GOURANG CHANDRA NAYAK,BHUBANESWAR vs. JCIT, RANGE-3, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK ‘SMC’ BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

ITA No.369/CTK/2018 Assessment Year : 2013-2014

Gourang Chandra Nayak, Plot Vs. JCIT, Range-3, Bhubaneswar. No.7, Adharsh Vihar, Lane-2, Phase-1, Bhubaneswar. PAN/GIR No.AAHPN 7112 M (Appellant) .. ( Respondent)

Assessee by : Shri N.R.Biswal, AR Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 24 /07/ 2019 Date of Pronouncement : 23 /09/ 2019

O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order of the

CIT(A)-2, Bhubaneswar dated 12.9.2018 for the assessment year 2013-14

P a g e 1 | 16 mentioned that the said case laws are not applicable as the facts of the cases are different as decided by the JCIT. Therefore The Ld. CIT(A) omitted to follow the question of law decided in the said judgement Therefore imposition of penalty of Rs. 14,00,000/- is illegal and should be deleted in full.

P a g e 2 | 16 purpose of penalty, the AO is JCIT. Therefore, notice of demand is not a valid notice of demand. Therefore, imposition of penalty is null and void without service of the notice of demand.”

pension income from Bank of India, Bhubaneswar. During the course of

assessment proceedings, the Assessing Officer noticed that the assessee

has accepted cash amounts totaling to Rs.14,00,000/- in contravention of

the provisions of section 269SS of the Act as under:

Sl.No. Name of the person Amount Alleged reasons

In response to the Assessing Officer’s requisition as to why penalty

u/s.271D of the Act should not be imposed, ld A.R. of the assessee

submitted that neither any of the transactions were doubtful nor any

transaction was made to evade tax and such no penalty is leviable. It was

also submitted that the receipts of cash by the assessee were neither loan

P a g e 3 | 16 or deposit. Ld A.R. also explained the circumstances under which the sums

received by different persons. However, the Assessing Officer did not

accept the explanation of the assessee and observed that the assessee has

received the sums in contravention of section 269SS of the Act and,

accordingly, levied penalty of Rs.14,00,000/- u/s.271D of the Act.

Act.

inter alia, penalty order, CIT(A)’s order, written submissions of the assessee

and other documents contained in paper book spread over 235 pages.

passing order u/s.271D of the Act had considered seven transactions as

has been mentioned at page 3 of the CIT(A) order Ld A.R. regarding

transaction of Rs.3,00,000/- mentioned at sl. No.7,submitted that this

amount was returned by the father of the assessee Shri Nrusingh Charan

Nayak. This amount was earlier given by the assessee to his father by

withdrawing the same from his own bank account on 27.9.2012 for

purchase of land for the family but due to cancellation of land deal, the

father returned the same to the assessee. Ld A.R. drew our attention to

page 65 of paper book, wherein, amount of Rs.3,03,000/- has been

withdrawn on 7.9.2012 from assessee’s bank account with Bank of India.

Ld A.R. further submitted that the amount returned by the father of the

P a g e 4 | 16 assessee cannot be treated as any loan or deposit or specified sum in

contravention of provisions of section 269SS of the Act.

Rs.50,000/- from his brother-in-law (sister husband) Shri Khirod Kumar

Swain, Rs.3,50,000/- from his (nephew) Shri Jyoti Prakash Nayak,

Rs.,1,20,000/- from Arjeet Mohapatra,( son-in-law) and Rs.80,000/- from

Nihar Ranjan Rout (brother in-law -wife brother) and all these four amounts

were received due to medical emergency as the assessee is the heart

patient having gone open heart surgery. Ld A.R. submitted that the

assessee has submitted confirmation, PAN nos from all these four persons

before the authorities below but the same were not appreciated and

accepted without any justified reasons and basis.

from Manoj Kumar Biswal and Rs.3,00,000/- from Shri Sasanka Sekhar

Sahu for establishment of school, which was deposited to the bank account

of the assessee. Elaborating the facts of his statement, ld A.R. submitted

that from agreement of Association of Persons (AOP) placed at pages 63 &

64 of the assessee’s paper book dated 1.4.2012, it is clear that four persons

entered into an agreement creating an AOP for the purpose of running a

school in the slum area for the education of children of the downtrodden

people. Ld A.R. further submitted that as it was agreed between the

persons constituting an AOP that the bank account will be opened in any

Nationalized Bank in the name of the school. Meanwhile, until opening a

P a g e 5 | 16 bank account in the name of the school, the amount of contribution from the

persons of AOP will be kept with Shri G.C.Nayak, i.e. assessee and the

same was deposited to his bank account. Ld counsel strenuously

contended that in view of factual position supported by documentary

evidence, these amounts received by the assessee on behalf of AOP i.e.

