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Facts
The assessee's wife withdrew Rs. 1,19,75,000 in cash from her bank account, which was admitted as an advance to the assessee for furnishing and renovation of their residential house. The JCIT levied a penalty of Rs. 1,19,75,000 under Section 271D for alleged violation of Section 269SS, which was subsequently confirmed by the CIT(A).
Held
The Tribunal held that transactions between husband and wife for common family benefit, such as house renovation, do not constitute a 'loan' or 'deposit' in the strict sense for the purpose of Section 269SS of the Income Tax Act. Relying on previous High Court and Tribunal decisions, it found that the assessee had a reasonable cause and that the penalty under Section 271D was not justified. Therefore, the penalty was deleted.
Key Issues
Whether cash transactions between husband and wife for common family benefit fall under the definition of 'loan or deposit' as per Section 269SS of the Income Tax Act, and if a penalty under Section 271D is leviable for such transactions.
Sections Cited
271D, 269SS, 273B, 271E
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Income Tax Appellate Tribunal, DELHI BENCHES : C : NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 27.02.2015 of the Commissioner of Income Tax (Appeals)-18, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.54/14-15 arising out of the appeal before it against the order dated 27.09.2013 passed u/s 271D of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’), by the JCIT, Range-32, New Delhi, (hereinafter referred to as the Ld. AO).
Heard and perused the record. On hearing both the sides it comes up that the assessee is an individual as such had not filed his return of income. During the course of assessment proceedings for the A.Y. 2010-11 in the case of Mrs. Pallavi Sood (Wife of the appellant), she was required to explain the reason for heavy cash withdrawal from the savings bank account. Ld. AR has submitted that the cash withdrawal from the savings bank account of Mrs. Pallavi Sood, was meant for furnishing and renovation of the newly purchased residential house situated at Y-72, G.F. Hauz Khas, New Delhi-110016. However, knowingly or un-knowingly based on wrong legal advice, the aforesaid amount of Rs.1,19,75,000/- was admitted as advanced to the appellant. Accordingly, a penalty of Rs.1,19,75,000/- was levied under the provision of sec. 27ID of the Act due to violation the provision of sec. 269SS of the Act. The CIT(A) also confirmed the penalty of Rs.1,19,75,000/-. The assessee has taken the following grounds of appeal:- “1) Under the circumstances and in view of the facts, the learned CIT(A), erred in law in confirming the penalty of Rs.1,19,75,000/- u/s. 27ID of the I.T. Act without allowing any reasonable and effective opportunity and at the same time over-looking the facts of the case. 2) Whether the JCIT, Range 32, New Delhi, was justified and within the law in imposing penalty of Rs.1,19,75,000/- u/s. 27ID due to violation of the provision of sec. 269SS of the Act, merely on the basis of wrong admission, based on wrong legal advice and without verifying the actual drawings in the name of the appellant. 3) Whether the JCIT, Range 32, New Delhi, was justified and within the law in imposing penalty of Rs.1,19,75,000/- u/s. 27ID merely on the strength of bearer cash withdrawal of Rs.13,75,000/- through the appellant by Mrs. Pallavi Sood (Wife of the appellant) meant for re-construction of residential house property. 2
4) The appellant reserve his right to add, amend and or withdraw any or all the grounds of appeal either before or at the time of hearing.”
3. Ld. AR has explained the withdrawals in the hands of Mrs. Pallavi Sood (Wife of the appellant) from her savings bank account number 431033 in Axis Bank as follows:- Sno Date Name Amount Cheque No. 1 08.07.2008 756922 Bearer - Kuldeep Sood 3,50,000 2 14.12.2009 25205 Bearer - Kuldeep Sood 75,000 3 15.12.2009 24206 Self 20,00,000 4 18.12.2009 24207 Self 30,00,000 5 24.12.2009 24209 Bearer - Kuldeep Sood 2,00,000 6 29.12.2009 24210 Bearer - Kuldeep Sood 2,50,000 7 05.01.2010 24215 Bearer - Chander Mohan 2,50,000 24216 8 06.01.2010 Bearer - Kuldeep Sood 1,00,000 9 11.01.2010 24421 Bearer - Kuldeep Sood 1,00,000 10 19.01.2010 24426 Bearer - Kuldeep Sood 3,50,000 11 01.02.2010 24433 Bearer - Kuldeep Sood 1,00,000 12 08.02.2010 24439 Self 50,00,000 13 08.02.2010 169501 Bearer - Kuldeep Sood 1,00,000 14 16.02.2010 169505 Bearer - Kuldeep Sood 1,00,000 TOTAL 11,975,000 3.1 Ld. AR submits that the fact is that there was total cash drawings of Rs.1,19,75,000/- during the F.Y 2007-08 to 2009-10 all from the savings bank account of Ms. Pallavi Sood through bearer cheques in the name of the appellant or by herself and same were meant for re-construction of residential house property.
4. Though Ld. DR has defended the order of Ld. Tax Authorities below we find that there was no question of any undisclosed source amount transacted between the husband and wife. There was sufficient material to establish that 3 the amount which the wife had given was from explained source and was used for the common purpose. Merely because of a certificate given by the husband for some purpose of assessment of wife, the addition in the hands of husband is not justified.
