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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
Per Shri A.T.Varkey, JM
This is an appeal filed by the assessee against the order of Ld. CIT(A)-6, Kolkata confirming the penalty passed u/s 271E of the Income Tax Act, 1961 (Act) for violation of the provision of section 269T of the Act for A.Y.2010-11.
Brief facts of the case is that the assessee is an individual, who is running a nursing hospital known as Ghosh Nursing Home as its proprietor and in the assessment year under consideration, the assessee filed return of income declaring Rs.3,93,199/- which was processed u/s 143(1) of the Act. Later on the assessee had preferred an application for settlement before the Settlement Commission which was not admitted by the Settlement Commission because there was no case pending before the income tax authorities for the relevant assessment years. However, the assessee had disclosed cash transactions which took place in the year under consideration and had remitted the tax for excess income which was not returned in her original Return of Income before approaching the Settlement Commission. Since the application by the assessee before the Settlement Commission was not entertained, taking notice of the disclosure made by the assessee as aforestated before the Settlement Commission, the AO issued notice u/s 148 of the Act for reopening the Sharmila Ghosh, AY- 2010-11 fit case for imposition of penalty u/s.271E on an amount of repayment of loans of Rs.36,08,000/- in contravention of Sec.269T. Therefore, I impose penalty u/s.271E of the I.T. Act, 1961 @ 100% of the repayment of cash loan i.e. Rs.36,08,000/-. I therefore, impose penalty u/s.271E of the LT. Act, 1961 @ 100% of the repayment of cash loan i.e.Rs.36,08,000/- for violation of Sec.269T of the I.T. Act. I direct the assesse to pay Rs.36,08,000/- by way of penalty u/s.271E of the I.T. Act. The A.O. is directed to upload the order in the AST portal & issue a copy of the order & demand notice to the assessee.”
Aggrieved by the order of the Joint Commissioner of Income Tax imposing the penalty as aforestated, the assessee preferred an appeal before the ld. CIT(A), who was pleased to dismiss the same holding that the appellant has not made out any reasonable cause for contravention of the provision of section 271E while making the cash repayments. Aggrieved the assessee is before us.
We have heard the rival submissions and perused the records. We note that the appellant, who is an individual and proprietor of M/s. Ghosh Nursing Home, earns her income from running of nursing home, capital gains, dividend income, interest income and agricultural income. The assessee had filed original return of income declaring total income of Rs.3,93,199/-. The return of income was processed u/s 143(1) of the Act on 25.06.2013. Thereafter, the appellant had filed an application on 25.06.2013 u/s 245C of the Act before the ld. Settlement Commission for A.Y.2007-08, 2008-09, 2010-11 to 2013-14 wherein assessee has disclosed excess income which was not returned through the return of income and remitted the tax on it. However, the ld. Settlement Commission vide its order u/s 245D(2C) dated 14.08.2013 rejected the application made by the appellant for A.Yrs.2007- 08, 2008-09 and 2010-11 as the application for the assessment years were abated u/s 245HA of the Act. Thereafter for these assessment years, the AO issued notice u/s 148 of the Act for reopening the assessment and for the assessment year under consideration the notice was issued on 19.12.2013. Pursuant to the 148 notice the assessee fled the return of income on 17.01.2014 disclosing total income of Rs.12,77,594/-. Thereafter the AO completed the re- assessment for the instant assessment year at Rs.14,21,566/- (adding only Rs.1,43,972). In the re-assessment order the AO observed that the appellant/assessee had entered into following loan transactions in cash with her husband Shri Kalidas Ghosh.
