2003 (3) TMI 323 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of section 269SS and section 271D of the Income-tax Act.
2. Validity of the penalty imposed by the Assessing Officer.
3. Justification for the deletion or retention of the penalty by the CIT(A).

Summary:

Issue 1: Applicability of section 269SS and section 271D of the Income-tax Act
The assessee, an individual, accepted loans in cash totaling Rs. 5,44,150 from various family members and close relatives, which was in violation of section 269SS. The Dy. CIT levied a penalty of Rs. 5,44,150 u/s 271D. The CIT(A) reduced the penalty to Rs. 41,500, considering only the unexplained cash gift of Rs. 41,500 as a violation.

Issue 2: Validity of the penalty imposed by the Assessing Officer
The CIT(A) relied on the Supreme Court decision in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, which stated that penalties should not be imposed for mere technical or venial breaches. The CIT(A) also considered CBDT Circular No. 387 dated 6-7-1984 and the ITAT Cochin Bench decision in Muthoot M. George Bankers v. Asstt. CIT [1993] 46 ITD 10, concluding that the transactions did not involve tax evasion or concealment of income. The CIT(A) thus deleted the penalty except for Rs. 41,500.

Issue 3: Justification for the deletion or retention of the penalty by the CIT(A)
The Tribunal upheld the CIT(A)'s deletion of the penalty for Rs. 5,02,650, agreeing that the transactions were genuine and involved family members living under the same roof. However, the Tribunal found no justification for retaining the penalty of Rs. 41,500, as the amounts treated as income from undisclosed sources lost their character as loans or deposits, making section 269SS inapplicable.

Separate Judgment by Judicial Member:
The Judicial Member partially disagreed with the Accountant Member, arguing that the penalty should be retained for amounts taken from the wife, minor children, and close relatives, totaling Rs. 2,24,650, as these transactions did not fall under the same category as those with the HUF.

Third Member Decision:
The Third Member concurred partly with both the Judicial and Accountant Members, concluding that the penalty should not be maintained for loans from minor children and wife but should be maintained for loans from close relatives, totaling Rs. 1,00,000.

Final Order:
In accordance with the majority view, the penalty u/s 271D was deleted for amounts from the minor son, minor daughter, and wife, totaling Rs. 1,24,650, but maintained for amounts from close relatives, totaling Rs. 1,00,000. The appeal of the revenue was partly accepted.