admin November 16, 2019

धारा 269SS का उल्लंघन नहीं एवं धारा 271D में पेनल्टी नहीं अगर परिवार के सदस्य को जमीन खरीदने या मेडिकल सहायता के लिए रोकड़ दिए और वापस लिए हैं और उसका उद्देश्य लोन नहीं है। CUTTACK TRIBUNAL ‌Sept 23,2019 को फैसला दिया है 

GOURANG CHANDRA NAYAK vs. JOINT COMMISSIONER OF INCOME TAX

CUTTACK TRIBUNAL

CHANDRA MOHAN GARG, JM.

ITA No. 369/CTK/2018

Sep 23, 2019

(2019) 57 CCH 0069 CuttackTrib

Legislation Referred to

Section 269SS, 271D

Case pertains to

Asst. Year 2013-2014

The assessee is an individual derives pension income from Bank of India, Zonal Office, Bhubaneswar. This is not a case of the Assessing officer that the assessee is engaged in the business activity or entrepreneur, who received the impugned amounts under commercial transaction in contravention of section 269SS of the Act.

(Para 19)

 

First transaction of Rs.3 lakhs is pertaining to cash received by the assessee from his father, Shri N.C.Nayak. Keeping in view the copy of bank account, it was observed that the amount of Rs.3,03,000/- has been withdrawn on 27.9.2012 by the assessee and the assessee has deposited Rs.3 lakhs on 21.9.2012 in his bank account No.511342710000152. Assessee gave this amount to his father after withdrawing the same from his bank account towards purchase of land and due to cancellation of land deal, it was returned to the assessee by his father and same was deposited by the assessee to his bank account. As the land deal was under process and for acquisition of land and the intention of the assessee was to contribute and support his family. Therefore, on cancellation of land deal, the amount was returned to the assessee and such transaction cannot be tagged as loan or advance in contravention of section 269SS of the Act. Hence, penalty u/s 271D cannot be imposed on this count.

(Para 20)

 

The assessee is a senior citizen having heart ailment, who also underwent open-heart surgery. The assessee submitted confirmations from four relatives alongwith their address and PAN nos., wherein, it was stated by them that they have the impugned amounts to the assessee for his treatment under medical emergency, then such transaction cannot be held as transaction of loan or advance.

(Para 21)

 

The object of introducing section 269SS of the Act was to ensure that a tax payer was not allowed to give false explanation for his unaccounted money or if the tax payer made some false entries, he would not escape by giving false explanation for the same. It was noticed by the tax authorities that during the search and seizure operation unaccounted money was found and the taxpayer usually gave an explanation that he had borrowed or received deposits from his relatives or friends and, consequently, it became easy for the so called lender to manipulate his record to suit the plea of the tax payer Section 269SS of the Act was introduced by the legislature in order to curb this menace and do away making false entries in the books of account and later give an explanation for the same. Consequently, section 269SS of the Act was inserted to the Act requiring that no person shall take or accept any loan or deposit, if it exceeds more than Rs.20,000/- in cash. Further Section 271D provides that a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS of the Act, he would be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. Consequently, Section 271D of the Act caused undue hardship to the tax payers where they took a loan or deposit in cash exceeding Rs.20,000/- even where there was a genuine or bonafide transaction under exigency or emergency.

(Para 22)

 

Alleged cash is a simply transaction of transfer of money from one family members to another family members to support him during medical emergency period and such transaction cannot be treated as loan or advance and transaction falling under the ambit of section 269SS of the Act attracting penalty u/s 271D of the Act. Therefore, the penalty imposed by the AO and confirmed by the CIT(A) needs to be deleted.

