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Income Tax Appellate Tribunal, JAIPUR BENCHES (SMC
Before: SHRI BHAGCHANDvk;dj vihy la-@ITA No. 268/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 268/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Bhopal Singh Shekhawat, Jt. CIT, Vs. 6, Bhartendu Nagar, Khatipura, Range-1, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AOWPS 1925 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri F. Rehman Khan (Adv) jktLo dh vksj ls@ Revenue by : Shri Ajay Mallik (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 15/09/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 21/09/2017 vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-I, Jaipur dated 23/01/2016 for the A.Y. 2008-09. The only issue involved in appeal is sustaining the penalty of Rs. 35,000/- levied U/s 271D of the Income Tax Act, 1961 (in short the Act).
The brief facts of the case are that the assessee is deriving income from salary, house property and other sources. Return of income was filed on 31/03/2009 declaring total income of Rs. 1,34,790/-, which was
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processed U/s 143(1) of the Act. Notice U/s 148 of the Act was issued and
the assessment was completed U/s 143(3) read with Section 147 of the
Act at Rs. 32,66,490/- on 24/03/2014. The Assessing Officer noted that
the assessee had received loan of Rs. 25,000/- from Shri Mukesh of
village Dhana and Rs. 50,000/- from Shri Rupesh Singh Shekhawat. Thus,
there was a violation of provisions of Section 269SS of the Act. The
matter was referred to JCIT, who issued show cause notice on 13/8/2014
for levy of penalty and levied penalty of Rs. 75,000/- vide order dated
18/09/2014. The ld. CIT(A) partly deleted the penalty.
Now the assessee is in appeal before the ITAT. While pleading on
behalf of the assessee, the ld AR has submitted as under:
Receipts were not on account of any loan or deposit but is only a family arrangement: At the outset we may submit that the assessee is a retired soldier and does not understand complexities of Income Tax Laws. The first subjected amounts of Rs.25,0001- [Rs. 5000/- partly sustained now by the ld. CIT(A) for the purpose of penalty], was required in an emergency need of household [which fact is not denied neither by the JCIT nor by the ld. CIT (A)] and as a usual practice of common man, it was arranged from the family members i.e. cousin brother of the assessee. Moreover the second subjected amounts of Rs.50,000l-[Rs. 30,000/- partly sustained now by the ld. CIT(A) for the purpose of penalty] was received from Shri Rupesh Singh Shekhawat who was the son of the assessee. The same was required by the assessee for giving as an advance in a deal of purchase of land, [which
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fact is not denied neither by the JCIT nor by the ld. CIT(A)]. However, the same did not materialize but the amount so received stood utilized in meeting with some other household expenses.
The purpose behind the arrangement is construction of assessee's house at Mitra Nagar, Khatipura, Jaipur for him and his family. The very nature of these transactions clearly suggest that it was a merely family accommodation at the time of need. It was not taken from the stranger / outsider and thus, was not in the nature of loan or deposit.
Relatives not covered: In any case, it is not denied that the subjected amounts were received from the blood/close relatives of the assessee who cannot be termed as a loan in the strict legal sense of the term. In this regard, reliance is placed on the decision of Dillu Cine Enterprises Pvt. Ltd. Vs. ACIT (2002) 80 ITD 484 (HydTrib) (DPB 13- 24) wherein it was held that in the context of section 269-SS, 'any other person, does not include closely related person'. Also kindly refer G.D. Subraya Sheregar 10 SOT 378 (Bang) laying down an identical proposition. The various benches of the Hon’ble ITAT have been consistently, taking a view that any amount received from a close relative cannot be treated as a loan or deposit. There is no “Transfer” as such between two closely related persons, which is a condition precedent, so as to validly invoke sec.269SS or 269 for that reason.
