2013 (2) TMI 211 - HC - Income Tax

Penalty u/s 271D for violation of Section 269SS - ITAT deleted the penalty as assessee had taken the loan only from her father-in-law and the transaction was genuine - Held that - In the light of the relationship between the assessee and her father-in-law, the Tribunal has rightly held that the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for purchase of property and the source had also been disclosed during the assessment proceedings. If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. See Commissioner of Income Tax V. Lakshmi Trust Company Commissioner of Income Tax V. Lakshmi Trust Company - in favour of assessee.

Summary

Issues:
1. Penalty under Section 271D of the Income Tax Act for violation of Section 269SS.

Detailed Analysis:

Issue 1: Penalty under Section 271D of the Income Tax Act for violation of Section 269SS

The case involved the appellant claiming a loan from her father-in-law for purchasing property. The Assessing Officer initiated penalty proceedings under Section 271D for contravention of Section 269SS, alleging that the cash received was a loan and not a gift. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the amount was indeed a loan. However, the Tribunal, citing precedents and the nature of the transaction, found no basis for the penalty. The appellant argued that the amount was a gift, not a loan. The Court analyzed the situation under Section 273B, emphasizing that if a reasonable cause is shown, no penalty shall be imposed. The appellant's assertion that the amount was a gift was supported by an affidavit from her father-in-law. The Tribunal found the transaction genuine and reasonable, considering the urgency of the funds for property purchase. Referring to previous decisions, the Court upheld the Tribunal's decision, emphasizing the genuineness of the transaction and absence of tax evasion intent. The Court dismissed the appeal, finding no error in the Tribunal's order.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive understanding of the case and the reasoning behind the decision.