(Para 23)

In favour of

Assessee

Cases Referred to

Hindustan Steel Limited Vs. State of Orissa(83 ITR 26(SC)

CIT Vs Maa Khodiar Construction (2014 365 ITR 474(Guj)

Counsel appeared:

N.R. Biswal, AR for the Assessee.: Subhendu Dutta, DR for the Revenue

1. M. GARQ, JM.

1. This is an appeal filed by the assessee against the order of the CIT(A)-2, Bhubaneswar dated 12.9.2018 for the assessment year 2013-14

2. The grounds of appeal raised by the assessee are as under:

1. For that, the Ld. CIT(A) is illegal and unjustified towards conforming the penalty of Rs. 14,00,000/- u/s 271D of the Income Tax Act 1961. During the course of assessment the Assessee has explained all the cash transactions of Rs. 14,00,000/- before the Ld. A.O. Neither any of the transactions were doubtful nor any transaction is made to prevent tax evasion. The Ld. A.O. is agreed upon the same & mentioned in the Asst. Order. The assessee has relied and submitted the Judgement of Hindustan Steel Limited Vs. State of Orissa(83 ITR 26(SC), CIT Vs Maa Khodiar Construction (2014 365 ITR 474(Guj), Omec Engineers vs. Cit (Jharkhand High Court) (2007) and jurisdictional ITAT decision i.e. the decision of the ITAT, Cuttack Bench in case of Dipak Kumar Sahu Vs. JCIT (ITA NO.115/CTK/2016) and PATO Builders Pvt. Limited Vs. ACIT of Ranchi ITAT, Ranchi (ITA No. 33/Ran/2014). However Ld. CIT(A) mentioned that the said case laws are not applicable as the facts of the cases are different as decided by the JCIT. Therefore The Ld. CIT(A) omitted to follow the question of law decided in the said judgement Therefore imposition of penalty of Rs. 14,00,000/- is illegal and should be deleted in full.

2. For that, the Ld. CIT(A) is illegal and unjustified towards conforming the penalty of Rs. 14,00,000/- u/s 271D of the Income Tax Act 1961 when the transactions are neither loan nor deposit in nature. The Ld. A.O. has not arrived at a conclusion that the transactions are either loan or deposit. therefore neither the A.O. nor the JCIT nor the CIT(A) found that the transactions are loan or deposit in nature. The cash transactions are made for some reasonable cause and duly submitted before the A.O. & JCIT. Therefore violation of Sec. 269SS does not attract. Therefore imposition of penalty of Rs. 14,00,000/- u/s 271D is illegal and should be deleted in full.

3. For that, the Ld. CIT(A) is illegal and unjustified towards conforming the penalty of Rs. 14,00,000/- u/s 271D of the Income Tax Act 1961. Out of which Rs.3,00,000/- Lakh was returned by his father having 91 years old to whom money were given for purchase of*a property & the same were given after withdrawn from his bank account on 27.Q9.20T2″. Besides the same Rs. 6,00,000/- Lakh given by the relatives (Brother in law son in law & nephew etc) for the purpose of the treatment of cardiac surgery for emergency purpose. the same is non refundable in nature t. Rs. 8,00,000/- Lakh is collected to run a school pursuant to an agreement ot AUP and copy of the agreement is submitted to JCIT and CIT(A). Out of which the Ld. A.O. has added Rs. 3,00,000/- as undisclosed income since the source is not verified and balance of Rs. 5,00,000/- is considered by the JCIT, even after the transactions are found genuine, for the purpose of penalty u/s 271D. Therefore , all the transaction are made for some reasonable cause. Therefore imposition of penalty of Rs.14,00,000/- is illegal and should be deleted in full.

4. For that the CIT(A) is illegal and unjustified towards confirming the penalty of Rs.14,00,000/- u/s.271D of the Act when imposition of penalty is time barred u/s.275. The penalty is initiated by the AO in the assessment order. The demand notice is signed by the AO. Therefore, assessment is null and void,.

5. For that the CIT(A) is illegal and unjustified towards confirming the penalty of Rs.14,00,000/- u/s.271D of the Act when the notice of demand is issued by the Ito, whereas the penalty is imposed by the JCIT. The CIT(A) wrongly appreciated the fact that demand notice is required by the AO u/s.156. However in the present case for the purpose of penalty, the AO is JCIT. Therefore, notice of demand is not a valid notice of demand. Therefore, imposition of penalty is null and void without service of the notice of demand.”

3. Facts in brief are that the assessee is an individual and derives pension income from Bank of India, Bhubaneswar. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has accepted cash amounts totaling to Rs.14,00,000/- in contravention of the provisions of section 269SS of the Act as under:

Sl.No.