Also kindly refer Muthoot M. George Brothers v/s ACIT (1993) 47 TTJ 434 (Coch) (DPB 25-34), Mahesh Prasad Soni v/s ACIT (2004) 86 TTJ 815 (Jab.) and ACIT v/s Gujarat Ambuja Proteins Ltd. (2004) 89 TTJ 324 (Ahm) and Rajendra Suryavanshi vs. ACIT (2011) 56 DTR 0386 (Pune) (DPB 35-42).
ITA 268/JP/2017_ 4 Bhopal Singh Shekhawat Vs Jt.CIT
Section 269SS cannot be invoked: 3.1 It is submitted that S. 269SS cannot be invoked unless the department establishes that what the assessee received was a loan or deposit. Kindly refer Jagvijay Auto Finance Pvt. Ltd v/s ACIT (1996) 19 TW 82 (JP). The AO did not appreciate that there was no term or condition on which the amount was taken and no interest was payable on the amounts taken by the assessee. Hence, the receipts were not in the nature of loans or deposits and hence were outside the purview of section 269-SS. In this regard, reliance is placed on the decision of Karnataka Ginning & Pressing Factory Vs. JCIT(2001) 72 TTJ 307 (Mum) (DPB 1- 8).
3.2 Krishna Kr. Pathak (HUF) vs. ITO (2004) 90 TTJ 0940 (Kol Trib) (DPB 9-11) held as under:
“The assessee(HUF) and the Karta of the assessee(HUF) were maintaining current account with each other and the transactions between them were in the nature of temporary adjustment/accommodation and there was no cash loan or deposit by the Karta of the assessee (FIUF). The Department has not disputed the submission of the assessee (FIUF) that no interest was paid or payable or received by either side. By passing the journal entry by the Karta of the assessee (HUF) on account of expenditure incurred by him for giving gifts to relatives on behalf of the assessee (HUF) does not amount to loan or deposit within the meaning of s. 269SS and as such, no penalty is leviable under s. 271D. Accordingly, the penalty is cancelled.—Shrepak Enterprises vs. Dy. CIT (1998) 60 TTJ (Ahd) 199 : (1998) 64 ITD 300 (Ahd), Muthoot M. George Bankers \/s. Asstt. CIT (1993) 47 TTJ (Coch) 434 : (1993) 46 ITD 10 (Coch), Dillu Cine Enterprises (P) Ltd. vs. Addl. CIT (2002) 80 ITD 484 (Hyd) and Sun Flower Builders (P) Ltd. vs. Dy. CIT (1997) 61 ITD 227 (Pune) relied on." Subjected amount was found Genuine: It is pertinent to note that no 4. addition u/s 68 or other provision, was made in the assessment order 18.09.2014 though framed u/s 143(3)/148 meaning thereby the subjected transactions were treated as genuine transaction, which are not intended to be covered. There is absolutely no doubt raised in any of the orders by lower authorities that the money involved was black
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money. Kindly refer CIT vs. Maheshwari Nirman Udyog (2007) 211 CTR 0579 (Raj.) (DPB 43-48) held as under:
"Appellate authority as well as the Tribunal having found that the transaction in question is a genuine transaction and that the assessee has shown reasonable course for accepting loan in cash in violation of s. 269SS, such finding of fact cannot be disturbed by the Court and no substantial question of law arises for determination."
Also kindly refer Kusum Dhamani vs. ACIT (2014) 40 CCH 0842 (Jaipur Trib) (DPB 49-54) wherein there is a detailed discussion explaining the legislative intent with the help of CBDT Circular and case laws which are not repeated here for the sake of gravity.
