MANISH NARENDRABHAI GANDHI,RAJKOT vs. ADDL.CIT, RANGE- 1(1),RAJKOT, RAJKOT

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ITA 597/RJT/2026Status: DisposedITAT Rajkot12 June 2026AY 2015-165 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that transactions between close family members do not constitute loans or deposits for the purpose of Sections 269SS and 269T. Therefore, penalties under Sections 271D and 271E are not sustainable.

What were the facts?

The assessee received cash amounts exceeding ₹20,000 from close family members and also made cash repayments to them. Penalties were levied under Section 271D for accepting cash and Section 271E for making cash repayments.

What were the issues?

Whether cash transactions between close family members are considered loans or deposits attracting penalties under Sections 271D and 271E.

Which sections of the Income-tax Act were involved?

Section 269SS,Section 269T,Section 271D,Section 271E,Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

Before: Dr. Arjun Lal Saini & Shri Sonjoy Sarma

For Appellant: Shri Gaurang Khakhkhar, Ld. AR
For Respondent: Shri Anadi Dixit, Ld. Sr. DR
Hearing: 10/06/2026

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member And Shri Sonjoy Sarma, Judicial Member

आयकर अपील सं./ITA No. 596 & 597/RJT/2026 [ �नधा�रण वष�/Assessment Year: 2015-16 ] Manish Narendrabhai Gandhi Addl. CIT, Range-1(1), Rajkot 10, Amba Ashish, Madhuvan Duplex, Vs. Aayakar Bhavan, Race Course Giriraj Nagar Main Road, 150 Feet Road, Rajkot – 360001 Ring Road, Nr Raiya Chowkadi, Gujarat Rajkot – 360005, Gujarat �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ADMPG8264H (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri Gaurang Khakhkhar, Ld. AR Respondent by : Shri Anadi Dixit, Ld. Sr. DR Date of Hearing : 10/06/2026 12/06/2026 Date of Pronouncement :

ORDER Per, Shri Sonjoy Sarma, JM: These two appeals filed by the assessee arise out of separate orders of the Learned CIT(A), both dated 23.02.2026, for Assessment Year 2015-16. ITA No. 596/Rjt/2026 relates to penalty imposed under section 271D of the Income-tax Act, 1961, whereas ITA No. 597/Rjt/2026 relates to penalty imposed under section 271E of the Act. Since the issues involved in both the appeals are interconnected, arise out of the same assessment year, and pertain to the same assessee, both appeals were heard together and are being disposed of by this consolidated order.

ITA No. 596 & 597/Rjt/2026 [ AY 2015-16 ] Manish N. Gandhi v. ADIT

2.

For the sake of convenience, we first take up ITA No. 596/Rjt/2026. The findings recorded therein shall apply mutatis mutandis to ITA No. 597/Rjt/2026.

ITA No. 596/Rjt/2026 3. The brief facts of the case are that penalty proceedings under section 271D of the Act were initiated against the assessee on the allegation that the assessee had violated the provisions of section 269SS by accepting cash amounts exceeding ₹20,000. During the course of penalty proceedings, it was found that the assessee had accepted aggregate cash receipts amounting to ₹10,08,000 from the following persons:

Name of Party Amount (₹) Sunil Narendrabhai Gandhi (HUF) 2,50,000 Maltiben Manishbhai Gandhi 2,88,000 Illakshi Sunil Gandhi 2,20,000 Manisha N Gandhi (HUF) 2,50,000 Total 10,08,000

4.

Accordingly, a notice under section 271D read with section 274 of the Act was issued calling upon the assessee to explain why penalty should not be levied. In response to the show-cause notice, the assessee submitted that all the amounts were received from close family members and relatives for business purposes and, therefore, the transactions did not partake the character of loans or deposits contemplated under section 269SS of the Act. However, the Additional Commissioner of Income-tax did not accept the explanation furnished by the assessee and imposed a penalty of ₹10,08,000 under section 271D of the Act, being equal to the amount received in cash. The learned CIT(A) confirmed the penalty.

