SRABANI CHAKRABORTY,KOLKATA vs. JCIT, RG-29, KOLKATA, KOLKATA

This appeal by assessee is arising out of order of CIT(A)-XVI, Kolkata vide Appeal No. 35/ CIT(A)-XVI/Kol/12-13 dated 11.12.2013. Assessment was framed by ITO, Ward- 29(3), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2009-10 vide his order dated 25.10.2011. Penalty was imposed by JCIT, Range-29, Kolkata u/s. 271E of the Act vide his order dated 19.02.2013.

Brief facts of the case are that one Shri Tarun Chakraborty is the proprietor of M/s. Chakraborty Enterprises, who is the husband of the assessee and Confidential Assistant of a Central Minister at the relevant period. In discharge of his duties he was travelling all over India and for running his business smoothly he used to keep some money with his wife to give it to the concern as and when need arises. According to the assessee, she was giving the amounts to M/s. Chakraborty Enterprises whenever they require. According to her, it is purely a family arrangement and has been a practice quite for a long time. However, while processing the return of income of the assessee for AY 2009-10 it was noticed that during the relevant previous year a sum of Rs.6,79,000/- was paid by the assessee to Chakraborty Enterprises by cash and i.e. in violation of provisions of section 269T of the Act. As such, u/s. 271E of the Act the JCIT levied penalty at 100% i.e. Rs.6,79,000/- by his order dated 19.02.2013. Aggrieved by such an order, assessee preferred appeal before the Ld. CIT(A), who dismissed the appeal of assessee confirming the penalty. Challenging the said order, the assessee is in appeal before us on the following grounds:

It is the argument of the Ld. AR that it is only due to the mistake of the Accountant such amounts were shown as loans but, as a matter of fact, it was only a family arrangement. He further submitted that the disclosure of the amount was contained in the compilation of accounts and the explanation offered by the assessee constitutes reasonable cause u/s. 273B of the Act, as such, imposition of penalty is not justified. He further submitted that since there is no tax effect, a liberal construction of the provisions is to be made. For this reason, he prayed to allow the appeal and quash the orders of the authorities below.

It is the argument of the Ld. DR that in this matter the accounts of the assessee itself clearly show that the amounts were taken by the assessee as loan and the repayment thereof in cash are in violation of provisions of section 269T of the Act attracting the penal provision of section 271E of the Act and since the Income Tax Act makes no difference basing on any relationship the JCIT is justified in imposing the penalty and the ld. CIT(A) is justified in confirming the same. For this reason he prayed to dismiss the appeal.

We have heard rival submissions and gone through facts and circumstances of the case. We find that there is no dispute that the assessee is the wife of one Shri Tarun Chakraborty, who is the proprietor of M/s. Chakraborty Enterprises. There is also no dispute that the assessee gave the amounts in cash to M/s Chakraborty Enterprises only. However, since it was shown by the assessee in Balance Sheet as loan and advance in the liability side, the JCIT concluded that it is only repayment of loan in the form of cash attracting the penal provisions u/s. 269T r.w.s. 271E of the Act. Both the authorities below rejected the plea of the assessee that it is only a family arrangement and not otherwise. When the plea of family arrangement is taken, the transactions were between the wife and husband, and more particularly in the light of the fact that these payments were shown in the accounts of the assessee, it does not appear to be a matter to brush aside the plea of the assessee that the Accountant committed a mistake in treating the payments as repayment of loans. Should there be any mala fide intention, perhaps the assessee would not have shown

The Ld. AR placed reliance on a decision of Hon’ble Apex court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City reported in (2015) 379 ITR 521 (SC) for the principle that without recording of any satisfaction no penalty could be levied though the AO wanted penalty proceedings to be initiated u/s. 271(1)(c) of the Act. A coordinate Bench of this Tribunal in the case of Vinod Kr. Agarwal Vs. JCIT in and 238/Kol/2013 dated 04.02.2016 while following the above decision of Hon’ble Apex Court deleted the impugned penalty levied u/s. 271D and 271E of the Act.

On merits also, Ld. AR placed reliance on a decision in the case of CIT Vs. Sunil Kumar Goel (2009) 315 ITR 0163 (P&H) for the principle that a family transaction between the two independent assessee based on an act of casualness especially in a case where the disclosure thereof is contained in the compilation of accounts, and which has no tax effect, establishes ‘reasonable cause’ u/s. 273B of the Act for not invoking the penal provisions of ss. 271D and 271E of the Act. Basing on this judgment, Ld. AR submits that in this matter the husband entrusted some amounts to the wife to be used for his business in his absence as such, such an act of casualness does not give rise to any commercial relations between the wife and the husband. He further submitted that all these facts are disclosed in the accounts of the assessee but it is only due to the mistake of the Accountant such amounts were treated as loans and advances but, as a matter of fact, it is only pursuant to a family arrangement the wife dealt with the money of the husband in his absence only for his business purposes.

Considering the facts and circumstances as a whole, an element of truth cannot be ruled out in the contention of the assessee. The assessee and her husband are independent assessee and dealing with the money of husband for the purpose of business in his absence

In the result, the appeal of assessee is allowed.