Case Law Details
Kalpesh Mahidas Maradia Vs Add. CIT (ITAT Rajkot)
as the impugned amount received by the assessee from his father’s proprietary firm is concerned, we note that the Gujarat High Court in the case of Dr. Rajaram L. Akhani v ITO [2017] 88 taxmann.com 693 (Gujarat) has held that where assessee had accepted a sum of Rs. 2 lakhs from his son to meet urgent requirement of depositing margin money in bank account for buying a vehicle for personal use, amount so received was neither a loan nor a deposit within meaning of section 269SS. The Delhi ITAT in the case of ACIT v Vardaan Fashion [2015] 60 taxmann.com 407 (Delhi – Trib.) held that acceptance of cash by husband from his wife cannot said to be taking of loan or advance in strict sense of section 269SS and therefore, no penalty under section 271D could be levied. In the case of Smt. Kusum Dhamani [2014] 47 taxmann.com 143 (Jaipur – Trib.), ITAT held that where assessee running a proprietorship concern, took cash loans from her husband carrying on another proprietorship business on account of business exigencies for making payments to labourers and lenders, there being no violation of provisions of section 269SS, impugned penalty order passed under section 271D was to be set aside. In the case of ITO v. Tarlochan Singh [2003] 128 taxman 20 (Asr.) (Mag.) penalty under section 271D was levied on ground that assessee had received loan of Rs. 70,000 in cash from his wife for investment in acquisition of immovable properties. Wife had given money to husband for prosperity of family only and there was no evidence that amount in question was taken for commercial use. Though revenue considered it loan, but there was no material on record to show that assessee had returned amount received from wife or paid interest thereupon. Assessee was also under bona fide belief that amount in question did not require to be received otherwise than by an account payee cheque or account payee bank draft. Whether considering above and also keeping in view that intention of Legislature was never to punish a party involved in genuine transactions, it had to be held that there was reasonable cause and no penalty was leviable. In the case of Smt. Meera Devi Kumawat v. JCIT [2021] 132 taxmann.com 21 (Jaipur – Trib.) where assessee received substantial amount of cash from her husband for purchase of plot and construction of residential house on it, since repayment of said amount was not mandatory and there was no element of interest, and pooling of family funds was done by assessee due to family requirement and as she did not have any known sources of funds, no penalty could be levied under section 271D for violation of section 269SS. The jurisdictional ITAT Rajkot Bench in the case of Shailesh Akbari v. Addl. CIT in ITA No. 666/Rjt/2014 has held that transaction between closely related persons such as father and son must fall outside the purview of section 269SS. In view of the decision of the jurisdictional Gujarat High Court in the case of Dr. Rajaram L. Akhani supra and other case laws cited above, as applicable to the facts of the case, in our view so far as receipt of ₹ 12,49,526/- by the assessee from his father’s proprietary firm is concerned, the provisions of section 269SS do not stand attracted. There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his father and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with or without interest) and therefore in view of the judicial precedents cited above, in our view provisions of section 269SS cannot be invoked so far as the amount of ₹ 12,49,526/- is concerned.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
This assessee’s appeal for A.Y. 2008-09, arises from order of the CIT(A)-1, Rajkot dated 26-08-2019, in Appeal No. CIT(A)-I/Rjt/11507/16-17, in proceedings under section 271D of the Income Tax Act, 1961; in short “the Act”.
2. The assessee has taken the following grounds of appeal:-
Ground No.-1:
The Learned Commissioner of Income Tax (Appeals)-l, Rajkot (hereinafter referred to as “CIT(A)”) erred in law and on facts in confirming Penalty u/s 271D of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) of Rs. 12,49,526 levied by the Add. CIT-1(1) & 1(2), Rajkot on account of alleged contravention of provisions of Section 269SS of the Act. The Penalty levied, for interest-free loan received from M/s. Ghanshyam Trading Co., proprietary concern of father, is totally unjustified on facts and also in law, may kindly be cancelled.
2. Ground -2:
That on the facts and in the circumstances of the case, CIT(A) failed to appreciate that the loan received during the year from proprietary concern of the father was to maintain sufficient bank balance to honor the cheque of Angel Commodities Pvt. Ltd. for business purpose and the same found as genuine by AO. Thus, there was reasonable cause in accepting the loan within the meaning of Section 273B of the Act and the penalty may kindly be deleted.
3. The brief fact of the case are that the assessee had received amount of Rs.12,49,526/- in cash from M/s Ghanshayam trading company, which was a proprietary concern of the assessee’s father Shri Mahidas Maradia. The Additional CIT held that receipt of the cash deposit exceeding Rs.20,000/-was in violation of provisions of section 269SS and imposed penalty u/s 271D of the Act. The assessee during appeal before Ld. CIT(A) contended that impugned deposits were received from proprietary concern of his father as assessee was required to maintain sufficient bank balance to make timely payments to Angel Trading Private Limited. The assessee contended that the transaction was between father and son and the cash deposit was accepted under the bonafide belief that this transaction was not covered by section 269SS. The assessee has also stated that words “any other person” appearing in section 269SS are relevant to persons who are not intimately or closely connected. In this regard the assessee placed reliance upon decision of ITAT Hyderabad in case of Dillu Cine enterprise in ITA No. 184/Hyd/1999. The Ld. CIT(A) however dismissed the assessee’s appeal with the following observations:
“I find it uncontroverted that the deposit had been accepted in cash in violation of provisions of 269SS. It is not the case of assessee that father of assessee did not have bank account and that he could not advance these deposits through banking channel. The assessee has not shown any reasonable cause for acceptance of loans in cash. The contentions of assessee that receipt of deposit of father is not covered by section 269SS as words “any Other person” appearing in that section did not apply to closely related person like father is not tenable. In the case of Dilu cine Enterprise cited by assessee the deposit was from Director of company and the Director was actively engaged in day to day affairs of company. The ITAT in those facts had held that active director of assessee company was not covered by expression “any other person” occurring in section 269SS. In my considered opinion the father of assessee in the instant case of cannot be put on the same footing as that of the director of the company in the cited case. Here it is not the case of assessee that father of assessee was managing the day to day affairs of assessee and he was beneficially involved in business of Assessee. The father and assessee are two distinct entities and the transaction between two cannot be said to be out of ambit of section 269SS.
