2024 (7) TMI 1430 - AT - Income Tax

Penalty u/s 271D - violation of the provisions of section 269SS penalty was levied for accepting interest free loan - as contended that the assessee obtained cash as gift from his father-in-law - CIT(A) did not accept the submissions of the assessee as the cash obtained in order to purchase of property from his father-in-law as gift, warranting no violation of provisions of section 269SS - HELD THAT - We find that similar identical issue came up in the case of Mani Sundaram 2024 (2) TMI 534 - ITAT CHENNAI wherein, the Tribunal, while deciding the issue by placing reliance in the case of Ms. Nanda Kumari 2019 (1) TMI 413 - MADRAS HIGH COURT held that no penalty u/s 271D of the Act is attracted if the cash obtained from family members as gift. The order of the ld. CIT(A) in confirming the penalty levied under section 271D of the Act is not maintainable. Accordingly, we direct the Assessing Officer to delete the penalty levied under section 271D - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty under section 271D of the Income Tax Act for obtaining interest-free hand loan from family members.

Detailed Analysis:
The appeal was against the order confirming the penalty under section 271D of the Act for obtaining interest-free hand loans from family members. The Assessing Officer initiated penalty proceedings for violating section 269SS of the Act, resulting in a penalty of Rs. 8,05,000. The appellant contended that the loans were obtained from family members and thus should not attract a penalty. The appellant referred to a similar case before the ITAT, Chennai Bench, where it was held that no penalty is leviable if the loan in cash is availed from family members.

The Tribunal noted that the Assessing Officer recorded cash deposits in banks, which the appellant explained as being from salary, gold loans, and personal loans. The ld. CIT(A) did not accept the explanation, stating that the cash was obtained as a gift from the appellant's father-in-law for property purchase, not violating section 269SS. The Tribunal referred to a case where it was held that no penalty is attracted if cash is obtained from family members as a gift. The Tribunal emphasized the importance of showing reasonable cause for receiving money in contravention of the Act.

In a similar case, the Division Bench granted relief to the assessee, emphasizing the genuineness of the transaction between family members. The Tribunal held that the levy of penalty was not warranted in such circumstances. The Tribunal further highlighted the necessity of demonstrating a reasonable cause for receiving cash. The Tribunal concluded that the case did not warrant a penalty under section 271D of the Act and directed the Assessing Officer to delete the penalty.

Based on the identical facts and the decision in the referenced case, the Tribunal held that the confirmation of the penalty by the ld. CIT(A) was not maintainable. Consequently, the Tribunal directed the Assessing Officer to delete the penalty levied under section 271D of the Act. The appeal filed by the assessee was allowed, and the order was pronounced on 26th July 2024 in Chennai.