Name of the person

Amount

Alleged reasons

1.

Khirod Kumar Swain

50,000/-

For medical emergency

2.

Jyoti Prakash Nayak

3,50,000/-

-do-

3.

Arjeet Mohapatra

1,20,000/-

-do-

4.

Nihar Ranjan Rout

80,000/-

-do-

5.

Manoj Kumar Biwal

2,00,000/-

For establishment of school

6.

Sasanka Sekhar Sahu

3,00,000/-

-do-

7.

Nrusingh Charan Nayak

3,00,000/-

From father

 

Total:

14,00,000/-

 

In response to the Assessing Officer’s requisition as to why penalty u/s.271D of the Act should not be imposed, ld A.R. of the assessee submitted that neither any of the transactions were doubtful nor any transaction was made to evade tax and such no penalty is leviable. It was also submitted that the receipts of cash by the assessee were neither loan or deposit. Ld A.R. also explained the circumstances under which the sums received by different persons. However, the Assessing Officer did not accept the explanation of the assessee and observed that the assessee has received the sums in contravention of section 269SS of the Act and, accordingly, levied penalty of Rs.14,00,000/- u/s.271D of the Act.

4. On appeal, the CIT(A) confirmed the levy of penalty u/s. 271D of the Act.

5. We have heard the rival submissions, perused the record of the case, inter alia, penalty order, CIT(A)’s order, written submissions of the assessee and other documents contained in paper book spread over 235 pages.

6. Ld A.R. of the assessee submitted that the Assessing Officer in passing order u/s.271D of the Act had considered seven transactions as has been mentioned at page 3 of the CIT(A) order Ld A.R. regarding transaction of Rs.3,00,000/- mentioned at sl. No.7, submitted that this amount was returned by the father of the assessee Shri Nrusingh Charan Nayak. This amount was earlier given by the assessee to his father by withdrawing the same from his own bank account on 27.9.2012 for purchase of land for the family but due to cancellation of land deal, the father returned the same to the assessee. Ld A.R. drew our attention to page 65 of paper book, wherein, amount of Rs.3,03,000/- has been withdrawn on 7.9.2012 from assessee’s bank account with Bank of India. Ld A.R. further submitted that the amount returned by the father of the assessee cannot be treated as any loan or deposit or specified sum in contravention of provisions of section 269SS of the Act.

7. Ld A.R. further submitted that the assessee received an amount of Rs.50,000/- from his brother-in-law (sister husband) Shri Khirod Kumar Swain, Rs.3,50,000/- from his (nephew) Shri Jyoti Prakash Nayak, Rs.,1,20,000/- from Arjeet Mohapatra, (son-in-law) and Rs.80,000/- from Nihar Ranjan Rout (brother in-law -wife brother) and all these four amounts were received due to medical emergency as the assessee is the heart patient having gone open heart surgery. Ld A.R. submitted that the assessee has submitted confirmation, PAN nos from all these four persons before the authorities below but the same were not appreciated and accepted without any justified reasons and basis.

8. Ld A.R. also submitted that the assessee received Rs.2,00,000/- from Manoj Kumar Biswal and Rs.3,00,000/- from Shri Sasanka Sekhar Sahu for establishment of school, which was deposited to the bank account of the assessee. Elaborating the facts of his statement, ld A.R. submitted that from agreement of Association of Persons (AOP) placed at pages 63 & 64 of the assessee’s paper book dated 1.4.2012, it is clear that four persons entered into an agreement creating an AOP for the purpose of running a school in the slum area for the education of children of the downtrodden people. Ld A.R. further submitted that as it was agreed between the persons constituting an AOP that the bank account will be opened in any Nationalized Bank in the name of the school. Meanwhile, until opening a bank account in the name of the school, the amount of contribution from the persons of AOP will be kept with Shri G.C.Nayak, i.e. assessee and the same was deposited to his bank account. Ld counsel strenuously contended that in view of factual position supported by documentary evidence, these amounts received by the assessee on behalf of AOP i.e. Manoj Kumar Biswal, Sasanka Sekhar Sahu cannot be treated as loan or deposit or specified sum in contravention of provisions of section 269SS of the Act.

