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Before: Shri Inturi Rama Rao & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 7, Chennai, dated 21.12.2018 relevant to the assessment year 2014-15. The ground raised by the assessee is that the ld. CIT(A) has erred in confirming the penalty of ₹.10,85,000/- levied under section 271D of the Income Tax Act, 1961 [“Act” in short].
Brief facts of the case are that the assessee is an individual and filed his return of income for the assessment year 2014-15 on 29.09.2014 declaring returned income of ₹. 1,62,94,340/-. The assessment under section 143(3) of the Act was completed by assessing total income of the assessee at ₹.1,63,02,858/-. From the record and verification of the accounts, the JCIT has found that the assessee has accepted ₹.10,85,000/- in cash from Smt. R.M. Durgadevi and shown it as loan violating the provisions of section 269SS of the Act. After considering the submissions of the assessee, the Assessing Officer levied penalty under section 271D of the Act at ₹.10,85,000/- being the amount received by cash in contravention to provision under section 269SS of the Act. On appeal, the ld. CIT(A) confirmed the penalty levied under section 271D of the Act.
On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the amount of ₹.10,85,000/- received by the assessee from his sister was merely a temporary accommodation of cash among family members and cannot be considered as loan or deposit for the purposes of section 269SS of the Act. It was further submission that the assessee has not paid any interest on the above sum since the transaction was only between the assessee and his sister, which cannot be considered as loan and prayed for deleting the penalty levied under section 271D of the Act. On the other hand, the ld. DR supported the orders of authorities below.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book. The main business of the assessee is agriculture. Against the penalty notice, it was the submission of the assessee that the assessee own agricultural land of 64 acres in Puduvoyal, peruvoyal, Madharapakkam, Mannelore, Sundaracholavaram and Puchiathipedu villages of Thiruvallur District and maintaining bank account in the name of Kishore Farms. It was further submission that Smt. R.M. Durgadevi, sister of the assessee own 35 acres of agricultural land in Peravallore and Peruvoyal villages and maintaining bank account in the name of Durgadevi Farms. In order to meet the expenditure on wages to labourers, manure, etc. in assessee’s farm, surplus cash available in his sister’s farm account was utilized. It was further submission before the authorities below that temporary accommodation of funds among siblings cannot be considered as loan or deposit within the meaning of section 269SS of the Act by relying on various decisions. However, the assessing Officer has not accepted the explanation of the assessee and levied penalty under section 271D of the Act, which was confirmed by the ld. CIT(A).
4.1 The Hon’ble Madras High Court in the case of CIT v. T.R. Rangarajan in 279 ITR 587 has held that penalty under section 271D of the Act cannot be levied on the loan received from the relatives on a Sunday. Moreover, In the case of M. Yeshodha in 351 ITR 265 (Mad), the Hon’ble Madras High Court held that transaction of loan between father in law and daughter in law in cash cannot be subject matter of levy of penalty u/s.271D of the Act. Further, In the case of CIT v. Sunil Kumar Goel 315 ITR 163, Hon’ble Punjab & Harayana High Court has held that penalty under section 271D/271E of the Act cannot be levied on the loan received from sister concern if the assessee has substantiated reasonable cause under section 273B of the Act.
4.2 Further, we find that the object of introducing section 269SS of the Act is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he makes some false entries, he shall not escape by giving false explanation for the same. In the present case, the assessee is engaged and earns income out of agricultural activities and the sum received from his sister was to meet the emergent requirement of agricultural activities, thereby establishes reasonable cause under section 273B of the Act. Confirmation of accounts of Smt. R.M. Durgadevi was also brought on record. In view of the above facts and circumstances, we are of the considered opinion that the cash transaction among the family members/siblings cannot be considered as loan or deposit within the meaning of section 269SS of the Act warranting levy of penalty under section 271D of the Act.
4.3 However, on perusal of the appellate order as well as penalty order, we do not find that the above transaction of the assessee was with his own sister. Accordingly, we direct the Assessing Officer to verify as to whether the above transaction of the assessee was with his own sister and if so, delete the penalty levied under section 271D of the Act.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on the 24th October, 2019 in Chennai.