Personal cash dealings between close relatives were treated as non-business arrangements, defeating penalty under cash transaction rules.

Cash receipts and repayments between close relatives, explained as personal arrangements to help purchase a flat, were treated as non-business transactions. The uncle explained the source of funds, and the Revenue did not produce material to dislodge that explanation. On those facts, the dealings were found to be personal in nature and not loans or deposits in the business sense, so the statutory prohibitions on cash acceptance and cash repayment were held inapplicable. The penalty imposed under the relevant cash transaction provisions was therefore not sustainable and was deleted.

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Issues: Whether cash receipts and repayments between an uncle and nephew, stated to be for personal purposes, constituted loans attracting penalty under the provisions governing cash loans and repayments.

Analysis: The material on record showed that the transactions were between close relatives and were consistently explained as personal arrangements made to assist the assessee in purchasing a flat. The source of funds was explained by the uncle, and the Revenue did not bring material to dislodge that explanation. On these facts, the transactions were found to be personal in nature and not business loans or deposits. In that situation, the statutory prohibitions on cash acceptance and cash repayment were held not to apply so as to sustain penalty.

Conclusion: The penalty levied under the relevant provisions was not sustainable and was rightly deleted.

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