2017 (7) TMI 68 - AT - Income Tax

Tribunal cancels penalty under Income Tax Act for genuine family transactions

The Tribunal allowed the appeal, deleting the penalty imposed under Section 271E of the Income Tax Act. It was held that transactions between the assessee ... Penalty order passed u/s 271E - “reasonable cause” - Held that:- The assessee had taken cash loan from her husband and mother-in-law which has been repaid in cash and there is no repeated transactions and the assessee has explained the reasonable cause for accepting such loans and repayment thereof in cash, therefore, in our opinion, the expression “reasonable cause” in section 273B for non imposition of penalty u/s.271D and 271E would have to be construed liberally. Accordingly we hold that penalty u/s.271D and 271E are not imposable in the facts of the present case. See case of M/s Deepali Mandar Joshi [2016 (9) TMI 262 - ITAT PUNE] - Decided in favour of assessee. Issues Involved:1. Validity of penalty imposed under Section 271E of the Income Tax Act.2. Applicability of Sections 269SS and 269T to transactions between close family members.3. Determination of 'reasonable cause' under Section 273B for non-imposition of penalty.Issue-wise Detailed Analysis:1. Validity of Penalty Imposed under Section 271E:The assessee, engaged in yarn trading, repaid a loan of Rs. 2,05,000 in cash to his wife. The Assessing Officer (AO) initiated penalty proceedings under Section 271E for contravening Section 269T, which prohibits repayment of loans or deposits in cash exceeding Rs. 20,000. The AO rejected the assessee's contention that the repayment was made from the cash balance of his proprietary concern and was not undisclosed income. Consequently, a penalty of Rs. 2,05,000 was levied. The Commissioner of Income Tax (Appeals) upheld this penalty, stating that the repayment did not constitute an emergency that justified bypassing banking channels.2. Applicability of Sections 269SS and 269T to Transactions Between Close Family Members:The assessee argued that the repayment was to his wife to clear her personal obligations urgently, believing that Sections 269SS and 269T were not applicable to transactions between close family members. The case referenced by the assessee, M/s Deepali Mandar Joshi Vs. Addl. CIT, supported this view, where the Pune Bench of the Tribunal held that genuine transactions between close family members do not attract penalties under Sections 269SS and 269T. The Tribunal in this case found the transactions genuine and noted that the amount was already taxed in the assessee's business, thus not constituting undisclosed income.3. Determination of 'Reasonable Cause' Under Section 273B:The Tribunal examined if there was a 'reasonable cause' under Section 273B for non-imposition of penalty. The assessee's belief that the provisions of Section 269T did not apply to transactions with his wife was considered bona fide. The Tribunal cited the Hon’ble Punjab & Haryana High Court's decision in Sunil Kumar Goel, which emphasized that bona fide belief and genuineness of transactions constitute a 'reasonable cause' under Section 273B. The Tribunal also referenced the Saini Medical Store case, where the genuineness of transactions and lack of tax evasion were deemed reasonable causes for not imposing penalties under Sections 271D and 271E.The Tribunal concluded that the transactions between the assessee and his wife were genuine, undertaken under a bona fide belief, and constituted a reasonable cause under Section 273B. Therefore, the penalty under Section 271E was not justified.Conclusion:The Tribunal allowed the appeal, deleting the penalty levied under Section 271E, and reversed the order of the Commissioner of Income Tax (Appeals). The Tribunal emphasized that genuine transactions between close family members, undertaken under a bona fide belief, do not attract penalties under Sections 269SS and 269T, and constitute a reasonable cause under Section 273B for non-imposition of penalties. The appeal was allowed, and the penalty was canceled.Order:The appeal of the assessee was allowed, and the penalty levied under Section 271E was deleted. The order was pronounced in the open court on 12th January 2016.