Manish Narendrabhai Gandhi Vs ACIT (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT), Rajkot, allowed two appeals filed by the assessee and deleted penalties imposed under Sections 271D and 271E of the Income-tax Act, 1961, holding that cash transactions between close family members do not constitute loans or deposits within the meaning of Sections 269SS and 269T.
The first appeal related to a penalty of ₹10,08,000 imposed under Section 271D for alleged violation of Section 269SS. During penalty proceedings, it was found that the assessee had accepted cash receipts aggregating to ₹10,08,000 from the assessee’s brother’s HUF, wife, brother’s wife, and the assessee’s own HUF. The assessee explained that the amounts were received from close family members for business purposes and, therefore, the transactions did not partake the character of loans or deposits contemplated under Section 269SS. However, the Additional Commissioner of Income-tax rejected the explanation and levied a penalty equal to the cash received, which was confirmed by the CIT(A).
Before the Tribunal, the assessee reiterated that all the transactions were between close relatives and relied upon the Gujarat High Court’s decision in Dr. Rajaram L. Akhani vs. ITO, wherein it was held that transactions between close family members do not amount to loans or deposits for the purposes of Sections 269SS and 269T and, consequently, no penalty under Sections 271D and 271E is leviable.
