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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI S. RIFAUR RAHMAN
ORDER PER S. RIFAUR RAHMAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2014-15. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-36, Mumbai [in short ‘CIT(A)’] and arises out of the penalty levied u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’).
The brief facts of the case are, assessee filed e-return of income on 16.03.2016 for assessment year 2014-15 declaring total income at Rs.3,50,730/–. The case was selected for scrutiny under CASS – limited criteria, accordingly statutory notices under section 143 (2) and 142 (1) of the Income Ms. Parinita Anil Khot 2 Tax Act, 1961 (in short Act). In response, A.R. of the assessee attended and filed relevant information as called for. During assessment proceedings, AO observed that assessee has taken loan from the following persons and the amount involved: Name Amount of loan Remark in loan confirmation (Rs.) Nandini S Kempwada Rs.2,00,000/- It was not possible for me to arrange the funds immediately within short span of time. Hence, I sponsored her studies by way of friendly loan in cash of Rs. Two Lakhs in July 2013. Arun Bapusaheb Khot Rs.2,50,000/- The loan is interest free loan & the same has been given out of my love and affection towards her and to assist her for completing her post- graduation course. Loan amount was given in cash. Padmanabha Rs.1,00,000/- I assisted my granddaughter for her Parnisappa Ijari medical studies in Cash. I gifted her Rs. One Lakh. Prajakta Khot Rs.1,00,000/- The same is interest free loan given to her out of my love and affection to enable her to complete her higher education. Based on the above observation, AO initiated the proceedings under section 269SS against the assessee for accepting loans/specified some of Rs.6,50,000 in cash. Accordingly show cause notice under section 271D of the act was issued and served on the assessee. Based on the submissions of the assessee, the amount received from grandmother Ms. Padmanabha was deleted and for the remaining loan amount of Rs.5,50,000/–, the penalty under section 271D was levied. Aggrieved with the above order, assessee filed an appeal before Ld. CIT(A), after considering the submissions of the assessee, Ld. CIT(A) sustained the penalty levied under section 271D of the Act with the observation Ms. Parinita Anil Khot 3 that the loans are taken in cash, the provisions of section 269SS are attracted and as a consequence of penal provisions of section 271D are attracted. 3. Aggrieved with the above order, assessee preferred an appeal before us raising following ground of appeal : “The Joint Commissioner of Income Tax-24(3) has erred in levying penalty Rs.5,50,000/- u/s 271D of the Income Tax Act, 1961 as the assessee failed to comply with the provisions of section 269SS of the Act. The assessee appeals that the Joint Commissioner may be directed to withdraw the above penalty of Rs.5,50,000/- u/s 271D of the Income Tax Act, 1961.” At the time of hearing it is brought to our notice by the A.R. of the assessee that the assessee has taken loan from her relatives i.e. her sister (Prajakta Anil Khor), uncle (Arun Bapusaheb Khot) and auntie (Nandini Kempwade) for her higher education during this year. Along with the above submission, Ld. AR brought to our notice the confirmation letters from all the above parties and filed the same before us. On the other hand, the Ld. AR relied on orders passed by lower authorities.
4. Considered the rival submissions and material on record. We notice that assessee has taken loan from her relatives in various dates in cash in order to meet her higher education expenses. We notice that all these loans were taken from close relatives for the purpose of higher education. As held by the Hon’ble Madras High Court in CIT versus Balaji Traders that when there is an immediate need of money the person cannot get it immediately from a nationalized bank. To satisfy such immediate requirement of money a person normally approaches the moneylender or a friend or relative who could lend money immediately. In those circumstances it cannot be said that the assessee has Ms. Parinita Anil Khot 4 ITA No. 4016/M/2019 entered into a transaction to avoid the payment of tax or to defraud the revenue. Even in this case, the assessee has taken loans from relatives to finance her higher education. We do not see any reason to impose a penalty in the circumstances of this case where the assessee has taken loan from her relatives without approaching any banking institution. Accordingly, the penalty imposed by the revenue authorities are deleted.
5. In the net result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 02/06/2021.