SUKANTA BARDHAN,KOLKATA vs. JCIT, RANGE-2, HOOGHLY, HOOGHLY

The captioned appeal filed by the assessee, pertaining to assessment year 2009-10, is directed against the order passed by the ld. Commissioner of Income Tax (Appeals) – 6, Kolkata, in Appeal No.10/CIT(A)-6/Kol/12-13, dated 29.01.2015, which in turn arises out of an order passed by the AO u/s.271D of the Income Tax Act 1961, (hereinafter referred to as the ‘Act’) dated 29.03.2012.

The brief facts qua the assessee are that the assessee filed its return of income for the A.Y 2009-10 on 27.09.2009. The assessee’s return was processed u/s.143(1), dated 30.07.2010. Subsequently, the Sukanta Bardhan A.Y. 2009-10 assessee’s case was selected for scrutiny u/s. 143(2) of the Act and the AO had completed the assessment by making various additions based on estimate. During the assessment proceedings, the Assessing Officer observed that the assessee has accepted “Temporary Financial Accommodation” loan of Rs.6,00,000/- from different persons. The Assessing Officer initiated penalty proceedings u/s.271D because the loan has been accepted and paid in cash. During the penalty proceedings, the assessee submitted that transfer of funds between father and son cannot be categorized as a loan and do not violate the provisions of section 269SS of the Income Tax Act, 1961 and the penalty u/s 271D read with section 273B of the Act is not tenable. The son and father do not fall in the definition of “any other persons”. Therefore, penalty should not be levied. However, the Assessing Officer ignoring the submissions of the assessee imposed penalty U/s 271D of the Act at Rs.3,30,000/- being equal to the amount of the cash loan taken by the assessee. 3. Aggrieved from the penalty order u/s.271D of the I.T Act, the assessee filed an appeal before the CIT(A) who has confirmed the penalty U/s 271D imposed by the Assessing Officer. The Ld. CIT(A) observed that as per section 269SS no person shall take or accept any loan or deposit otherwise then by account payee cheque/draft. In Page | 2 Sukanta Bardhan A.Y. 2009-10 case any deposit is taken contrary to provisions of section 269SS, the penalty u/s271D will be imposed. The only mitigating condition has been laid down in Section 273B as per which, if the assessee proves that there was reasonable cause for such failure. The Ld. CIT(A) also observed that in this case, there was no business exigency for accepting such deposit in cash as there was absolutely no urgency for giving or receiving the amount in cash. Therefore, assessee has to prove that the penalty should not be levied. Hence, the Ld. CIT(A) confirmed the penalty imposed by the Assessing Officer.

Not being satisfied with the order of the Ld. CIT(A), the assessee is in appeal before us, and has taken the following grounds of appeals:

The ld. Counsel for the assessee has submitted that the transaction was happened only between father and son. Father and son does not fall in the definition of “any other person” as explained in section 269SS of the I.T Act, which reads as under: “269SS. Mode of taking and acception certain loans, deposits and specified sum: No person shall take or accept from any other person (herein referred to as depositor), Mode of taking any loan or deposit…..” Therefore, looking to the provisions of section 269SS as explained above, the transactions between father and son does not fall in the definition of “any other person”. The assessee has taken loan and paid loan on account of “Temporary Financial Accommodation” and it is between father and son only. Therefore, transfer of funds between father and son cannot be categorized as a loan and penalty u/s271D Page | 4 Sukanta Bardhan A.Y. 2009-10 read with section 273B of the Act is not applicable. The Ld counsel for the assessee also relied on the following judgments: i) ITA no.198/Kol/2015 in the case of Avijit Saha vs. Joint Commissioner of Income Tax, Hooghly in A.Y. 2009-10 wherein it was held as under: “3. At the outset itself, the Ld. Counsel for the assessee stated that the penalty u/s.271D read with section 269SS of the Act is not applicable to the facts of the case because the assessee accepted an amount of Rs.7.80 lacs on account of temporary financial accommodation from his mother Smt. Alpana Saha. According to him, taking cash from mother/parent out of business expediency cannot attract penalty u/s271D r.w.s. 269SS of the Act. Ld. Counsel drew our attention to the Coordinate Bench decision in Swapan Dutta vs. JCIT, Range-2, Hooghly, reported in 2010 Tax L.R 166, wherein it was held as under: "5. After hearing both the parties and perusing the material available on record and the case law cited by the assessee, we find that in this case, admittedly, the money has come from the parents of the assessee. Therefore, the ratio laid down in the case of G. D. Subraya Sheregar v. I. T.O. (2006) 10 378 by the Bangalore Bench of this Tribunal is squarely applicable to the facts of this case, wherein contravention of provisions of S. 269- SS was held to be not applicable in a transaction between a father and son. We further find that the fact that the assessee was in need of funds and took this money from his parents whose business was conducted by him on their behalf has not been disputed by the revenue before us. In such circumstances, there is a reasonable cause for taking money in cash from his parents out of business expediency. This view of ours is supported by the decision of Rajasthan High Court in the case of CIT vs. Manoj Lalwani (2003) 260 ITR 590; (2003) Tax LR 290) (Raj), wherein it was held that when loan in cash has been taken in view of urgent need connected with export, Tribunal was justified in deleting the penalty u/s. 271D.” Page | 5