• Mar
  • 24
  • 2013

S. 269SS not violated if Assessee borrows in cash from Relatives to meet urgent needs

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HIGH COURT OF MADRAS

Commissioner of Income-tax – I

versus

Smt. M.Yesodha

TAX CASE (APPEAL) NO. 320 OF 2010

Date of pronouncement – 05.02.2013

JUDGMENT

R. Banumathi, J.

The Revenue has come forward with this appeal and the same was admitted on the following substantial question of law:

“Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in deleting the penalty of Rs. 20,99,393/- levied under Section 271D of the Income Tax Act for violation of Section 269SS on the ground that the assessee had taken the loan only from her father-in-law and the transaction was genuine?”

2. The assessee, for the assessment year 2005-2006, claimed loan of Rs. 20,99,393/- taken from her father-in-law for purchasing the property. The Assessing Officer initiated penalty proceedings under Section 271D of the Income Tax Act, 1961 on the ground that the assessee had obtained a loan of Rs. 20,99,393/- in cash from her father-in-law, which is in contravention of the provision of Section 269SS of the Income Tax Act. During the penalty proceedings, the assessee claimed that the amount received in cash from her father-in-law – M. Kathirvel, was a gift and not a loan. The Assessing Officer held that the assessee received the amount as a loan and not as a gift, because the same was shown as a loan in the balance sheet of the assessee, which was filed along with the return of income. Hence, the Assessing Officer levied penalty of Rs. 20,99,393/-.

3. The assessee challenged the penalty levied by the Assessing Officer before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) dismissed the appeal holding that the Assessing Officer has rightly levied penalty under Section 271D of the Income Tax Act after giving opportunity to the assessee and on being fully satisfied that the amount in cash taken by the assessee from her father-in-law was not a gift but only a loan.

4. In the appeal preferred before the Tribunal by the assessee, the Tribunal referred to the decision of the Tribunal in the case of Shri M. Raju v. Addl. CIT [I.T.A. No. 899/Mds/2006] and the decision of the Tribunal, Pune Bench in the case of ITO v. Sunil M. Kasliwal [2005] 94 ITD 281 (Pune)(TM). The Tribunal also referred to the judgment of this Court CIT v. Lakshmi Trust Co. [2008] 303 ITR 99 (Mad.) and held that in the facts and circumstances of the case, levy of penalty is not warranted. The Tribunal further held that the transaction of receiving amount of Rs. 20,99,393/- is between the father-in-law and daughter-in-law and the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for the purchase of property. On those findings, the Tribunal allowed the appeal.

5. Mr. J. Narayanasamy, learned standing counsel appearing for the Revenue submitted that the Tribunal has not appreciated the nature of transaction and that the assessee had taken only loan of Rs. 20,99,393/- from her father-in-law. He further submitted that the assessee had no where pleaded any ‘reasonable cause’ as contemplated under Section 273B of the Income Tax Act and while so, the Tribunal was not right in saying that the genuineness of the transaction is not disputed. He also submitted that the Tribunal was not right in re-appreciating the factual findings recorded by the Assessing Officer and the Commissioner of Income Tax (Appeals) that the cash taken by the assessee from her father-in-law was only a loan transaction.

6. Per contra, learned counsel appearing for the assessee submitted that as evident from the stand of the assessee before the Assessing Officer, the amount taken by the assessee from her father-in-law was a cash gift and no loan was taken by the assessee.

7. We have carefully considered the submissions of learned standing counsel appearing for the appellant and the learned counsel appearing for the assessee.

8. Under Section 273B of the Income Tax Act, on ‘reasonable cause’ being shown, no penalty shall be imposable. As rightly pointed out by the learned counsel appearing for the assessee, in the reply furnished before the Assessing Officer, the assessee clearly mentioned that her father-in-law – M. Kathirvel sent the amount of Rs. 20,99,393/- directly to the seller of the house bought in the name of the assessee at Chennai and that necessary funds were provided by the assessee’s father-in-law as a cash gift and the said cash gift was taken urgently by the assessee to get the purchase deed executed and no loan was taken from her father-in-law. Even though the assessee had not taken a specific plea of reasonable cause, it must be considered as applied to human action. Where the transactions are bonafide, penalty cannot be imposed.

9. To substantiate the plea that her father-in-law had advanced the amount as cash gift, the assessee’s father-in-law had filed an affidavit before the Commissioner of Income Tax (Appeals). Regarding the affidavit, remand report was called for from the Assessing Officer. In the remand report, the Assessing Officer has doubted the nature of transaction. In our considered view, 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.

10. The contention of the Revenue is that the amount received by the assessee from her father-in- has to be treated only as a loan and if is a loan, then the assessee is liable to pay penalty under Section 271D of the Income Tax Act. Whether it is a loan or other transaction, still the other provision, namely, Section 273B of the Income Tax Act, comes to the rescue of the assessee, if she ables to show reasonable cause for avoiding penalty under Section 271D of the Income Tax Act. The Tribunal has rightly found that the transaction between the daughter-in-law and father-in-law is a reasonable transaction and a genuine one owing to the urgent necessity of money to be paid to the seller. We find that this would amount to reasonable cause shown by the assessee to avoid penalty under Section 271D of the Income Tax Act.

11. Referring to the decision reported in CIT v. Kundrathur Finance and Chit Co. [2006] 283 ITR 329 (Mad.), this Court in the decision reported in Lakshmi Trust Co. (supra), held as follows:

“In the instant case, the Commissioner of Income-tax (Appeals) and the Appellate Tribunal found on the facts that the transactions were genuine and the identity of the lenders was also satisfied. The Appellate Tribunal also upheld the order of the Commissioner of Income-tax (Appeals) that there was no intention on the part of the assessee to evade the tax.

Once the said finding as to the genuineness of the transactions is arrived at by the Tribunal on the facts, following the decision of this Court in CIT v. Ratna Agencies [2006] 284 ITR 609, wherein it was held that the finding recorded by the Tribunal in this regard is a finding of fact and no question of law much less a substantial question of law would arise, we do not have any hesitation to hold that it may not be proper for this court to interfere with such a finding of fact.”

12. The Tribunal, referring to the decision of this Court reported in Lakshmi Trust Co. (supra), has rightly allowed the appeal. We do not find any error or infirmity in the order of the Tribunal to warrant interference. Accordingly, the substantial question of law is answered in favour of the assessee and this Tax Case (Appeal) stands dismissed. No costs.


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