Case Law Details
Mani Sundaram Vs ITO (ITAT Chennai)
No section 271D penalty on cash loan from close relatives due to reasonable cause which subsequently treated as gifts
The case of Mani Sundaram Vs ITO (ITAT Chennai) revolves around the imposition of penalty under section 271D of the Income Tax Act, 1961, for availing cash loans from close relatives. The appellant, Mani Sundaram, proprietor of M/s. Surabi PVC Pipes, received loans from family members, which were subsequently treated as gifts.
The Assessing Officer initiated penalty proceedings under section 271D of the Act due to the receipt of cash loans exceeding ₹20,000 in contravention of section 269SS. Despite explanations from the appellant that the loans were treated as gifts and credited to his capital account, the penalty was levied and confirmed by the ld. CIT(A).
However, upon further scrutiny, the Tribunal found merit in the appellant’s explanations. The loans were received from close relatives – wife, mother, and father-in-law – and were treated as gifts, supported by confirmation letters. Additionally, the appellant demonstrated a reasonable cause for receiving cash towards the purchase of machinery.
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