2016 (9) TMI 262 - AT - Income Tax

Tribunal Cancels Penalties for Family Transactions under Income Tax Act

The Tribunal allowed the appeals, condoning the delay in filing and setting aside the penalties levied under Sections 271D and 271E, directing the AO to ... Reasonable cause - penalty under section 271D - penalty under section 271E - sections 269SS and 269T - section 273B as a non-obstante clause - genuineness of transactions - transactions between close family membersPenalty under section 271D - sections 269SS and 269T - reasonable cause - section 273B as a non-obstante clause - transactions between close family members - genuineness of transactions - Validity of penalty levied under section 271D for acceptance of cash loans in alleged contravention of section 269SS - HELD THAT: - The Tribunal held that the assessee accepted cash loans from close family members (husband and mother-in-law) and repaid in cash, but the genuineness of the transactions was not disputed. Applying section 273B, which operates as a non-obstante clause permitting an assessee to establish a 'reasonable cause' for non-compliance with sections 269SS/269T, the Tribunal concluded that bona fide belief coupled with undisputed genuineness and absence of tax evasion can constitute a reasonable cause. The Tribunal distinguished authorities where repeated cash transactions with moneylenders or lack of explanation for urgency justified penalty, observing those facts were not present here. On the facts, the isolated family transactions and business exigency explained by the assessee warranted a liberal construction of 'reasonable cause' and negated imposition of penalty under section 271D. [Paras 16, 17, 20]Penalty under section 271D cancelled and AO directed to withdraw/adjust demand.Penalty under section 271E - sections 269SS and 269T - reasonable cause - section 273B as a non-obstante clause - transactions between close family members - genuineness of transactions - Validity of penalty levied under section 271E for repayment of cash loan in alleged contravention of section 269T - HELD THAT: - For the repayment side, the Tribunal applied the same reasoning under section 273B: where the transaction is genuine, between close family members, not repeated, and there is no evidence of tax avoidance, the assessee may establish a 'reasonable cause' for non-compliance with section 269T. The Tribunal relied on precedents holding that bona fide belief and undisputed genuineness can constitute reasonable cause and distinguished cases involving repeated cash dealings or unexplained urgency. In the facts of this case the conditions for invoking penalty were not satisfied and penalty under section 271E was held not imposable. [Paras 16, 17, 20]Penalty under section 271E cancelled and AO directed to withdraw/adjust demand.Final Conclusion: Both appeals allowed: penalties imposed under sections 271D and 271E set aside because the assessee established reasonable cause under section 273B arising from genuine, non-repeated cash transactions with close family members and absence of tax evasion; AO directed to cancel the penalties for Assessment Year 2007-08. Issues Involved:1. Delay in filing appeals.2. Levy of penalty under Section 271D of the Income Tax Act.3. Levy of penalty under Section 271E of the Income Tax Act.4. Reasonable cause for violation of Sections 269SS and 269T of the Income Tax Act.Detailed Analysis:1. Delay in Filing Appeals:The assessee filed appeals with a delay of 69 days, attributing it to serious illness and medical examination for enterocolitis and abdominal pain. The Tribunal, after considering the affidavit and arguments, found a reasonable cause for the delay and condoned it, admitting the appeals for adjudication.2. Levy of Penalty under Section 271D:The AO levied a penalty of Rs. 1,75,000 under Section 271D for accepting loans in cash amounting to Rs. 45,000 from Smt. Aparna A. Joshi and Rs. 1,30,000 from Smt. Mandar A. Joshi, violating Section 269SS. The assessee argued that the transactions were with close family members and were genuine, not intended to evade tax. The CIT(A) upheld the penalty, stating that the genuineness of the transaction does not exempt it from the ambit of Section 271D, and ignorance of law is not an excuse.3. Levy of Penalty under Section 271E:The AO also levied a penalty of Rs. 2,35,000 under Section 271E for repaying loans in cash to Smt. Aparna A. Joshi, violating Section 269T. The CIT(A) upheld this penalty as well, echoing similar reasons as for the penalty under Section 271D.4. Reasonable Cause for Violation of Sections 269SS and 269T:The assessee contended that the transactions were genuine and due to business exigency, and there was no intention to evade tax. The Tribunal considered various judgments, including the Hon'ble Punjab & Haryana High Court in the cases of CIT Vs. Sunil Kumar Goel and CIT Vs. Saini Medical Store, which established that genuine transactions between family members, without tax evasion, constitute a 'reasonable cause' under Section 273B, exempting the assessee from penalties under Sections 271D and 271E.The Tribunal found the assessee's arguments persuasive, noting that the transactions were genuine and between close family members. The Tribunal also noted that the assessee had a bona fide belief that transactions with family members were not covered by Sections 269SS and 269T. The Tribunal concluded that the penalties under Sections 271D and 271E were not justified and directed the AO to cancel the penalties.Conclusion:The Tribunal allowed the appeals, condoning the delay in filing and setting aside the penalties levied under Sections 271D and 271E, directing the AO to cancel the penalties. The judgment emphasized that genuine transactions between family members, without intent to evade tax, constitute a reasonable cause for non-imposition of penalties under the Income Tax Act.