2018 (11) TMI 1490 - AT - Income Tax

Addition u/s 68 - Unsecured cash credit - Held that - Amount was transferred by the assessee through banking channel only. The account ledger of the Axis Bank of M/s Paramount Trading Co. was also filed by the assessee before the CIT(A) to explain that the amount was transferred out of the explained sources of the assessee. There is no incidence of pre-cash deposit before transfer, neither any such incidence was discussed by the CIT(A). The provisions of section 68 are applicable in case where the credit was received by the assessee. However, in the present case, the position is entirely different, as the amount of ₹ 58 lacs was not received by the assessee rather the amount was paid by the assessee to his wife out of his explained sources. Hence, the addition in dispute made in the hands of the assessee should not be taxed and therefore, the same is hereby deleted and accordingly, the appeal of the assessee stands allowed. Penalty made u/s 271D - loan transaction between husband and wife - Held that - Assessee received advance money of ₹ 22 lacs from the four parties for the property no. 3498, Gali Sangrasha, Bara Hindu Rao, Delhi 6. Due to some reasons, the deal was not materialized and the purchaser parties agreed to take another property which is in the name of assessee s wife. The said amount was transferred to his wife s account i.e., Mrs. Shahina Qureshi. Further note that there is no denial on the part of the AO that the amount of ₹ 22 lacs was received by the assessee from his wife, Mrs. Shahina Qureshi. However, while levying the penalty u/s. 271D AO did not appreciate the fact that the provisions of section 269SS are not applicable on the loan transaction between husband and wife. Thus, the question of levying of penalty u/s. 271D does not arise on the impugned transaction, hence, delete the penalty in dispute and allow the appeal of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Enhancement of addition under Section 68 of the Income Tax Act, 1961.
2. Applicability of Section 68 to the facts of the case.
3. Confirmation of addition under Section 68 by the CIT(A).
4. Penalty under Section 271D of the Income Tax Act, 1961.
5. Applicability of Section 269SS to the loan transaction between husband and wife.

Issue-wise Detailed Analysis:

1. Enhancement of addition under Section 68 of the Income Tax Act, 1961:
The Assessee challenged the enhancement of addition from ?3,00,000/- to ?58,00,000/- made by the Commissioner of Income Tax (Appeals) [CIT(A)] under Section 68 of the Income Tax Act, 1961. The Assessee argued that such enhancement was beyond the powers of the CIT(A) and thus, the additional amount of ?55,00,000/- should be deleted. The Tribunal noted that the amount of ?58,00,000/- was transferred by the Assessee through banking channels and was not received by the Assessee but paid to his wife from explained sources. Therefore, the addition was deleted, and the Assessee's appeal was allowed.

2. Applicability of Section 68 to the facts of the case:
The Assessee contended that Section 68, which deals with unexplained cash credits, was not applicable to the facts of the case. The Tribunal observed that the amount in question was transferred by the Assessee to his wife and not received by him. Since Section 68 applies to credits received by the Assessee, it was not applicable in this case. Consequently, the addition made under this section was deleted.

3. Confirmation of addition under Section 68 by the CIT(A):
The CIT(A) had confirmed the addition of ?3,00,000/- made by the Assessing Officer (AO) under Section 28(iv) of the Income Tax Act, 1961. The Assessee argued that this addition was also incorrect. The Tribunal found that the Assessee had provided sufficient evidence, including bank statements, to show that the amount was transferred from his own account and not from his wife's account. Therefore, the addition of ?3,00,000/- was also deleted.

4. Penalty under Section 271D of the Income Tax Act, 1961:
The Assessee also appealed against the penalty of ?22,00,000/- imposed under Section 271D for allegedly accepting a loan in violation of Section 269SS. The Tribunal noted that the amount in question was received as an advance against the sale of property and was later transferred to the Assessee's wife's account. The Tribunal held that the provisions of Section 269SS were not applicable to loan transactions between husband and wife, and thus, the penalty under Section 271D was not justified. The penalty was deleted, and the Assessee's appeal was allowed.

5. Applicability of Section 269SS to the loan transaction between husband and wife:
The Tribunal referred to the decision in the case of Sunil Kumar Sood vs. JCIT, where it was held that Section 269SS does not apply to loan transactions between husband and wife. The Tribunal applied the same rationale to the present case, concluding that the penalty under Section 271D was not applicable. The appeal of the Assessee was allowed, and the penalty was deleted.

Conclusion:
In conclusion, the Tribunal allowed both appeals of the Assessee, deleting the additions made under Section 68 and the penalty imposed under Section 271D. The Tribunal emphasized that the provisions of Sections 68 and 269SS were not applicable to the facts of the case, particularly in the context of transactions between husband and wife. The judgment was pronounced on 27-11-2018.