Manoj Kumar Biswal, Sasanka Sekhar Sahu cannot be treated as loan or

deposit or specified sum in contravention of provisions of section 269SS of

the Act.

the Act, it is the duty of the AO to establish that the assessee has taken or

accepted any loan or deposit or specified sum in contravention of the

provisions of section 269SS of the Act but in the present case all the

impugned transactions are neither loan or deposit nor specified sum in

contravention of section 269SS of the Act. Therefore, the impugned penalty

order and the first appellate order is not sustainable.

the case of Nikhil Bankik Mazumdar VS JCIT in ITA Nos.453 &

454/Kol/2016 for assessment year 2020-11 order dated 10.1.2018, ld A.R.

submitted that in the present case, the assessee is not a business man or

entrepreneur but the assessee is an individual derives pension income from

Bank of India and he is not indulged any kind of commercial or business

activity. Ld A.R. further submitted that based on the facts and

P a g e 6 | 16 circumstances of the present case, all seven transactions do not fall within

the ambit of section 269SS of the Act.

case of Anant Himatsinghka vs ACIT dated 25.11.2011 in ITA Nos.331 &

332/Kol/2010 and another order in the case of Manisha Prakash Amin vs

JCIT dated 24.5.2011 for A.Y. 2006-07 and submitted that the loans from

relatives for meeting unprecedented medical emergency expenses are in

the nature of financial help within the family members and medical

emergency is a reasonable cause falling under ambit of section 273B of the

Act and thus, the immunity from penalty u/s.271D of the Act should be

allowed to the assessee on humanitarian ground. Ld D.R,. further

submitted that transaction between the assessee and relatives are neither

loan nor deposit and purely a family support system out of love and affection

to help each other in the need of hours of medical help, educational help

and on other occasions to strengthen the moral of family.

case of Jagmohan Sharma vs JCITin ITA Nos.552 & 553/Kol/2015 for A.Y.

2005-06 order dated 10.1.2018, ld A.R. submitted that the transaction

between the assessee and his brother-in-law , nephew, sister-in-law and

brother in law (wife brother) in the event of medical emergency do not fall

within the definition of loan or advance. Therefore, penalty u/s.271D of the

Act cannot be levied on the assessee.

P a g e 7 | 16

case of CIT vs. Sunil Kumar Goel in ITA No.777 of 2008 and ITA No.778 of

2008 order dated 3.3.2009, ld A.R. submitted that where there is reasonable

cause shown by the assessee and no prejudice has been caused to the

revenue and the transactions are between the family members due to

medical emergency and exigency, then such transaction falls within the

section 273B of the Act and thus, immunity of levy of penalty u/s.271D

should be allowed to the assessee.

the case of Ridhi Sidhi Infraprojects Pvt Ltd vs JCIT in ITA No.49/Ju/2013

for A.Y. 2009-2010 order dated 18.3.2013, ld A.R. submitted that when the

assessee has taken cash amount under bonafide belief that a transaction

with its AOP is outside purview of penalty provisions being a transaction

between two sister concerns and if it is properly explained, then penalty

u/s.271D of the Act cannot be imposed on such transaction. Ld A.R.

submitted that the rational behind the provisions of section 269SS has been

explained by the CBDT vide circular No.387 dated 7.7.1984, wherein, it has

been mentioned that unaccounted cash found during the course of search

carried by the department is often explained by tax payers as representing

loans taken from or deposits made and unaccounted income is thus brought

in the books of account and provisions of section 269SS of the Act was

brought into the Statute with a view to deal with such situations, where tax

payers also obtain confirmatory letters from such persons in support of their

P a g e 8 | 16 explanations, which enables them to explain away unaccounted cash or

unaccounted deposits. Ld A.R. submitted that in the present case cash was

neither seized during the course of search nor it was unaccounted,

therefore, the impugned amounts and transaction do not attract penalty

u/s.271D of the Act as immunity available to the assessee u/s.273B of the

Act should be provided to the assessee.

