2020 (4) TMI 227 - AT - Income Tax

Penalty u/s 271D - contravention of Section 269SS - cash loan taken by the assessee - AR submitted before us, the assessee had borrowed cash loan from his own brother in law due to unavoidable circumstances - HELD THAT - It is not in dispute that the assessee has obtained the cash from his own brother-in-law. It is also not in dispute that the assessee obtained the cash loan for the purpose of acquiring immovable property wherein he was constrained to resciend the agreement in the event the balance purchase consideration is not paid within the stipulated time and in such event the transaction has to be reversed. Further, there is nothing on record to suggest that the transaction is not genuine and bona fide. In this situation, the decisions relied by AR supports the case of the assessee. In the case of ITO vs. Trilokchand 2002 (12) TMI 195 - ITAT AMRITSAR it has been categorically held that when the assessee recieves cash loan from his wife for acquiring immovable property it will not result in commercial transaction and there is no breach of provisions of section 269SS of the Act and accordingly penal provisions under section 271D of the Act cannot be invoked. There existed reasonable cause for the assessee for accepting cash loans from his own brother-in-law and since there is nothing to suggest that the transaction is a commercial transaction and is not genuine, we hereby direct the Ld. AO to delete the penalty levied for ₹ 6 lakhs invoking the provisions of section 271D - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271D for cash loan obtained from brother-in-law.

Analysis:
1. The appellant challenged the order of CIT(A) upholding the penalty under section 271D imposed by the AO for accepting a cash loan from the brother-in-law.
2. The AO observed that the cash loan contravened section 269SS of the Act and referred the case for penalty proceedings under section 271D.
3. Despite explanations provided by the appellant, the AO levied a penalty of ?6,00,000, equivalent to the loan amount, for non-compliance with section 269SS.
4. The appellant contended before the CIT(A) that the cash received was for purchasing immovable property, not a business loan, but the penalty was confirmed.
5. The appellant appealed to the Tribunal, arguing that the cash loan was necessitated by the urgency of the property purchase and cited relevant case laws supporting their position.

Tribunal's Decision:
1. The Tribunal acknowledged that the appellant received cash from the brother-in-law for a genuine purpose - acquiring immovable property under urgent circumstances.
2. Citing precedents, the Tribunal found that the loan transaction was genuine, reflected in accounts, and not a sham to cover unaccounted money.
3. The Tribunal noted that the loan was routed through the appellant's bank account, showing bona fides, and the Assessing Officer accepted the transaction's genuineness.
4. Considering the circumstances and case laws, the Tribunal concluded that a reasonable cause existed for accepting the cash loan, directing the AO to delete the penalty under section 271D.
5. The Tribunal allowed the appellant's appeal, emphasizing the genuine nature of the transaction and the absence of commercial motives or non-genuineness.

Conclusion:
The Tribunal's decision favored the appellant, recognizing the genuine and urgent need for the cash loan from the brother-in-law for acquiring immovable property, leading to the deletion of the penalty imposed under section 271D.