9. Ld A.R. submitted that for invoking and levying penalty u/s.271D of the Act, it is the duty of the AO to establish that the assessee has taken or accepted any loan or deposit or specified sum in contravention of the provisions of section 269SS of the Act but in the present case all the impugned transactions are neither loan or deposit nor specified sum in contravention of section 269SS of the Act. Therefore, the impugned penalty order and the first appellate order is not sustainable.

10. Placing reliance on the order rendered by ITAT ‘D’ Bench, Kolkata in the case of Nikhil Bankik Mazumdar VS JCIT in ITA Nos.453 & 454/Kol/2016 for assessment year 2020-11 order dated 10.1.2018, ld A.R. submitted that in the present case, the assessee is not a business man or entrepreneur but the assessee is an individual derives pension income from Bank of India and he is not indulged any kind of commercial or business activity. Ld A.R. further submitted that based on the facts and circumstances of the present case, all seven transactions do not fall within the ambit of section 269SS of the Act.

11. Ld A.R. also placed reliance on the orders of ITAT Kolkata in the case of Anant Himatsinghka vs ACIT dated 25.11.2011 in ITA Nos.331 & 332/Kol/2010 and another order in the case of Manisha Prakash Amin vs JCIT dated 24.5.2011 for A.Y. 2006-07 and submitted that the loans from relatives for meeting unprecedented medical emergency expenses are in the nature of financial help within the family members and medical emergency is a reasonable cause falling under ambit of section 273B of the Act and thus, the immunity from penalty u/s.271D of the Act should be allowed to the assessee on humanitarian ground. Ld D.R,. further submitted that transaction between the assessee and relatives are neither loan nor deposit and purely a family support system out of love and affection to help each other in the need of hours of medical help, educational help and on other occasions to strengthen the moral of family.

12. Placing reliance on the decision rendered by Kolkata ‘D’ Bench in the case of Jagmohan Sharma vs JCIT in ITA Nos.552 & 553/Kol/201 5 for A.Y. 2005-06 order dated 10.1.2018, ld A.R. submitted that the transaction between the assessee and his brother-in-law, nephew, sister-in-law and brother in law (wife brother) in the event of medical emergency do not fall within the definition of loan or advance. Therefore, penalty u/s.271D of the Act cannot be levied on the assessee.

13. Placing reliance on the decision of Hon’ble P&H High Court in the case of CIT vs. Sunil Kumar Goel in ITA No.777 of 2008 and ITA No.778 of 2008 order dated 3.3.2009, ld A.R. submitted that where there is reasonable cause shown by the assessee and no prejudice has been caused to the revenue and the transactions are between the family members due to medical emergency and exigency, then such transaction falls within the section 273B of the Act and thus, immunity of levy of penalty u/s.271D should be allowed to the assessee.

14. Placing reliance on the decision of Jodhpur Bench of the Tribunal in the case of Ridhi Sidhi Infraprojects Pvt Ltd vs JCIT in ITA No.49/Ju/2013 for A.Y. 2009-2010 order dated 18.3.2013, ld A.R. submitted that when the assessee has taken cash amount under bonafide belief that a transaction with its AOP is outside purview of penalty provisions being a transaction between two sister concerns and if it is properly explained, then penalty u/s.271D of the Act cannot be imposed on such transaction. Ld A.R. submitted that the rational behind the provisions of section 269SS has been explained by the CBDT vide circular No.387 dated 7.7.1984, wherein, it has been mentioned that unaccounted cash found during the course of search carried by the department is often explained by tax payers as representing loans taken from or deposits made and unaccounted income is thus brought in the books of account and provisions of section 269SS of the Act was brought into the Statute with a view to deal with such situations, where tax payers also obtain confirmatory letters from such persons in support of their explanations, which enables them to explain away unaccounted cash or unaccounted deposits. Ld A.R. submitted that in the present case cash was neither seized during the course of search nor it was unaccounted, therefore, the impugned amounts and transaction do not attract penalty u/s.271D of the Act as immunity available to the assessee u/s.273B of the Act should be provided to the assessee.