Sharmila Ghosh, AY- 2010-11 i.e. wife in this case for settling certain amounts given to her by her husband can be treated as a loan transaction in the strict sense between the debtor and creditor. The Ld. Counsel assailing the actions of the JCIT and the Ld. CIT(A) strenuously contended that without the JCIT bringing out the transaction in question strictly as between a ‘debtor’ and a ‘creditor’ and the character of money in question as ‘loan’ which have been settled between any person even if either party to the transaction is wife or her husband cannot be treated as violation of section 269T of the Act because the penalty provisions has to be strictly construed. Therefore he vehemently pleaded that without bringing the appellant as a debtor to the money given/settled as a ‘loan’ given back to her husband (in the capacity as a creditor) the penalty cannot be levied against the appellant u/s 271E of the Act and therefore he prays for deletion of the penalty.
The ld. DR supported the orders of the authorities below and does not want us to interfere in the order of the ld. CIT(A).
We note that the AO in the re-assessment order after reopening the assessment has made a passing reference to the effect that the assessee has entered into the following loan transactions in cash with her husband Shri Kalidas Ghosh and after giving the chart (supra) of 13 number of transactions has merely observed that there is violation of section 269T of the Act and that he has recommended penalty proceedings by the JCIT. We note on a perusal of the penalty order passed by the ld. JCIT that he has simply made an observation that the assessee failed to give any satisfactory explanation for failure to comply with the provision of section 269T of the Act and therefore he levied the penalty. It is a trite law that penalty proceedings are distinct and different from that of the assessment proceedings and penalty provisions had to be strictly interpreted. In this case, the penalty has been levied for violation of section 269T of the Act. As per section 269T of the Act, if any person repays any loan or deposit taken by a person, he has to do so by account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account. In case of violation of the same it may invite penalty u/s 271E of the Act. So, if the mode of repayment of loan/deposit is not by account payee cheque/draft or by electronic clearing system of bank, then penalty u/s. 271E of the Act is attracted. Therefore, the first
Sharmila Ghosh, AY- 2010-11 “loan transaction” between a creditor or debtor or repayment of loan by the debtor to the creditor and amount given by the husband and wife in good faith cannot, according to us, invite penal action per se and, therefore, penalty ought not to have been levied against the giving and taking of money between the husband and wife. Recently, the Hon’ble Supreme Court Judge, Justice Chandrachud observed about the importance of marriage in Haldiya case while rebutting the contention of Ld. Sr. counsel for father of girl who got married (with a person of different caste) that public law has evolved to account for situations where a marriage may be intended to defeat a State interest or even a private interest, the Hon’ble Justice observed that “the moment we are stepping into the realm of public law, we are stepping into a dangerous domain. There may be several State interests. Marriage and personal relations are the core of plurality of Indian culture. We must do everything to protect it …..”. So, money exchanged between husband and wife cannot be treated in the same manner and equated on same pedestal with that of commercial transactions between debtor and creditor. It should be kept in mind that even if family settlement of immovable property is orally done it is recognized by law to avoid litigation between relatives and sec. 56(2) of the Act does not tax gift inter relatives specified therein, which are recognition of importance of family and relationship and responsibility between them. Section 122 of 1EA (Indian Evidence Act) – Privileged communication between husband and wife is protected. According to the section, a husband and wife may not be compelled to disclose any communication made between them during marriage life unless either party consults Exception to this rule is only when there is suit between spouses in which one married person is prosecuted for any crime committed against the other. The object for which this provision was enacted is to promote family peace at the same time husband-wife solace relation from being disturbed. So long the wed-lock continues both the husband and wife are under solemn responsibility to maintain the dignity of married life. Anything said or made by the husband to wife or vice versa is treated to be privileged communication founded on law and ethic. “This protective provision is based on the wholesome principle of preserving domestic peace and conjugal confidence between the spouses.”
We note that there was no element of interest for the amount given back by the assessee to her husband, which shows that there was no loan repaid by the assessee to her husband. Merely by AO/JCIT terming the transaction between the wife and her husband as Sharmila Ghosh, AY- 2010-11 9. Therefore, relying on the reasons given supra in a similar case and the detailed discussion given above, we are unable to sustain the action of Ld. CIT(A) and, therefore, for the reasons stated above, the appeal of the assessee is allowed.
In the result the appeal of the assessee is allowed