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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Commissioner of Income-Tax (Appeals)[CIT(A)], Vijayawada vide ITANo.367/CIT(A)/VJA/13-14 dated 24.11.2014 for the assessment year 2009-10.
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All the grounds of appeal are related to the levy of penalty u/s 271D of I.T.Act. During the assessment proceedings, the Assessing Officer(AO) found that the assessee has made cash deposits of Rs.14,90,000/- in the bank account of Coastal Local Area Bank Ltd. The assessee could not properly explain the cash deposits, hence, the AO felt that the assessee accepted loans or deposits in excess of Rs.20,000/- in violation of the provisions of Sec.269SS hence, the AO sent proposal to the Addl. Commissioner of Income Tax (ACIT), Vijayawada for initiation of penalty proceedings u/s 271D of I.T.Act. The Addl. CIT initiated penalty proceedings u/s 271D and called for explanation of the assessee as to why the penalty should not be imposed u/s 271D of I.T.Act for violation of the provisions of Section 269SS of I.T.Act. The assessee stated that the amount of Rs.14,90,000/- was withdrawn from M/s Venkateswara Steel House, his father’s business concern and no documents such as promissory notes etc. were executed, hence, requested to treat the amount received from his father as a gift and to drop the penalty proceedings. The Addl. CIT did not accept the contention of the assessee and held that the transaction was reflected as debt in the balance sheet of his father and there is no business or commercial expediency between the assessee and his father. The Addl.CIT further held that withdrawal of funds in cash from his father’s
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account and, depositing the same in his bank account and showing him as debtor in the books of his father would tantamount to violating the provisions of Section 269SS of I.T.Act, thus, liable for penalty of u/s 271D of the I.T.Act and accordingly levied the penalty of Rs.15,54,000/-.
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A), and the Ld.CIT(A) confirmed the penalty stating that it is a cash deposit hence attracts the provisions of section 269SS of I.T.Act.
Aggrieved by the order of the CIT(A), the assessee in appeal before the Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee’s father Sri G.V.N.Panduranga Rao is carrying business in the name of M/s Sri Venkateswara Steel House at Gudivada. The assessee’s father had advanced amounts to Sri Katari Ram Kumar on 01.03.2008 on the security of mortgage of three shops belonging to Ram Kumar. Since the debtor did not repay the amounts advanced by the assessee’s father, the assessee’s father had purchased the above three shops and requested the seller to register the properties in favour of the assessee. For settlement of the outstanding loan a sum of Rs.14,90,000/- was withdrawn from Sri Venkateswara Steel House, the business concern of the assessee’s father
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and deposited in the bank account of the assessee and subsequently settled the debt of Sri Ramkumar in the books of his father. In a nut shell, the assessee has taken the sum of Rs.14,90,000/- from father and issued the cheque in favour of his father, Shri G.V.N.Pandu Ranga Rao to settle the outstanding debt of Shri Katari Ramkumar. The Ld.AR argued that there was no outflow of cash except the withdrawl of money from his father’s business concern, which was deposited in his bank account and again issued cheque to his father on the same date. The transaction was between the father and the son and there is no dispute with regard to genuineness and the source of money, hence argued that the provisions of section 269SS and 271D does not attract. The Ld.AR relied on the orders of of Hon’ble Madras High Court in the case of CIT Vs. Smt. M.Yesodha [351 ITR 265 (Mad)] and Hon’ble High Court of Gujarat, Ahmedabad in Tax Appeal No.554 of 2007 dated 22.06.2016.
On the other hand, Ld.DR supported the orders of the lower authorities.