The assessee has also placed reliance upon decision of Gujarat High court in the case of Raja Ram Lakhani 395 ITR 497. I find that in the cited case the penalty had been deleted on the ground that the transaction was between father and son for meeting requirement of depositing the marging money in the bank account for buying the vehicle for personal use and that it was neither the loan nor the deposit. However, in the present case the assessee has not shown any exigency for receipt of the amount from father and the said deposit is not for personal use and the assessee is under obligation to repay the amount. Therefore the said decision is not applicable to the case of assessee.
Having considered facts and circumstances of the case I do not find any merit in contentions of assessee. The case laws cited by assessee are distinguishable on facts. There existed no reasonable cause for the said default and the penalty is therefore confirmed. The grounds of appeal is rejected.
7. For statistical purposes, the appeal of the assessee is to be treated as dismissed.”
4. Before us the counsel for the assessee reiterated the arguments taken before Ld. CIT(A). He submitted that it has been nowhere alleged that the transaction is not genuine. He further submitted that the correct amount received is Rs. 8,76,644/- and drew our attention to Page 7 of Paper-Book. Ld. Counsel for the assessee further drew our attention to Page 45 of Paper-Book (Shailesh Akbari case), wherein Rajkot ITAT has held that transaction between closely related persons such as father and son must fall outside the purview of section The Ld. Departmental Representative, in response relied on the order passed by Ld. CIT(A) and Ld. Assessing Officer.
5. We have heard the rival contentions and perusal the material on So far as the impugned amount received by the assessee from his father’s proprietary firm is concerned, we note that the Gujarat High Court in the case of Dr. Rajaram L. Akhani v ITO [2017] 88 taxmann.com 693 (Gujarat) has held that where assessee had accepted a sum of Rs. 2 lakhs from his son to meet urgent requirement of depositing margin money in bank account for buying a vehicle for personal use, amount so received was neither a loan nor a deposit within meaning of section 269SS. The Delhi ITAT in the case of ACIT v Vardaan Fashion [2015] 60 taxmann.com 407 (Delhi – Trib.) held that acceptance of cash by husband from his wife cannot said to be taking of loan or advance in strict sense of section 269SS and therefore, no penalty under section 271D could be levied. In the case of Smt. Kusum Dhamani [2014] 47 taxmann.com 143 (Jaipur – Trib.), ITAT held that where assessee running a proprietorship concern, took cash loans from her husband carrying on another proprietorship business on account of business exigencies for making payments to labourers and lenders, there being no violation of provisions of section 269SS, impugned penalty order passed under section 271D was to be set aside. In the case of ITO v. Tarlochan Singh [2003] 128 taxman 20 (Asr.) (Mag.) penalty under section 271D was levied on ground that assessee had received loan of Rs. 70,000 in cash from his wife for investment in acquisition of immovable properties. Wife had given money to husband for prosperity of family only and there was no evidence that amount in question was taken for commercial use. Though revenue considered it loan, but there was no material on record to show that assessee had returned amount received from wife or paid interest thereupon. Assessee was also under bona fide belief that amount in question did not require to be received otherwise than by an account payee cheque or account payee bank draft. Whether considering above and also keeping in view that intention of Legislature was never to punish a party involved in genuine transactions, it had to be held that there was reasonable cause and no penalty was leviable. In the case of Smt. Meera Devi Kumawat v. JCIT [2021] 132 taxmann.com 21 (Jaipur – Trib.) where assessee received substantial amount of cash from her husband for purchase of plot and construction of residential house on it, since repayment of said amount was not mandatory and there was no element of interest, and pooling of family funds was done by assessee due to family requirement and as she did not have any known sources of funds, no penalty could be levied under section 271D for violation of section 269SS. The jurisdictional ITAT Rajkot Bench in the case of Shailesh Akbari v. Addl. CIT in ITA No. 666/Rjt/2014 has held that transaction between closely related persons such as father and son must fall outside the purview of section 269SS. In view of the decision of the jurisdictional Gujarat High Court in the case of Dr. Rajaram L. Akhani supra and other case laws cited above, as applicable to the facts of the case, in our view so far as receipt of ₹ 12,49,526/- by the assessee from his father’s proprietary firm is concerned, the provisions of section 269SS do not stand attracted. There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his father and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with or without interest) and therefore in view of the judicial precedents cited above, in our view provisions of section 269SS cannot be invoked so far as the amount of ₹ 12,49,526/- is concerned.
6. In the result, the assessee’s appeal is allowed.
Order pronounced in the open court on 29-06-2022
