Case Law Details
Nabil Javed Vs ITO (ITAT Delhi)
Conclusion: Provisions of section 269SS was not applicable to the loan transaction between husband and wife because there was no relationship of the depositor or a creditor and no interest of parties were involved.
Held: AO did not appreciate the fact that the provisions of section 269SS were not applicable on the loan transaction between husband and wife and levied penalty u/s. 271D on the impugned transaction. In the case of Tuhinara Begum Hoogly Vs. JCIT Range 2, Hoogly ITA No. 2256/Kol/2014 dated 04.10.2017 it was noted wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. This transaction was not for commercial use. The amount directly received by the husband. i.e assessee. was to the extent of Rs. 17.000 only and the balance amount of Rs. 26.000 was given by payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no ‘interest’ element was involved and there was no promise to return the amount with or without interest. Therefore, section 269SS was not applicable to the loan transaction between husband and wife because there was no relationship of the depositor or a creditor as no interest was involved and penalty should be deleted as assessee had a reasonable cause under section 273B. Following the same, penalty levied u/s 271D in the present case was deleted.
FULL TEXT OF THE ITAT JUDGEMENT
The Assessee has filed these two Appeals against the respective Orders of the Ld. CIT(A)-20, New Delhi pertaining to assessment year 2013-14.
2. The grounds raised in Appeal No. 3797/De/2018 (AY 2013-14) read as under:-
1. That the Id. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while enhancing addition of Rs.3,00,000/- made by the AO to Rs.58,00,000/- under section 68 of the Income Tax Act, 1961 which is beyond the powers of Ld. Commissioner of Income Tax (Appeals). As such, the addition of Rs.55,00,000/- is bad in law and may please be deleted.
2. That the ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while making addition of Rs.55,00,000/- under section 68 of the Income Tax Act, 1961 without appreciating that the provisions of section 68 of the Income Tax Act, 1961 are not applicable to the facts of the case. As such, the addition of Rs.55,00,000/- is bad in law and may please be deleted.
3. That the ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while making addition of Rs.55,00,000/- under section 68 of the Income Tax Act, 1961 without appreciating the facts of the case and submissions of assessee. As such, the addition of Rs.55,00,000/- is bad in law and may please be deleted.
4. That the ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while confirming addition of Rs.3,00,000/- under section 68 of the Income Tax Act, 1961 originally made by ld. AO under section 28(iv) of the Income Tax Act, 1961 without appreciating the facts of the case and submissions made by the assessee. As such, the addition of Rs.3,00,000/- is bad in law and may please be deleted.
5. The assessee craves to add, alter, delete, modify or withdraw any of the above grounds at the time of hearing.
3. The brief facts of the case are that assessee filed his e-return of income on 25.9.2013 declaring net taxable income of Rs. 5,82,679/-. The return was processed u/s. 143(1) of the Income Tax Act, 1961 (in short “Act”). Later the case was selected for scrutiny through CASS and notice u/s. 143(2) of the Act dated 3.9.2014 was issued and subsequently notice u/s. 142(1) of the Act alongwith questionnaire also issued. In response thereto, the assessee’s AR attended the proceedings from time to time and filed necessary details. The assessee is engaged in the business of trading of metal and sale and purchase of live stock. The assessee is engaged in the business of trading of metal and sale and purchase of live stock. The AO observed that assessee has shown loan of Rs. 88,00,000/- from his wife, Mrs. Shahina Quereshi, during the year under consideration. Out of Rs. 88,00,000/-, the assessee explained that Rs. 63,000/-was received from Mrs. Shahina Qureshi directly and Rs. 22,00,000/-received by the assessee as advance against sale of his proty and Rs. 3,00,000/- was wrongly considered in the name of his wife rather the same was transferred by assessee’s own account and hence, should be considered as capital not unsecured loan. The AO did not accept the explanation filed by the assessee in respect of Rs. 3 lacs and made the alleged addition of Rs. 3 lacs by stating that no satisfactory explanation was filed by the assessee. Before the Ld. CIT(A), the assessee appealed and filed bank statement in his account and bank account of Mrs. Shahina Qureshi, to show that the amount of Rs. 3 lacs was transferred from assessee’s own account not from his wife account and plea that the addition of Rs. 3 lacs should be deleted. Ld. CIT(A) observed from the bank statement of Mrs. Shahina Qureshi’s account, that the amount of Rs. 58,00,000/-was transferred from the bank account of Paramount Trading Co. (the proprietorship concern of the assessee) to Mrs. Shahina Qureshi’s and the same was not considered in the books of the assessee. During the year consideration, the payments of Rs. 58,00,000/- were paid by M/s Paramount Trading Co. to Mrs. Shahina Qureshi for the payment made to Shadiq Qureshi. In respect of the same, the assessee filed before the Ld. CIT(A) that the said payment of Rs. 58 lacs made to Mrs. Shahina Qureshi was kept in the separate account in the name of Mrs. Shaheena Nabeel to distinguish the same from the loan account of Mrs. Shahina Qureshi as both transactions were of different nature. But Ld. CIT(A) did not accept the contention of the assessee and made the alleged addition of Rs. 58 lacs as unexplained cash u/s. 68 of the Act. Against the action of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
4. Ld. AR for the assessee submitted that Ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while enhancing addition of Rs.3,00,000/- made by the AO to Rs.58,00,000/- under section 68 of the Income Tax Act, 1961 which is beyond the powers of Ld. Commissioner of Income Tax (Appeals). As such, the addition of Rs.55,00,000/- is bad in law and may please be deleted. He further submitted that Ld. CIT(A) has wrongly made the addition of Rs.55,00,000/- under section 68 of the Income Tax Act, 1961. As such, the addition of Rs.55,00,000/- is bad in law and may please be deleted. It was further submitted that Ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while making addition of Rs.55,00,000/- under section 68 of the Income Tax Act, 1961 without appreciating the facts of the case and submissions of assessee. As such, the addition of Rs.55,00,000/-is bad in law and may please be deleted. It was further submitted that Ld. CIT(A) while confirming addition of Rs.3,00,000/- under section 68 of the Income Tax Act, 1961 originally made by AO under section 28(iv) of the Income Tax Act, 1961 without appreciating the facts of the case and submissions made by the assessee. As such, the addition of Rs.3,00,000/- is bad in law and may please be deleted. In view of above, he requested to delete the additions in dispute and allow the appeal of the assessee.
