TaxTMI 
TaxTMI 
2017 (7) TMI 1331
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....ted penalty proceedings under section 271D of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). During the course of assessment proceedings, it was noticed that the assessee had obtained unsecured loan of Rs. 37,35,000/- from his daughter Smt. P.Shilpa, who is on the rolls of the ITO, Ward-2, Bhimavaram. On verification of the copies of the ledger extract of the loan account, it is found that out of total loan amount from Smt. P. Shilpa, an amount of Rs.18 lakhs was accepted by the assessee, in cash on 01/11/2004 by means of two receipts bearing No. 93 & 94 for Rs. 9 lakhs each. The balance amount of Rs. 19,35,000/- was accepted on 02/11/2004 through bank cheque bearing Nos. 95324 & 95325 for an amount of Rs.9,85,000/- & Rs. 9,50,000/- respectively. In view of the above, the Assessing Officer came to a conclusion that the assessee is liable for penalty under section 271D as he was violated the provisions of section 269SS of the Act. The Assessing Officer has issued a show-cause notice dated 10/02/2011 calling explanation from the assessee. The assessee, in response to that show-cause notice, it was submitted that the transa....
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....rriage the assessee took the lands of his relatives on lease for carrying out fish culture on her behalf in October, 2004 i.e. immediately after she attained majority, and the assessee, as father, naturally managed all the affairs pertaining to her business [and also to her person till she got married in the year February, 2009 after she completed her studies]. Thus, at the time of carrying on fish culture on her behalf by the assessee, she was only a student and as such as her father and care taker the assessee conducted and attended. to all her business matters, whether day-to-day matters or otherwise, including the handling of money. 6. Since already the assessee was facing considerable financial stringencies, in October, 2004 for financing the fish culture activities he arranged a loan in her name from Corporation Bank, Bhimavaram with the assessee himself giving the guarantee for the loan. The loan amounts were partly disbursed on 1.11.2004. Since the assessee was looking after all the matters pertaining to his daughter, the assessee took the amounts so disbursed in her name to the tune of Rs. 9,00,000 in two installments on 1.11.2004 and, pending the utilization ther....
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.... amount received from his daughter P.Shilpa is not a loan as is evidenced by the fact that no interest has been paid on such amount. Secondly, the appellant has stated that the entire transaction is bonafide and there is no unaccounted money involved, Moreover, the appellant has actually obtained a loan from a Nationalized Bank in the name of his daughter by mortgaging his personal property. The purpose of loan was to create a corpus for his then unmarried daughter and the amount was obtained partly In cash due to a bonafide belief that provisions of Section 269SS do not apply to this transaction. 5.6 As regards the first contention of the appellant, it is suffice to say that the provisions of Section 269SS apply to all kinds of deposits received and not merely interest bearing loans. However, the appellant has placed reliance on the decision of the Hon'ble ITAT, Visakhapatnam Bench in the case of Dr. Datta Siva Sankar Rao vs. Addl. CIT, Eluru ITA No.69 & 70/Vizag/2008 and in the case of Addl.CIT, Rajahmundry vs. Harshavardhana Raju ITA No.208/vizag/2011. In both decisions, the Hon'ble ITAT has held that "since assessee has taken a loan from his dose relat....
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....action was done in between Corporation bank and his daughter Smt. P. Shilpa and in turn, the amount was received by the assessee, is a genuine transaction, the Assessing Officer has also not doubted about the transaction. We find that when assessee is carrying business for himself and on behalf of his daughter who was not yet married. For the purpose of business, assessee's daughter obtained loan, for which assessee stood guarantor. The loan amount was received by the assessee through her daughter. It is also a fact that assessee has not paid any interest to his daughter. This transaction is only in between father and his unmarried daughter. Therefore, in our opinion, section 269SS has no application to the facts of the present case. 10. Under similar circumstances, the coordinate bench of the tribunal in the case of Bh. Harshavardhana Raju (supra), has considered the scope of section 269SS and held as under:- "6. We have heard the rival contentions and carefully perused the record. The undisputed facts are that the assessee was a student at the relevant point of time and the year under consideration was his 2nd year's....
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....direct role to play in the method and mode of transaction in augmenting funds for the purpose of investment in his name, he cannot be entirety blamed for the default committed by his grandfather on his behalf. Having regard to the totality of the facts and circumstances of the case, it can be said that there existed a reasonable cause on the part of the appellant in committing default in accepting cash loans exceeding the prescribed limit from his family members in contravention of the provisions of the section 269SS of the Act. Accordingly, the appellant deserved a lenient view on the issue and, consequently, penalty under section 2710 of the Act in his case was not exigible. Hence, the order levying penalty of Rs. 9,39,000/- under section 2710 of the Act is, hereby, cancelled". Thus, we notice that the Learned CIT(A) has taken into consideration the fact that the assessee, being a student studying outside his native place, had no direct role to play in the method and mode of transaction in augmenting funds for the purpose of investment in his name. Further the impugned amounts have been received only from the close relatives of the assessee. In these circumstances, the e....
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.... there is no dispute about the fact that the instant cash transactions of the assessee were with the sister concern, and that, these transactions were between the family, and due to business exigency. A family transaction, between two independent assessees, based on an act of casualness, specially in a case where the disclosure thereof is contained in the compilation of accounts, and which has no tax effect, establishes "reasonable cause" under s. 273B. Since the assessee had satisfactorily established "reasonable cause" under s. 273B, he must be deemed to have established sufficient cause for not invoking the penal provisions (ss. 271D and 271E of the Act) against him." In the case of Star Electroplaters Vs. ITO (supra), the Tribunal has taken a view that the assessee having accepted loans in cash mainly from the party for whom it was doing job work to meet its business exigencies after making huge investment in fixed assets, there was no willful neglect of law on the part of assessee and therefore the penalty u/s 217D was not justified. In the case of Sharda Educational Trust Vs. ACIT (supra), the Tribunal has examined the circular no.387 dated 6.7.84 ....