CIT(A) order and submitted that the onus of proving that he has not

contravened the provisions of section 269SS of the Act lies on the

assessee, which has not been discharged by the assessee in the present

case. Ld D.R. further submitted that the assessee has not discharged onus

and showing any reasonable cause of which he had received cash amount

from his father, relatives and members of AOP, therefore, penalty u/s.271D

of the Act was rightly levied on the assessee for contravention of section

269SS of the Act.

identity, creditworthiness of the lenders and genuineness of the transaction

and u/s.271D of the Act, penalty will be levied for the loan or deposit as

accepted in cash without reasonable cause notwithstanding that the

transaction of loan/deposit is genuine.

loan/deposit is genuine and, therefore, penalty u/s.271D of the Act should

P a g e 9 | 16 not be levied, then the provisions of section 269SS r.w.s 271D of the Act

would become redundant and unworkable. Therefore, keeping in view the

legislative intent, the penalty in the present case should be confirmed. Ld

D.R. submitted that unless the appellant-assessee gives a reasonable

cause in accepting the cash loan, penalty u/s.271D is imposable, thus,

orders of lower authorities may kindly be confirmed.

returned by the father of the assessee, which was given by the assessee to

his father for purchase of land and on the event of cancellation of land deal,

same was returned to the assessee and this explanation also gets support

from the copy of bank account of the assessee placed at page 65 of

assessee’s paper book. Ld A.R. submitted that undisputedly, the assessee

is a heart patient who undertook open heart surgery and the amount

received from his brother -in-law, Khirod Kumar Swain, nephew, Jyoti

Prakash Nayak, son-in-law, Shri Arjeet Mohapatra and brother in law, Nihar

Ranjan Rout under medical emergency cannot be treated as loan or

advance in contravention of section 269SS of the Act. He submitted that

medical emergency is itself a reasonable cause from receiving cash from

the relatives and family members out of love and affection as a support

during tough time and due to this bonafide and reasonable cause, immunity

u/s.273B of the Act should be granted to the assessee on these four

transactions. Ld A.R, further submitted that the cash received by the

assessee from the members of AOP in which the assessee was also a

P a g e 10 | 16 member only for the purpose of keeping the same in the bank account till

the account is opened in the name of the school, therefore, the same cannot

be treated as loan or advance which attracts penalty u/s.271D of the Act.

Ld A.R. submitted that this fact also gets support from the documentary

evidence from the copy of agreement placed at paper book at pages 63 &

64 specially clause 5 pertaining to opening of bank account. Ld A.R.

submitted that the assessee is an old aged heart patient and never indulged

in any commercial business activity, therefore, penalty imposed by the AO

and confirmed by the CIT(A) u./s 271D of the Act is not justified, reasonable

and sustainable. Therefore, same be deleted.

from first sentence of assessment order, that the assessee is an individual

derives pension income from Bank of India, Zonal Office, Bhubaneswar.

This is not a case of the Assessing officer that the assessee is engaged in

the business activity or entrepreneur, who received the impugned amounts

under commercial transaction in contravention of section 269SS of the Act.

Now I proceed to consider each transaction one by one.

the assessee from his father, Shri N.C.Nayak. Keeping in view the copy of

bank account placed at page 65 of paper book, I observe that the amount of

Rs.3,03,000/- has been withdrawn on 27.9.2012 by the assessee and the

assessee has deposited Rs.3 lakhs on 21.9.2012 in his bank account

No.511342710000152. I am satisfied with the explanation of the assessee

P a g e 11 | 16 that the assessee gave this amount to his father after withdrawing the same

from his bank account towards purchase of land and due to cancellation of

land deal, it was returned to the assessee by his father and same was

deposited by the assessee to his bank account. I observe that as the land

deal was under process and for acquisition of land and the intention of the

assessee was to contribute and support his family. Therefore, on

cancellation of land deal, the amount was returned to the assessee and

such transaction cannot be tagged as loan or advance in contravention of

section 69SS of the Act. Hence, penalty u/s.271D cannot be imposed on

this count.

