2019 (6) TMI 396 - AT - Income Tax

Penalty u/s 271D - default u/s 269SS - borrowings made in cash at each stage exceeds the permissible limit - transactions between family members - HELD THAT - Tribunal has considered an identical issue in the case of Smt. Deepika vs. Addl CIT 2017 (10) TMI 1405 - ITAT BANGALORE and held that the transactions between family members would not attract penalty u/s 271D In the instant case also, we have noticed that the assessee has taken loan from his father and paternal aunt, who are family members. We notice that the co-ordinate bench has followed the decision rendered in the case of Sunil Kumar Goel 2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT wherein it has been held that the family transactions would fall within the meaning of reasonable cause u/s 273B of the Act. Hon ble Madras High Court has cancelled the penalty in respect of loan transactions between father in law and daughter in law in the decision of M.Yesodha 2013 (2) TMI 211 - MADRAS HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty under sec. 271D for taking cash loans in violation of sec. 269SS.

Analysis:
The appeal challenged the penalty of ?2.20 lakhs imposed by the Additional Commissioner of Income tax for taking cash loans in violation of sec. 269SS. The AO observed that the assessee had taken cash loans from family members, which led to the penalty proceedings under sec. 271D. The assessee argued that the loans were taken in installments and believed sec. 269SS applied only if borrowings exceeded ?20,000 at each stage. The assessee cited precedents to support that loan transactions between family members were exempt from sec. 269SS. However, both the Addl. CIT and the CIT(A) upheld the penalty.

The Tribunal referred to a similar case where it was held that transactions between family members did not attract penalty under sec. 271D. Citing various judicial decisions, the Tribunal emphasized that loans between family members did not violate sec. 269SS and were protected under sec. 273B as a "reasonable cause." The Tribunal highlighted cases where penalties were canceled due to genuine transactions or family dealings. It concluded that the penalty imposed on the assessee was not sustainable based on the legal precedents and directed the deletion of the penalty.

The Tribunal's decision was based on the principle that cash loans between family members did not breach sec. 269SS and were considered a "reasonable cause" under sec. 273B. It relied on judicial interpretations and precedents to support the cancellation of the penalty. The Tribunal highlighted that transactions between family members for specific purposes were exempt from penalties under sec. 271D. By following established legal principles and previous judgments, the Tribunal allowed the appeal and directed the deletion of the penalty.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed under sec. 271D for taking cash loans in violation of sec. 269SS. The decision was based on the exemption granted to family transactions under sec. 273B and supported by legal precedents. The Tribunal emphasized that loans between family members did not attract penalties and directed the deletion of the penalty imposed on the assessee.