We have heard both the parties and perused the material placed on record. In this case, as observed from the Ld.Addl. CIT’s order the assessee
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had deposited amounts in cash with Coastal Local Area Bank Ltd. for a sum of Rs.14,90,000/-. The Ld.Addl. CIT levied the penalty of Rs.15,54,000/- i.e.(Rs.21,38,500-Rs.5,84,500). As per the discussion in the Addl. CIT’s order, the AO felt that the deposit was a loan because the assessee could not explain the source properly for cash deposit whether it is a gift or a loan. However, from the balance sheet the Addl.CIT observed that the assessee’s name is shown as debtor in the books of his father’s business concern M/s Venkateswara Steel House, hence treated the same as unsecured loan and accordingly, levied penalty u/s 271D of I.T.Act for violation of the provisions of section 269SS of I.T.Act. In this case, the fact is that the assessee has taken a loan from his father which was used for the purpose of purchasing the assets. There was no dispute with regard to the genuineness of the transaction. The same was reflected in the balance sheet of the assessee’s father. The assessee’s father submitted that the amounts were withdrawn from M/s Venkateswara Steel house and the same may be taken as gift. The assessee has also enclosed the Will of his father dated 19.01.2004, in page No.63 to 67 of paper book according to which the properties including Sri Venkateswara Steel House would devolve upon the assessee. The assessee, in his explanation stated that no documents, promissory note etc. were executed by the assessee in the
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name of his father and there is no creditor and debtor relation in the transaction. Since the transaction is between the father and the son and there is no dispute with regard to the genuineness of the transaction and the source, we hold that merely because the amount was shown as debt in the balance sheet the same need not be treated as violation of the provision of Section 269SS and attracts the levy penalty u/s 271D of I.T.Act. Every financial transaction or the help extended by father to his son would not end up in loan. The same can be treated as gift also. The Hon’ble Madras High Court in the case of CIT Vs. Smt. M.Yesodha (supra) held as under : “In our considered view, in the light of the relationship between the assessee and her father-in-law, the Tribunal has rightly held that the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for purchase of property and the source had also been disclosed during the assessment proceedings. If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty. 11. Referring to the decision reported in CIT v. Kundrathur Finance and Chit Co. [2006] 283 ITR 329 (Mad.), this Court in the decision reported in Lakshmi Trust Co. (supra), held as follows: "In the instant case, the Commissioner of Income-tax (Appeals) and the Appellate Tribunal found on the facts that the transactions were genuine and the identity of the lenders was also satisfied. The Appellate Tribunal also upheld the order of the Commissioner of Income-tax (Appeals) that there was no intention on the part of the assessee to evade the tax. Once the said finding as to the genuineness of the transactions is arrived at by the Tribunal on the facts, following the decision of this Court in CIT v. Ratna Agencies [2006] 284 ITR 609, wherein it was held that the
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finding recorded by the Tribunal in this regard is a finding of fact and no question of law much less a substantial question of law would arise, we do not have any hesitation to hold that it may not be proper for this court to interfere with such a finding of fact."
assessee and her father-in-law, the Tribunal has rightly held that the genuineness of the transaction is not disputed, in which, the amount has been paid by the father-in-law for purchase of property and the source had also been disclosed during the assessment proceedings. If there was a genuine and bonafide transaction and the tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretion not to levy penalty.”
6.1. Similarly Hon’ble High Court of Gujarat at Ahmedabad in the case of Dr.Rajaram Lakhani Vs. ITO, Gandhidham (supra) allowed the appeal of the assessee holding that genuine transaction between father and a son which is not commercial but personal in nature does not attract penalty u/s 271D.
6.2. In the instant case, the assessee has taken certain amounts from his father’s business concern i.e. Sri Venkateswara Steel House. The same is reported in the income tax returns of the assessee as well as the father and the genuineness of the transaction is not disputed. The fact that the transaction between the father and son also is not disputed. The transactions are purely personal in nature for purchase of property by father in favour of his son. The amount was withdrawn only to adjust the book entries in the books of his father i.e. Sri Venkateswara Steel House
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who has given the loan against the properties to Mr.Ram kunmar, vendor of the properties . There is no evasion of tax in this case and the transaction appears to be bonafide. Therefore, the assessee’s case is squarely covered by the decision of the Hon’ble Madras High Court in the case of CIT Vs. Smt.M.Yesodha (supra) and Hon’ble Gujarat High Court in the case of Dr.Rajaram Lakhani Vs. ITO, Gandhidham. Accordingly, we hold that there is no case for levying penalty u/s 271D. Accordingly we cancel the penalty and set aside the orders of the lower authorities and allow the appeal of the assessee.
In the result, appeal of the assessee is allowed.
The above order was pronounced in the open court on 11th Apr, 2018.
Sd/- Sd/- (िी.दुगााराि) (डड.एस. सुन्दरससंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याययकसदस्य/JUDICIAL MEMBER ऱेखासदस्य/ACCOUNTANT MEMBER ववशधखधऩटणम /Visakhapatnam ददनधंक /Dated : 11.04.2018 L.Rama, SPS
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आदेश की प्रनतलऱवऩ अग्रेवषत/Copy of the order forwarded to:- 1. अपीलाथी / The Appellant- Gokavarapu Venkata Satya Durga Prasad, 7/258A, Tilak Road, Gudivada 2. प्रत्यधथी / The Respondent-Addl.Commissioner of Income Tax, Range-1, Vijayawada 3. The Commissioner of Income Tax, Vijayawada 4. The Commissioner of Income-Tax(Appeals), Vijayawada 5. ववभधगीयप्रनतननधध, आयकरअऩीऱीयअधधकरण, ववशधखधऩटणम /DR, ITAT, Visakhapatnam 6.गधर्ाफ़धईऱ / Guard file आदेशधनुसधर / BY ORDER // True Copy //
Sr. Private Secretary ITAT, VISAKHAPATNAM