5. On the contrary, Ld. DR relied upon the orders of the authorities below and stated that Ld. CIT(A) has rightly enhanced the addition which does not need any interference on our part.
6. I have heard both the parties and perused the records. I note that the amount of Rs. 58 lacs was transferred by the assessee through banking channel only. The account ledger of the Axis Bank of M/s Paramount Trading Co. was also filed by the assessee before the Ld. CIT(A) to explain that the amount was transferred out of the explained sources of the assessee. However, there is no incidence of pre cash deposit before transfer, neither any such incidence was discussed by the Ld. CIT(A). We also note that the provisions of section 68 are applicable in case where the credit was received by the assessee. However, in the present case, the position is entirely different, as the amount of Rs. 58 lacs was not received by the assessee rather the amount was paid by the assessee to his wife out of his explained sources. Hence, the addition in dispute made in the hands of the assessee should not be taxed and therefore, the same is hereby deleted and accordingly, the appeal of the assessee stands allowed.
7. Now I deal with ITA No. 3798/Del/2018 (AY 2013-14) relating to penalty made u/s 271D of the Act wherein the following grounds have been raised.
1. That the Ld. CIT(A) has erred in law and facts of the case while confirming penalty u/s. 271D of the IT Act, 1961 of Rs. 22 lacs without appreciating the facts of the case and submissions of the assessee. As such, penalty of Rs. 22 lacs is bad in law and may please be deleted.
2. That the Ld. CIT(A) has erred in law and facts of the case while confirming penalty u/s. 271D of the Act of Rs. 22 lacs without appreciating that the provisions of Section 269SS of the I.T. Act, 1961 are not applicable in the case of assessee. As such, penalty of Rs. 22 lacs is bad in law and may please be deleted.
3. The assessee craves to add, alter, delete, modify or withdraw any of the above grounds at the time of hearing.
8. In this case the AO has observed that assessee has shown loan of Rs. 88,00,000/- from his wife, Mrs. Shahina Quereshi, during the year under consideration. Out of Rs. 88,00,000/-, the assessee explained that Rs. 63,000/- was received from Mrs. Shahina Qureshi directly and Rs. 22,00,000/- received by the assessee as advance against sale of his proty and Rs. 3,00,000/- was wrongly considered in the name of his wife rather the same was transferred by assessee’s own account and hence, should be considered as capital not unsecured loan. In respect of Rs. 22,00,000/-, received by the assessee as advance against sale of his property, the AO levied the penalty u/s. 271D of the Act and Ld. CIT(A) has also confirmed the penalty levied by the AO on the ground that the impugned amount is in the nature of loan. Against the Ld. CIT(A)’s action, the Assessee is in appeal before the Tribunal.
9. Ld. AR for the assessee submitted that Ld. CIT(A) has wrongly confirmed the penalty of Rs. 22 lacs u/s. 271D of the Act without appreciating that the provisions of Section 269SS of the Act are not applicable in the case of the assessee. As such, penalty of Rs. 22 lacs is bad in law and may be deleted. He further submitted that the issue in dispute is squarely covered by the decision of the ITAT, ‘G’ Bench, New Delhi in the case of Sunil Kumar Sood vs. JCIT passed in ITA No. 1831/Del/2016 (AY 2007-08) vide order dated 20.6.2018.