15. Replying to above, ld D.R. supported the penalty order as well as the CIT(A) order and submitted that the onus of proving that he has not contravened the provisions of section 269SS of the Act lies on the assessee, which has not been discharged by the assessee in the present case. Ld D.R. further submitted that the assessee has not discharged onus and showing any reasonable cause of which he had received cash amount from his father, relatives and members of AOP, therefore, penalty u/s.271D of the Act was rightly levied on the assessee for contravention of section 269SS of the Act.

16. Ld D.R. submitted that the appellant also failed to establish the identity, creditworthiness of the lenders and genuineness of the transaction and u/s.271D of the Act, penalty will be levied for the loan or deposit as accepted in cash without reasonable cause notwithstanding that the transaction of loan/deposit is genuine.

17. Ld D.R. further submitted that if the interpretation that the alleged loan/deposit is genuine and, therefore, penalty u/s.271D of the Act should not be levied, then the provisions of section 269SS r.w.s 271D of the Act would become redundant and unworkable. Therefore, keeping in view the legislative intent, the penalty in the present case should be confirmed. Ld D.R. submitted that unless the appellant-assessee gives a reasonable cause in accepting the cash loan, penalty u/s.271D is imposable, thus, orders of lower authorities may kindly be confirmed.

18. Placing rejoinder to above, ld A.R. submitted that the amount returned by the father of the assessee, which was given by the assessee to his father for purchase of land and on the event of cancellation of land deal, same was returned to the assessee and this explanation also gets support from the copy of bank account of the assessee placed at page 65 of assessee’s paper book. Ld A.R. submitted that undisputedly, the assessee is a heart patient who undertook open heart surgery and the amount received from his brother -in-law, Khirod Kumar Swain, nephew, Jyoti Prakash Nayak, son-in-law, Shri Arjeet Mohapatra and brother in law, Nihar Ranjan Rout under medical emergency cannot be treated as loan or advance in contravention of section 269SS of the Act. He submitted that medical emergency is itself a reasonable cause from receiving cash from the relatives and family members out of love and affection as a support during tough time and due to this bonafide and reasonable cause, immunity u/s.273B of the Act should be granted to the assessee on these four transactions. Ld A.R, further submitted that the cash received by the assessee from the members of AOP in which the assessee was also a member only for the purpose of keeping the same in the bank account till the account is opened in the name of the school, therefore, the same cannot be treated as loan or advance which attracts penalty u/s.271D of the Act. Ld A.R. submitted that this fact also gets support from the documentary evidence from the copy of agreement placed at paper book at pages 63 & 64 specially clause 5 pertaining to opening of bank account. Ld A.R. submitted that the assessee is an old aged heart patient and never indulged in any commercial business activity, therefore, penalty imposed by the AO and confirmed by the CIT(A) u./s 271D of the Act is not justified, reasonable and sustainable. Therefore, same be deleted.

19. On careful consideration of the rival submissions, first of all, I observe from first sentence of assessment order, that the assessee is an individual derives pension income from Bank of India, Zonal Office, Bhubaneswar. This is not a case of the Assessing officer that the assessee is engaged in the business activity or entrepreneur, who received the impugned amounts under commercial transaction in contravention of section 269SS of the Act. Now I proceed to consider each transaction one by one.

20. The first transaction of Rs.3 lakhs is pertaining to cash received by the assessee from his father, Shri N.C.Nayak. Keeping in view the copy of bank account placed at page 65 of paper book, I observe that the amount of Rs.3,03,000/- has been withdrawn on 27.9.2012 by the assessee and the assessee has deposited Rs.3 lakhs on 21.9.2012 in his bank account No.511342710000152. I am satisfied with the explanation of the assessee that the assessee gave this amount to his father after withdrawing the same from his bank account towards purchase of land and due to cancellation of land deal, it was returned to the assessee by his father and same was deposited by the assessee to his bank account. I observe that as the land deal was under process and for acquisition of land and the intention of the assessee was to contribute and support his family. Therefore, on cancellation of land deal, the amount was returned to the assessee and such transaction cannot be tagged as loan or advance in contravention of section 69SS of the Act. Hence, penalty u/s.271D cannot be imposed on this count.

