S. 269SS not violated if Assessee borrows in cash from Relatives to meet urgent needs

S. 269SS not violated if Assessee borrows in cash from Relatives to meet
urgent needs<http://taxguru.in/income-tax-case-laws/269ss-violated-assessee-borrows-cash-relatives-meet-urgent.html>

In our considered view, in the light of therelationship 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.

The contention of the Revenue is that the amount received by the assessee
from her father-in- has to be treated only as a loan and if is a loan, then
the assessee is liable to pay penalty under Section 271D of the Income Tax Act.
Whether it is a loan or other transaction, still the other provision,
namely, Section 273B of the Income Tax Act, comes to the rescue of the
assessee, if she ables to show reasonable cause for avoiding penalty under
Section 271D of the Income TaxAct. The Tribunal has rightly found that the
transaction between the daughter-in-law and father-in-law is a reasonable
transaction and a genuine one owing to the urgent necessity of money to be
paid to the seller. We find that this would amount to reasonable cause
shown by the assessee to avoid penalty under Section 271D of the Income
Tax Act.

The Tribunal, referring to the decision of this Court reported in *Lakshmi
Trust Co.* (*supra*), has rightly allowed the appeal.*
*

*HIGH COURT OF MADRAS*

*Commissioner of Income-tax – I*

*v.*

*Smt. M.Yesodha*

TAX CASE (APPEAL) NO. 320 OF 2010

Date of pronouncement – 05.02.2013

*JUDGMENT*

*R. Banumathi, J.* – The Revenue has come forward with this appeal and the
same was admitted on the following substantial question of law:

"Whether on the facts and in the circumstances of the case, the Income
Tax Appellate Tribunal was right in deleting the penalty of Rs. 20,99,393/-
levied under Section 271D of the Income Tax Act for violation of Section
269SS on the ground that the assessee had taken the loan only from her
father-in-law and the transaction was genuine?"

*2.* The assessee, for the assessment year 2005-2006, claimed loan of Rs.
20,99,393/- taken from her father-in-law for purchasing the property. The
Assessing Officer initiated penalty proceedings under Section 271D of
the Income Tax Act, 1961 on the ground that the assessee had obtained a
loan of Rs. 20,99,393/- in cash from her father-in-law, which is in
contravention of the provision of Section 269SS of the Income Tax Act.
During the penalty proceedings, the assessee claimed that the amount
received in cash from her father-in-law – M. Kathirvel, was a gift and not
a loan. The Assessing Officer held that the assessee received the amount as
a loan and not as a gift, because the same was shown as a loan in the
balance sheet of the assessee, which was filed along with the return of
income. Hence, the Assessing Officer levied penalty of Rs. 20,99,393/-.

*3.* The assessee challenged the penalty levied by the
Assessing Officer before the Commissioner ofIncome Tax (Appeals). The
Commissioner of Income Tax (Appeals) dismissed the appeal holding that the
Assessing Officer has rightly levied penalty under Section 271D of
the Income Tax Act after giving opportunity to the assessee and on being
fully satisfied that the amount in cash taken by the assessee from her
father-in-law was not a gift but only a loan.

*4.* In the appeal preferred before the Tribunal by the assessee, the
Tribunal referred to the decision of the Tribunal in the case of *Shri M.
Raju* v. *Addl. CIT* [I.T.A. No. 899/Mds/2006] and the decision of the
Tribunal, Pune Bench in the case of *ITO* v. *Sunil M. Kasliwal *[2005] 94
ITD 281 (Pune)(TM). The Tribunal also referred to the judgment of this
Court *CIT* v. *Lakshmi Trust Co. *[2008] 303 ITR 99 (Mad.) and held that
in the facts and circumstances of the case, levy of penalty is not
warranted. The Tribunal further held that the transaction of receiving
amount of Rs. 20,99,393/- is between the father-in-law and daughter-in-law
and the genuineness of the transaction is not disputed, in which, the
amount has been paid by the father-in-law for the purchase of property. On
those findings, the Tribunal allowed the appeal.

*5.* Mr. J. Narayanasamy, learned standing counsel appearing for
the Revenue submitted that the Tribunal has not appreciated the nature of
transaction and that the assessee had taken only loan of Rs. 20,99,393/-
from her father-in-law. He further submitted that the assessee had no where
pleaded any 'reasonable cause' as contemplated under Section 273B of
the Income Tax Act and while so, the Tribunal was not right in saying that
the genuineness of the transaction is not disputed. He also submitted that
the Tribunal was not right in re-appreciating the factual findings recorded
by the Assessing Officer and the Commissioner of Income Tax (Appeals) that
the cash taken by the assessee from her father-in-law was only a loan
transaction.

*6.* Per contra, learned counsel appearing for the assessee submitted that
as evident from the stand of the assessee before the Assessing Officer, the
amount taken by the assessee from her father-in-law was a cash gift and no
loan was taken by the assessee.

*7.* We have carefully considered the submissions of learned standing
counsel appearing for the appellant and the learned counsel appearing for
the assessee.

*8.* Under Section 273B of the Income Tax Act, on 'reasonable cause' being
shown, no penalty shall be imposable. As rightly pointed out by the learned
counsel appearing for the assessee, in the reply furnished before the
Assessing Officer, the assessee clearly mentioned that her father-in-law –
M. Kathirvel sent the amount of Rs. 20,99,393/- directly to the seller of
the house bought in the name of the assessee at Chennai and that necessary
funds were provided by the assessee's father-in-law as a cash gift and the
said cash gift was taken urgently by the assessee to get the purchase deed
executed and no loan was taken from her father-in-law. Even though the
assessee had not taken a specific plea of reasonable cause, it must be
considered as applied to human action. Where the transactions are bonafide,
penalty cannot be imposed.

*9.* To substantiate the plea that her father-in-law had advanced the
amount as cash gift, the assessee's father-in-law had filed an affidavit
before the Commissioner of Income Tax (Appeals). Regarding the affidavit,
remand report was called for from the Assessing Officer. In the remand
report, the Assessing Officer has doubted the nature of transaction. 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.

*10.* The contention of the Revenue is that the amount received by the
assessee from her father-in- has to be treated only as a loan and if is a
loan, then the assessee is liable to pay penalty under Section 271D of
the Income Tax Act. Whether it is a loan or other transaction, still the
other provision, namely, Section 273B of the Income Tax Act, comes to the
rescue of the assessee, if she ables to show reasonable cause for avoiding
penalty under Section 271D of the Income TaxAct. The Tribunal has rightly
found that the transaction between the daughter-in-law and father-in-law is
a reasonable transaction and a genuine one owing to the urgent necessity
of money to be paid to the seller. We find that this would amount to
reasonable cause shown by the assessee to avoid penalty under Section 271D
of the Income Tax Act.

*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
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."

*12.* The Tribunal, referring to the decision of this Court reported
in *Lakshmi
Trust Co.* (*supra*), has rightly allowed the appeal. We do not find any
error or infirmity in the order of the Tribunal to warrant interference.
Accordingly, the substantial question of law is answered in favour of the
assessee and this Tax Case (Appeal) stands dismissed. No costs.