Reasonable Cause Existed
5.1 Ignorance of law is a reasonable cause u/s 273B: The assessee is a retired military official. His most of the life has been spent in the military and thereafter as a retired person only. He seldom had any occasion to meet with such a situation. He was completely ignorant that acceptance in cash from his own son and cousin even would have amounted to a contravention of a provision of law. Though he might be filing his return of income in the past and even with the help of CA yet however, such transaction of accepting amount came to notice of CA only much after the completion of the same when the return was being prepared and filed. It is a matter of common knowledge that in such cases otherwise also the assessee do not frequently consults with his CA / Consultant, more particularly in the cases of non businessman salaried class employee and rather a retired employee. The assessee therefore, proceeded in theses transaction without even knowing that there was some contravention at all (assuming it was so). Thus, there did exist a reasonable cause in terms of S. 273 B. Kindly refer Motilal Padampat Singhania 118 ITR 326(SC) followed in Veer Sales
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Corporation 50 TTJ 130 at 153, Dillu Cine Enterprises Ltd. v/s Ad. CIT 80 ITD 484 (Hyd.). In Dr. Deepak Muchala vs. ITO (1997) 58 TTJ 0524 (Mum.)
"Penalty under s. 271D—Leviability—Assessee, a dentist by profession, is not expected to be well-versed with fast changing laws—Further, he borrowed money for paying installments of his flat and also for purchasing certain items / instrument for his clinic—Genuineness of loan not doubted—No justification for applying s. 271D—No reason to impose penalty for technical default"
5.2 It has been held that the amount taken by the assessee in cash to meet with his urgent need of money, was a reasonable cause in terms of S.273B. In the present case also the assessee was in need of funds for giving an advance in a deal of purchase of land. However, the same did not materialize. In the cases of purchase of land, after the negotiations, the buyer is usually in a hurry to make the payment of Sai (advance) so as to lock the deal at the agreed prices because there are all the chances and apprehension of the seller not to proceed further at the agreed prices in the temptation of further increase in the prices unless he is bound by giving him the token amount/advance/sai and therefore, the assessee arranged Rs.50,000/- in cash from his son. Although in this case the amount could not be utilised for giving advance yet however, this fact is not relevant because at the moment when there was an urgent necessity of the amount to be paid in cash as advance, only was relevant.
For this preposition kindly refer CIT vs. Maheshwari Nirman Udyog (the amount was to be distributed to the labourers by the contractor in the field which was urgently required).
In case of difference of opinion, the view favourable to assessee must be adopted in assessment as also in penalty proceeding. Kindly refer
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CIT v/s Vegetable Products (1973) 88 ITR 192 (SC), ACIT & ors. v/s Velliappa textiles ltd. & ors. (2003) 184 CTR 193 (SC).
7.1 Despite of filling of detailed submissions dated 13.01.2017 (PB 8-15) and the case laws, the allegation of the CIT(A) that no reasons were stated and that there did not exist reasonable cause are factually incorrect on the face of the record.
7.2 Case cited by the Ld. CIT(A) is completely distinguishable: Because in the facts of that case, the contention of the assessee was that the subjected amount of the gift were already treated as undisclosed income of the assessee (which were shown in his account as loan taken from the wife and the daughter), and hence could not have been subjected to the penalty u/s 271D in as much as once it had already become his income, the same amount could not be treated as loan or in other words, one cannot transacted with himself. In these circumstances, the matter was considered. However, , in our case no such plea has been taken and on the contrary, vide para 4 it is submitted that the subjected amount was treated genuine and was never added to the assessee's income and therefore, no penalty u/s 271D should have been imposed. Thus, the controversy and the contention involved in that case was completely different then what is available in the present case hence it is clear that the Ld. CIT(A) blindly applied the above case and wrongly confirmed the impugned penalty.
Lastly, we strongly rely our submission filed before the Ld. CIT(A) but has not taken judiciously (PB 8-15).”
On the contrary, the ld Sr.DR has relied on the orders of the authorities below.
ITA 268/JP/2017_ 8 Bhopal Singh Shekhawat Vs Jt.CIT 5. After hearing both the sides and looking to the peculiar facts and
circumstances of the case. I find that the assessee was a retired military
official. He seldomly had any occasion to meet such situation. Such
person remain ignorant about the legal position that acceptance in cash
from close relative shall be in contravention of law. Keeping in view of
various decisions of ITAT cited by the assessee, the penalty is deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21/09/2017.
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