After considering the provisions of section 269SS of the Act along with definition of ‘loan or deposit’ defined in Explanation (iii) of this section, we are of considered view that, to invoke the provisions of section 269SS of the Act, the transaction must be of loan or deposit of money, but in case of husband and wife, if the money is given for the common benefit or benefit of family of the couple, then the money so given is not loan or deposit of money in strict sense. The use of word ‘loan’ between couple has a unique significance where, a spouse though may admit to have given or taken a ‘loan’ to or from the spouse, and may even intend to return the money, but if the money so taken is utilized for the common benefit of couple’s personal need or the family’s personal need, then there is no ‘loan’ transaction for the purpose of section 269SS of the Act.
In this context we rely Hon’ble Punjab and Haryana High Court in the case of CIT v. Sunil Kumar Goel [2009] 315 ITR 163, where Hon’ble High Court has held as under: “A family transaction, between two independent assessees, based on an act of casualness, especially in a case where the disclosure thereof was contained in the compilation of accounts, and which had no tax effect, established ‘reasonable cause’ under section 273B of the Act. Since the assessee had satisfactorily established ‘reasonable cause’ under section 273B of the Act, he must be deemed to have 4
established sufficient cause for not invoking the penal provisions of sections 271D and 271E of the Act against him. The deletion of penalty by the Tribunal was valid.”
Then Delhi Bench in the case of Shri Sunil Kumar Sood Vs JCIT (ITA No. 1831/Del/2016) has held that Section 269SS does not applies to loan transaction between husband and wife. In this context the co-ordinate bench has relied the decision of Kolkata Benche in the case of Tuhinara Begum Hoogly Vs JCIT Range 2, Hoogly (ITA No. 2256/Kol/2014) where it was held as under: “This was neither a loan nor a deposit. At the same time, the words ‘any other person’ are obviously a reference to the depositor as per the intention of the Legislature. The communication/transaction between the husband and wife are protected from the legislation as long as they are not for commercial use. Otherwise, there would be a powerful tendency to disturb the peace of families to promote domestic broils, and to weaken or to destroy the feeling of mutual confidence which is the most enduring solace of married life. In the instant case, the wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. This transaction was not for commercial use. The amount directly received by the husband. i.e the assessee was to the extent of Rs. 17.000 only and the balance amount of Rs. 26.000 was given by payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no interest’ element was involved and there was no promise to return the amount with or without interest. It was clear that the money given by the wife was a joint venture of the family. Taking into consideration overall facts and circumstances of the case, it could be said that the aforesaid piece of legislation was not applicable in the instant case. By taking the liberal view and applying the golden rule of interpretation, the assessee had a reasonable cause within the meaning of section 273B. Therefore, the penalty should be deleted. ”
7.1 In the case of Shri Nabil Javed Vs ITO Ward 63(3) (ITA No. 3797 & 3798/Del/2018) another co-ordinate bench at Delhi has held as under: “Since in the present case also the assessee had taken the loan from his wife for the purchase of house which is for the benefit of the whole family, therefore, following the decision cited [supra], we hold that penalty levied u/s 271D of the Act in the instant case is not justified. We, therefore, set aside the order of the ld. CIT(A) and 14 direct the Assessing Officer to cancel the penalty so levied. Grounds raised by the assessee are allowed. ”
7.2 The Amritsar Benches in the case of ITO v. Tarlochan Singh [2003] 128 Taxman 20 (Mag) held as under: “Even keeping in view the contents of the Departmental Circular No. 387 [1985] 152 ITR (St.) 1), it was never the intention of the Legislature to punish a party involved in a genuine transaction. Therefore, by taking a liberal view in the instant case, the assessee had a reasonable cause within the meaning of section 273D. Thus, keeping in view the entire facts of the instant case, and also keeping in view the intention of the Legislature in enacting the provisions of section 269SS, it was to be held that the assessee was prevented by sufficient cause from receiving the money by an account payee cheque or account payee bank draft. In the instant case, the assessee was of the opinion that the amount in question did not require to be received by an account payee cheque or account payee draft. Thus, there was a reasonable cause and no penalty should have been levied. From the above, it would be clear that the assessee had taken plea that firstly there was no violation of the provisions of section 269SS. Secondly, there was a reasonable cause. Thirdly, the assessee was under the bona fide belief that he was not required to receive the amount otherwise than by an account payee cheque or account payee draft. As an alternative submission, it was contended that the default could be considered either technical or venial breach of the provisions of law and, therefore, no penalty under section 271D was leviable. In view of the above discussion, no penalty under section 271D was leviable. It is well-settled that penalty provision should be interpreted as it stands and, in case of doubt, in a manner favourable to the taxpayer. If the court finds that the language is ambiguous or capable of more meaning that the one, then the court has to adopt the provision which favours the assessee, more particularly where the provisions relate to the imposition of penalty. In view of the above, the penalty sustained by the Commissioner (Appeals) was cancelled.”