Intra-family cash transactions not treated as loans or deposits, so penalties for sections 269SS and 269T violations were deleted.

Cash receipts from close family members and related entities did not attract penalty under section 271D because, on the jurisdictional High Court principle applied by the Tribunal, such intra-family transactions were not shown to be loans or deposits in substance for section 269SS. The corresponding cash repayments to close relatives also did not attract penalty under section 271E on the same reasoning under section 269T, and the Tribunal additionally noted that the assessment under section 143(3) recorded no adverse finding on the transactions. Both penalties were deleted and the assessee succeeded in both appeals.

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Issues: (i) Whether cash receipts from close family members and related entities attracted penalty under section 271D of the Income-tax Act, 1961 for alleged violation of section 269SS; and (ii) whether cash repayments to close relatives attracted penalty under section 271E of the Income-tax Act, 1961 for alleged violation of section 269T.

Issue (i): Whether cash receipts from close family members and related entities attracted penalty under section 271D of the Income-tax Act, 1961 for alleged violation of section 269SS.

Analysis: The receipts were found to be from close family members and related entities, and the Revenue did not dispute the relationship. The Tribunal followed the jurisdictional High Court decision holding that transactions between close family members do not assume the character of loans or deposits for the purposes of sections 269SS and 269T.

Conclusion: The penalty under section 271D was held to be unsustainable and was directed to be deleted.

Issue (ii): Whether cash repayments to close relatives attracted penalty under section 271E of the Income-tax Act, 1961 for alleged violation of section 269T.

Analysis: The repayments were likewise made to close relatives, and the same legal principle governing family transactions applied. The Tribunal also noted that the assessment under section 143(3) was completed without any adverse finding on the impugned transactions.

Conclusion: The penalty under section 271E was held to be unsustainable and was directed to be deleted.

Final Conclusion: Both penalties were set aside, and the assessee succeeded in both appeals.

Ratio Decidendi: Cash transactions between close family members, when not shown to be loans or deposits in substance, do not attract penalty under sections 271D and 271E for breach of sections 269SS and 269T.

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