2019 (9) TMI 1035 - AT - Income Tax

Penalty u/s 271D - assessee has accepted cash from his father - contravention of the provisions of section 269SS - HELD THAT - The first transaction pertaining to cash received by the assessee from his father we are satisfied with the explanation of the assessee that the assessee gave this amount to his father after withdrawing the same from his bank account towards purchase of land and due to cancellation of land deal, it was returned to the assessee by his father and same was deposited by the assessee to his bank account. As the land deal was under process and for acquisition of land and the intention of the assessee was to contribute and support his family. Therefore, on cancellation of land deal, the amount was returned to the assessee and such transaction cannot be tagged as loan or advance in contravention of section 69SS of the Act. Hence, penalty u/s.271D cannot be imposed on this count. Four transactions of receiving cash from relatives and family members by the assessee under medical emergency , then we are inclined to hold that this is a simply transaction of transfer of money from one family members to another family members to support him during medical emergency period and such transaction cannot be treated as loan or advance and transaction falling under the ambit of section 269SS of the Act attracting penalty u/s.271D - transaction between the relatives of family members for giving support and help, is not loan or deposit and it is only a financial support. Penalty imposed by the AO and confirmed by the CIT(A) on account of cash amount received from the members of AOP - there are four members of AOP including the assessee Shri Gourang Chandra Nayak and Shri Sasanka Sekhar Sahu alongwith Shri Manoj Kumar Biwal, wherein, it was agreed between the members of AOP that the contributory amount will be kept with the assessee until a bank account is opened in the name of school. Therefore, the said amount cannot be alleged as transaction of loan or deposit in contravention of section 269SS of the Act. In this situation, the assessee is only a trustee of money till bank account in the name of school is opened and thus, such transaction cannot be named as transactions as loan or advance in cash which attracts penalty u/s 271D Amount received by the assessee on seven transactions is genuine and not loan or advance in contravention of section 269SS - Decided in favour of assessee.

Issues Involved:
1. Legality and justification of penalty under Section 271D of the Income Tax Act, 1961.
2. Nature of transactions (whether they are loans or deposits).
3. Reasonable cause for transactions.
4. Timeliness of penalty imposition under Section 275.
5. Validity of the notice of demand.

Detailed Analysis:

1. Legality and Justification of Penalty under Section 271D:
The assessee contested the imposition of a ?14,00,000/- penalty under Section 271D of the Income Tax Act, 1961, arguing that the penalty was illegal and unjustified. The assessee explained all cash transactions to the Assessing Officer (A.O.), who did not find any transactions doubtful or aimed at tax evasion. The assessee cited several judgments to support their case, but the Commissioner of Income Tax (Appeals) [CIT(A)] did not find these applicable due to differing facts. The tribunal found that the transactions were not in contravention of Section 269SS, thus the penalty was deemed illegal and ordered to be deleted.

2. Nature of Transactions (Loans or Deposits):
The assessee argued that the transactions were neither loans nor deposits. The A.O. and CIT(A) did not conclusively determine the nature of the transactions. The tribunal reviewed the transactions individually:
- ?3,00,000/- from the father: This amount was returned after a canceled land deal, initially withdrawn from the assessee’s bank account.
- ?50,000/- from brother-in-law, ?3,50,000/- from nephew, ?1,20,000/- from son-in-law, and ?80,000/- from wife's brother: These amounts were received for medical emergencies due to the assessee's heart surgery.
- ?2,00,000/- and ?3,00,000/- from AOP members: These amounts were for establishing a school, as per an agreement among the AOP members.

The tribunal concluded that these transactions were not loans or deposits but rather financial support and contributions, thus not falling under Section 269SS.

3. Reasonable Cause for Transactions:
The assessee provided reasonable causes for the transactions:
- Medical emergencies justified the amounts received from relatives.
- The amount returned by the father was due to a canceled land deal.
- Contributions from AOP members were for a school project and kept with the assessee until a bank account was opened.

The tribunal found these explanations reasonable and supported by documentary evidence, thus granting immunity from penalty under Section 273B.

4. Timeliness of Penalty Imposition under Section 275:
The assessee claimed that the penalty imposition was time-barred under Section 275. However, this issue was not elaborately discussed in the judgment, implying that the tribunal focused on the nature and reasonableness of the transactions rather than the timeliness of the penalty.

5. Validity of the Notice of Demand:
The assessee argued that the notice of demand was invalid as it was issued by the Income Tax Officer (ITO) while the penalty was imposed by the Joint Commissioner of Income Tax (JCIT). The tribunal did not extensively address this procedural issue, focusing instead on the substantive grounds of appeal.

Conclusion:
The tribunal concluded that all seven transactions were genuine and not in contravention of Section 269SS. The transactions were either financial support during medical emergencies or contributions for a school project, thus not attracting penalty under Section 271D. The tribunal directed the deletion of the penalty and allowed the appeal in favor of the assessee.

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