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ITA No. 596 & 597/Rjt/2026 [ AY 2015-16 ] Manish N. Gandhi v. ADIT 5. Before us, the learned AR submitted that all the transactions were entered into amongst close relatives of the assessee. It was submitted that Sunil Narendrabhai Gandhi (HUF) belongs to the assessee’s brother, Maltiben Manishbhai Gandhi is the wife of the assessee, Illakshi Sunil Gandhi is the assessee’s brother’s wife, and Manisha N Gandhi (HUF) is the assessee’s own HUF. Therefore, the transactions were purely family transactions and could not be treated as loans or deposits within the meaning of section 269SS. The Ld. AR further relied upon the judgment of the Hon’ble Gujarat High Court in the case of Dr. Rajaram L. Akhani vs. ITO [(2017) 395 ITR 497 (Guj.)], wherein it was held that transactions between close family members do not amount to loans or deposits so as to attract the provisions of sections 269SS and 269T and consequently no penalty under sections 271D and 271E is leviable.

6.

On the other hand, the Ld. DR relied upon the orders of the authorities below.

7.

We have heard the rival submissions and perused the material available on record. We find that the entire amount of ₹10,08,000 was received from close family members and related entities. The relationship of the parties with the assessee has not been disputed by the Revenue Authorities. We further find that the issue is squarely covered by the judgment of the Hon’ble Gujarat High Court in the case of Dr. Rajaram L. Akhani vs. ITO (supra), wherein it was held that transactions between close family members cannot be regarded as loans or deposits for the purpose of sections 269SS and 269T of the Act. We, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court, we hold that the penalty imposed under section 271D of the Act is not sustainable. Accordingly, we set aside

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ITA No. 596 & 597/Rjt/2026 [ AY 2015-16 ] Manish N. Gandhi v. ADIT the order of the learned CIT(A) and direct the Assessing Officer to delete the penalty of ₹10,08,000.

8.

The facts involved in ITA No. 597/Rjt/2026 are substantially identical except that the penalty has been imposed under section 271E of the Act for alleged violation of section 269T. In this case the assessee had repaid cash amounts aggregating to ₹4,70,000 as under:

Name of Party Amount (₹) Sunil Narendra Bhai Gandhi (HUF) 2,50,000 Illakshi Sunil Gandhi 2,20,000 Total 4,70,000

9.

Where, the Ld. Additional Commissioner of Income-tax imposed a penalty of ₹4,70,000 under section 271E of the Act, being equal to the amount repaid in cash. The learned CIT(A) sustained the said penalty.

10.

We, after considering the rival submissions, we find that the repayments were also made to close relatives of the assessee. Therefore, the issue is fully covered by our findings recorded in ITA No. 596/Rjt/2026 and by the judgment of the Hon’ble Jurisdictional Gujarat High Court in Dr. Rajaram L. Akhani vs. ITO (supra). Accordingly, the penalty imposed under section 271E of the Act is also liable to be deleted. We further note that the assessment for Assessment Year 2015-16 was completed under section 143(3) of the Act vide order dated 22.12.2017 accepting the returned income of ₹2,70,000 without making any addition whatsoever. No adverse finding regarding the impugned transactions was recorded in the assessment order. Thus, on the facts of the present case, the penalties imposed under sections 271D and 271E cannot be sustained.

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ITA No. 596 & 597/Rjt/2026 [ AY 2015-16 ] Manish N. Gandhi v. ADIT

11.

Accordingly, both the penalties of ₹10,08,000 and ₹4,70,000 imposed under sections 271D and 271E of the Act are directed to be deleted

12.

In the result, both the appeals of the assessee are allowed.

Order is pronounced in the open Court on 12/06/2026.

Sd/- Sd/- [ Dr. Arjun Lal Saini ] [ Shri Sonjoy Sarma ] लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member राजकोट/Rajkot िदनांक/ Date: 12/06/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Rajkot 6. Guard File By order

Sr. Private Secretary ITAT, Rajkot

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