ITAT exempts penalty under section 271D for absence of cash loan, citing familial ties & expense nature. The ITAT allowed the appeal, directing the A.O. to delete the penalty imposed under section 271D of the Income Tax Act, 1961. The appellant's familial ...
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
ITAT exempts penalty under section 271D for absence of cash loan, citing familial ties & expense nature.
The ITAT allowed the appeal, directing the A.O. to delete the penalty imposed under section 271D of the Income Tax Act, 1961. The appellant's familial relationship with the partners of the alleged lender, coupled with the nature of transactions as current accounts for household expenses, led to the finding that no cash loan was received. The appellant's cash book entries supported the absence of any cash transactions, resulting in the exoneration of the appellant from violating the relevant provisions of the Act.
Issues: - Appeal against penalty imposed under section 271D of the Income Tax Act, 1961.
Analysis: 1. The appellant challenged the penalty order under section 271D, contending that it was unlawful and should be quashed. The specific penalty amount of Rs. 1,11,620 was disputed on legal and factual grounds, urging for its deletion in full. The appellant also sought permission to modify the grounds of appeal before the hearing.
2. The penalty was imposed for allegedly receiving a cash loan of Rs. 1,11,620 from M/s Ram Bilas Shiv Kumar. The CIT(A) upheld the penalty, leading to the appeal before the ITAT. The appellant argued against the penalty imposition.
3. Upon review, it was revealed that the family structure involved two partners in M/s Ram Bilas Shiv Kumar, with the appellant being the brother of one partner and the son of another. The family operated jointly, sharing household expenses equally among the family members in the firm's books.
4. The Assessing Officer (A.O.) alleged that the appellant received cash loans on various dates. However, it was clarified that the expenses were not loans but joint family expenses debited equally to the family members. The appellant only made a direct payment of Rs. 10,000 to the Post Office for purchasing NSC.
5. The appellant's cash book demonstrated that household expenses were debited equally to the family members, indicating no cash loan. The appellant, being a small trader without a journal, recorded transactions in the cash book, reflecting the nature of expenses and payments made.
6. The transactions were detailed in the cash book, showing that the appellant did not receive any cash. The expenses were debited to the appellant's account, with corresponding entries in the firm's account, clarifying the flow of funds within the family structure.
7. Citing precedents, it was established that the transactions between the appellant and the sister concern were current accounts, not loans or deposits. The nature of the accounts and the absence of a loan or deposit relationship exempted the appellant from violating the relevant sections of the Act.
8. Consequently, the ITAT found no justification for the penalty under section 271D and directed the A.O. to delete the penalty.
9. As a result, the appeal of the assessee was allowed, and the order was pronounced in open court on 20th June 2019.
Full Summary is available for active users!
Note: It is a system-generated summary and is for quick reference only.
TaxTMI 
of 
Join Channel
TaxTMI 