10. On the contrary, Ld. DR relied upon the order of the Authorities below.
11. I have heard both the parties and perused the records, especially the impugned order as well as the ITAT, ‘G’ Bench decision dated 20.6.2018 in the case of Sunil Kumar Sood vs. JCIT (Supra). I note that assessee received advance money of Rs. 22 lacs from the four parties for the property no. 3498, Gali Sangrasha, Bara Hindu Rao, Delhi – 6. Due to some reasons, the deal was not materialized and the purchaser parties agreed to take another property which is in the name of assessee’s wife. The said amount was transferred to his wife’s account i.e., Mrs. Shahina Qureshi. I further note that there is no denial on the part of the AO that the amount of Rs. 22 lacs was received by the assessee from his wife, Mrs. Shahina Qureshi. However, while levying the penalty u/s. 271D of the Act, the AO did not appreciate the fact that the provisions of section 269SS of the Act are not applicable on the loan transaction between husband and wife. Thus, the question of levying of penalty u/s. 271D of the Act does not arise on the impugned transaction, hence, I delete the penalty in dispute and allow the appeal of the assessee. My aforesaid view is fortified by the ITAT, ‘G’ Bench, New Delhi in the case of Sunil Kumar Sood vs. JCIT passed in ITA No. 1831/Del/2016 (AY 2007-08) vide order dated 20.6.2018 wherein it has been held as under:-
“9. We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the sides. We find the assessment order u/s 143(3) of the Act in the instant case was passed on 09.12.2009. Penalty notice u/s 271D was issued to the assessee on 28.08.2014. Thus, there is gap of more than four and half years from the date of completion of assessment order and initiation of penalty proceedings. Although there is no time limit prescribed for initiation of penalty proceedings under the said provisions, however the courts are invariably holding that such proceedings should be initiated within a reasonable time. Since in the instant case such penalty proceedings have been initiated after a gap of more than four and half years from the completion of assessment proceedings u/s 143(3) of the Act, therefore, initiation of penalty proceedings, in our opinion, is barred by limitation.
9.1 Even otherwise also, the transaction is between husband and wife. Various benches of the Tribunal are holding that transaction of loan between husband and wife does not attract the provisions of section 269SS of the Act. The Kolkata Bench of the Tribunal in the case of Tuhinara Begum Hoogly Vs. JCIT Range 2, Hoogly ITA No. 2256/Kol/2014 order dated 04.10.2017 under somewhat similar circumstances cancelled the penalty levied u/s 271D of the Act by observing as under:
“6. We have heard the rival submissions and we are of the view that the facts of the present case and the facts of the case referred to ITAT Kolkata in the case of Dr.B.G.Panda are identical . The Tribunal in the aforesaid case held as follows :-
“Section 269SS is applicable to the deposits or loan. It is true that both in the case of a loan and in the case of a deposit, there is a relationship of debtor or creditor between the party giving money and the party receiving money. In the case of deposit. the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money and the benefit normally being the earning of interest from the party who customarily accepts deposit. In the case of loan it is the borrower at whose instance and for whose needs the money is advanced. The borrowing is primarily for the benefit of a borrower although the person who lends the money may also stand to gain thereby earning interest on the money lent. In the instant case, this condition was not applicable because there was no relationship of the depositor or a creditor as no interest ITA N0. 2256/Kol/2014-Tuhinara Begum A.Y.2010-11 3 was involved. This was neither a loan nor a deposit. At the same time. the words ‘any other person’ are obviously a reference to the depositor as per the intention of the Legislature. The communication/ transaction between the husband and wife are protected from the legislation as long as they are not for commercial use. Otherwise, there would be a powerful tendency to disturb the peace of families. to promote domestic broils, and to weaken or to destroy the feeling of mutual confidence which is the most enduring solace of married life.
In the instant case, the wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. This transaction was not for commercial use. The amount directly received by the husband. i.e .. the assessee. was to the extent of Rs. 17.000 only and the balance amount of Rs. 26.000 was given by payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no ‘interest’ element was involved and there was no promise to return the amount with or without interest. It was clear that the money given by the wife was a joint venture of the family.
Taking into consideration overall facts and circumstances of the case, it could be said that the aforesaid piece of legislation was not applicable in the instant case. By taking the liberal view and applying the golden rule of interpretation, the assessee had a reasonable cause within the meaning of section 27 3B. Therefore. the penalty should be deleted.
7. The ratio laid down in the aforesaid decision is clearly applicable to the facts and circumstances of the present case as the transaction in the present case was also between husband and wife. As laid down in the aforesaid decision, penalty in the facts and circumstances of the case ought not to have levied u/s 271D of the Act and penalty levied u/s 271D of the Act is directed to be cancelled and the appeal of the assessee is allowed.
8. In the result the appeal of the assessee is allowed.”
10. Since in the present case also the assessee had taken the loan from his wife for the purchase of house which is for the benefit of the whole family, therefore, following the decision cited [supra], we hold that penalty levied u/s 271D of the Act in the instant case is not justified. We, therefore, set aside the order of the ld. CIT(A) and direct the Assessing Officer to cancel the penalty so levied. Grounds raised by the assessee are allowed.”
12. In the result, both the Assessee appeals are allowed.
Order pronounced on 27-11-2018.