Shri Khirod Kumar Swain(brother-in-law -sister husband), Shri Jyoti Prakash

nayak(nephew), Shri Arjeet Mohapatra (son-in-law), Shri Nihar Ranjan Rout

(brother -in-law wife’s brother) for medical emergency. I am of the view that

undisputedly, the assessee is a senior citizen having heart ailment, who

also underwent open-heart surgery. The assessee submitted confirmations

from these relatives alongwith their address and PAN nos., wherein, it was

stated by them that they have the impugned amounts to the assessee for

his treatment under medical emergency, then such transaction cannot be

held as transaction of loan or advance.

a tax payer was not allowed to give false explanation for his unaccounted

money or if the tax payer made some false entries, he would not escape by

P a g e 12 | 16 giving false explanation for the same. It was noticed by the tax authorities

that during the search and seizure operation unaccounted money was found

and the taxpayer usually gave an explanation that he had borrowed or

received deposits from his relatives or friends and, consequently, it became

easy for the so called lender to manipulate his record to suit the plea of the

tax payer Section 269SS of the Act was introduced by the legislature in

order to curb this menace and do away making false entries in the books of

account and later give an explanation for the same. Consequently, section

269SS of the Act was inserted to the Act requiring that no person shall take

or accept any loan or deposit, if it exceeds more than Rs.20,000/- in cash.

Further Section 271D provides that a person takes or accepts any loan or

deposit in contravention of the provisions of section 269SS of the Act, he

would be liable to pay by way of penalty a sum equal to the amount of the

loan or deposit so taken or accepted. Consequently, Section 271D of the

Act caused undue hardship to the tax payers where they took a loan or

deposit in cash exceeding Rs.20,000/- even where there was a genuine or

bonafide transaction under exigency or emergency.. To meet such need,

the legislature accordingly introduced section 273B of the Act, which

provides that if there was genuine and bonafide transaction, the taxpayer

could not get a loan or deposit by an account payee cheque or demand

draft transaction, for some bonafide reason, the authority vested with the

power to impose penalty had a discretion not to levy the penalty.

P a g e 13 | 16

transactions of receiving cash from relatives and family members by the

assessee under medical emergency, then I am inclined to hold that this is a

simply transaction of transfer of money from one family members to another

family members to support him during medical emergency period and such

transaction cannot be treated as loan or advance and transaction falling

under the ambit of section 269SS of the Act attracting penalty u/s.271D of

the Act. I am of the considered view that the transaction between the

relatives of family members for giving support and help, is not loan or

deposit and it is only a financial support. The prepositions relied by the ld

A.R. also supports the case of the assessee. Therefore, the penalty

imposed by the AO and confirmed by the CIT(A) needs to be deleted and,

accordingly, I direct the AO to delete the penalty on this count on these four

transactions.

account of cash amount received from the members of AOP i.e. from Shri

Manoj Kumar Biswal, Shri Sasanka Sekhar Sahu is concerned, from the

copy of the agreement duly created by AOP dated 1.4.2012, as per sub-

clause (5) of the agreement, I clearly observe that there are four members

of AOP including the assessee Shri Gourang Chandra Nayak and Shri

Sasanka Sekhar Sahu alongwith Shri Manoj Kumar Biwal, wherein, it was

agreed between the members of AOP that the contributory amount will be

kept with the assessee until a bank account is opened in the name of

P a g e 14 | 16 school. Therefore, the said amount cannot be alleged as transaction of loan

or deposit in contravention of section 269SS of the Act. In this situation, the

assessee is only a trustee of money till bank account in the name of school

is opened and thus, such transaction cannot be named as transactions as

loan or advance in cash which attracts penalty \u./s.271D of the Act. In the

totality of facts and circumstances of the case and as reveals from the

agreement of AOP and this fact being consistently submitted by the

assessee before the departmental authorities, I am of the considered view

that the penalty on such transaction cannot be imposed u/s.271D of the Act

in contravention of section 269SS of the Act.

received by the assessee on seven transactions is genuine and not loan or

advance in contravention of section 269SS of the Act. Accordingly, I delete

the same and allow the grounds of appeal of the assessee.

Order pronounced on 23 /09/2019.

Sd/- (Chandra Mohan Garg) JUDICIAL MEMBER

Cuttack; Dated 23 /09/209 B.K.Parida, SPS

P a g e 15 | 16 Copy of the Order forwarded to : 1. The Appellant : Gourang Chandra Nayak,Plot No.7, Adharsh Vihar, Lane-2, Phase-1, Bhubaneswar.

By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 16 | 16