenance of any penalty.

5. Applicability of Section 273B:
The assessee argued that the case was covered u/s 273B, which provides relief if there is a reasonable cause for the failure. The Tribunal referred to the Calcutta Bench's decision in Dr. B.G. Panda vs. Dy. CIT, emphasizing that transactions between spouses for family prosperity, without commercial intent, should not attract penalties. The Tribunal concluded that the assessee had a reasonable cause and bona fide belief that the amount did not require an account payee cheque or draft.

Conclusion:
The Tribunal canceled the penalty of Rs. 35,000 sustained by the CIT(A), allowing the assessee's appeal and dismissing the Department's appeal. The decision emphasized interpreting penalty provisions favorably towards the taxpayer in case of doubt.