CIT JALANDHAR vs. HARPAL SINGH

ITR/25/1998HC Punjab & HaryanaPHHC01037991199808 December 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL3 pages
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What were the facts?

The assessee, a retired Wing Commander, received a loan of Rs. 1,00,000 in cash from his father on July 26, 1991, for the assessment year 1992-93. The Assessing Officer found this to be a violation of Section 269-SS of the Income Tax Act, 1961, and referred the matter for penalty. The Additional Commissioner of Income-tax imposed a penalty of Rs. 1,00,000 under Section 271D. The CIT(A) reduced this penalty to Rs. 25,000. The Income Tax Appellate Tribunal (ITAT) set aside the penalty order, leading to a reference to the High Court by the Commissioner of Income-tax.

What did the High Court hold?

The High Court agreed with the view taken by the Tribunal. It held that the Tribunal's finding that the assessee received the amount out of love and affection from his father for house construction, and not as a loan or deposit with an intention to recover, meant no case was made out for imposing a penalty. The Court reiterated the principle that if there is a reasonable explanation for a cash transaction, no penalty shall be imposable. It referred to Section 273B, which provides that no penalty shall be imposable if the assessee proves a reasonable cause for the failure. The Court also cited the Supreme Court's decision in Assistant Director of Inspection (Investigation) Vs. Kum.A.B.Shanthi, which held that if cash payment was on account of reasonable belief, penalty will not be justified. Therefore, the question of law was answered against the Revenue and in favour of the assessee. The reference was disposed of.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in setting aside the order of the CIT(A) who reduced the penalty from Rs. 1,00,000 to Rs. 25,000 levied under Section 271D of the Income Tax Act, 1961, for violation of the provisions of Section 269-SS of the Income Tax Act, 1961? Assessee's contention: The Tribunal found that the cash receipt was not a loan or deposit but a distribution of assets out of love and affection by the father to his son for house construction, with no intention of recovery. Therefore, no penalty was imposable. Revenue's contention: The revenue argued that the acceptance of cash loan violated Section 269-SS, warranting a penalty under Section 271D, and challenged the Tribunal's decision to set aside the penalty.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269-SS,Section 273B

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
I.T.R No.25 of 1998 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R No.25 of 1998 Date of decision:8.12.2006 The Commissioner of Income-Tax, Jalandhar ...Petitioner Versus Shri Harpal Singh, Wing Commander (Retd.) Jalandhar ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE RAJESH BINDAL Present: Dr.N.L.Sharda, Advocate for the revenue ****

JUDGMENT Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar arising out of its order dated 23.6.1997 passed in I.T.A.No.253/ASR/1996, in respect of the assessment year 1992-93. “Whether on the facts and in the circumstances of the case, the Ld. Tribunal is right in law in setting aside the order of the CIT(A) who reduced the penalty from Rs.1,00,000/- to Rs.25,000/- levied u/s 271D of the Income Tax Act, 1961 for violation of the provisions of Section 269-SS of the Income Tax Act, 1961?”

The assessee is a retired Wing Commander, who derives income from pension from defence services and interest income on deposits with the bank and other concerns. During assessment

The order continues below.

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