21. I further analysed the amount received from four relatives i.e. from Shri Khirod Kumar Swain(brother-in-law -sister husband), Shri Jyoti Prakash nayak(nephew), Shri Arjeet Mohapatra (son-in-law), Shri Nihar Ranjan Rout (brother -in-law wife’s brother) for medical emergency. I am of the view that undisputedly, the assessee is a senior citizen having heart ailment, who also underwent open-heart surgery. The assessee submitted confirmations from these relatives alongwith their address and PAN nos., wherein, it was stated by them that they have the impugned amounts to the assessee for his treatment under medical emergency, then such transaction cannot be held as transaction of loan or advance.

22. The object of introducing section 269SS of the Act was to ensure that a tax payer was not allowed to give false explanation for his unaccounted money or if the tax payer made some false entries, he would not escape by giving false explanation for the same. It was noticed by the tax authorities that during the search and seizure operation unaccounted money was found and the taxpayer usually gave an explanation that he had borrowed or received deposits from his relatives or friends and, consequently, it became easy for the so called lender to manipulate his record to suit the plea of the tax payer Section 269SS of the Act was introduced by the legislature in order to curb this menace and do away making false entries in the books of account and later give an explanation for the same. Consequently, section 269SS of the Act was inserted to the Act requiring that no person shall take or accept any loan or deposit, if it exceeds more than Rs.20,000/- in cash. Further Section 271D provides that a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS of the Act, he would be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. Consequently, Section 271D of the Act caused undue hardship to the tax payers where they took a loan or deposit in cash exceeding Rs.20,000/- even where there was a genuine or bonafide transaction under exigency or emergency.. To meet such need, the legislature accordingly introduced section of the Act, which provides that if there was genuine and bonafide transaction, the taxpayer could not get a loan or deposit by an account payee cheque or demand draft transaction, for some bonafide reason, the authority vested with the power to impose penalty had a discretion not to levy the penalty.

23. Keeping in view the above noted legislative intent, I analysed the four transactions of receiving cash from relatives and family members by the assessee under medical emergency, then I am inclined to hold that this is a simply transaction of transfer of money from one family members to another family members to support him during medical emergency period and such transaction cannot be treated as loan or advance and transaction falling under the ambit of section 269SS of the Act attracting penalty u/s.271D of the Act. I am of the considered view that the transaction between the relatives of family members for giving support and help, is not loan or deposit and it is only a financial support. The prepositions relied by the ld A.R. also supports the case of the assessee. Therefore, the penalty imposed by the AO and confirmed by the CIT(A) needs to be deleted and, accordingly, I direct the AO to delete the penalty on this count on these four transactions.

25. So far as penalty imposed by the AO and confirmed by the CIT(A) on account of cash amount received from the members of AOP i.e. from Shri Manoj Kumar Biswal, Shri Sasanka Sekhar Sahu is concerned, from the copy of the agreement duly created by AOP dated 1.4.2012, as per sub-clause (5) of the agreement, I clearly observe that there are four members of AOP including the assessee Shri Gourang Chandra Nayak and Shri Sasanka Sekhar Sahu alongwith Shri Manoj Kumar Biwal, wherein, it was agreed between the members of AOP that the contributory amount will be kept with the assessee until a bank account is opened in the name of school. Therefore, the said amount cannot be alleged as transaction of loan or deposit in contravention of section 269SS of the Act. In this situation, the assessee is only a trustee of money till bank account in the name of school is opened and thus, such transaction cannot be named as transactions as loan or advance in cash which attracts penalty \u./s.271D of the Act. In the totality of facts and circumstances of the case and as reveals from the agreement of AOP and this fact being consistently submitted by the assessee before the departmental authorities, I am of the considered view that the penalty on such transaction cannot be imposed u/s.271D of the Act in contravention of section 269SS of the Act.

25. In the light of aforementioned discussion, I find that the amount received by the assessee on seven transactions is genuine and not loan or advance in contravention of section 269SS of the Act. Accordingly, I delete the same and allow the grounds of appeal of the assessee.

26. In the result, appeal of the assessee is allowed.

Order pronounced on 23 /09/2019.