Tribunal Admits Appeal, Cancels Penalty: Income Tax Act Section 271D Challenge

The Tribunal condoned the delay in filing the appeal and admitted it for adjudication. The penalty under Section 271D of the Income Tax Act, imposed on the assessee for receiving a cash loan from her husband, was challenged. The Tribunal found the explanation provided by the assessee reasonable and plausible, noting the genuine nature of the transaction for purchasing a family property. Consequently, the penalty was deleted, and the appeal of the assessee was allowed.

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Issues Involved:
1. Delay in filing the appeal.
2. Levy of penalty under Section 271D of the Income Tax Act for contravention of Section 269SS.
3. Applicability of Section 269SS to cash transactions between close relations, specifically between husband and wife.
4. Reasonable cause under Section 273B justifying the non-compliance with Section 269SS.

Detailed Analysis:

1. Delay in Filing the Appeal:
At the outset, the Tribunal noted there was a delay in filing the present appeal. After hearing both parties and considering the material placed on record, the delay was condoned, and the appeal was admitted for adjudication.

2. Levy of Penalty under Section 271D:
The assessee challenged the confirmation of the levy of penalty under Section 271D of the Income Tax Act. The penalty was imposed for receiving a loan in cash from her husband, which was alleged to be in contravention of Section 269SS. The assessee argued that the cash received was not a loan but a financial help for purchasing a plot and constructing a house, and thus, Section 269SS should not apply.

3. Applicability of Section 269SS to Cash Transactions between Close Relations:
The assessee contended that Section 269SS does not bar genuine cash transactions of loans between close relations, such as husband and wife, especially when there is no intention to evade taxes. The assessee cited various case laws to support this contention, including decisions from the Rajasthan High Court and ITAT Benches, which held that Section 269SS does not apply to transactions between close relations if there is a reasonable cause.

4. Reasonable Cause under Section 273B:
The assessee argued that there was a reasonable cause for receiving the cash, as the money was used for purchasing a family residence and not for any commercial purpose. The Tribunal considered several precedents where penalties under Section 271D were deleted due to reasonable cause, including the case of CIT vs. Raj Kumar Sharma and CIT vs. Sunil Kumar Goel. The Tribunal found that the assessee had a reasonable cause within the meaning of Section 273B, as the transaction was genuine and there was no intention to evade taxes.

Tribunal's Findings:
The Tribunal observed that the transaction involved the purchase of a plot and construction thereon, with the plot registered in the name of the assessee and funded by her husband. The practice of registering property in the wife's name was noted to be influenced by family and societal factors and government incentives. The Tribunal found the explanation provided by the assessee reasonable and plausible, noting that the payment details were documented in the registered sale deed. The Tribunal also considered the urgency and necessity of making cash payments as explained by the assessee.

The Tribunal concluded that the assessee had offered a reasonable explanation justifying the cash transactions. Citing various decisions supporting the assessee's case, the Tribunal held that the assessee did not deserve to be penalized under Section 271D for receiving money from her husband for purchasing family property. Consequently, the penalty was directed to be deleted.

Judgment:
The appeal of the assessee was allowed, and the penalty under Section 271D was deleted.

Order Pronounced:
The order was pronounced in the open Court on 21/10/2021.

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