Income Tax Appellate Tribunal - Amritsar
Subash Chander vs Joint Cit on 11 October, 2002
Equivalent citations: (2004)91TTJ(ASR)415
ORDER
H.L. Karwa, J.M.:
This is an appeal by the assessee and is directed against the order of the Commissioner (Appeals), Jammu, dated 13-12-2001, confirming the penalty of Rs. 1 lakh levied under section 271D of the Income Tax Act, 1961.
2. Briefly stated, the facts of the case are that the assessee is an individual and assessment year involved is 1998-99. The assessing officer noticed that the assessee purchased a house on 10-4-1997, for a consideration of Rs. 1,50,000. While explaining the source of investment in the purchase of house, it was stated by the assessee that his wife, Smt. Sneh Rani and his son, Shri Anil Kumar have contributed Rs. 50,000 each towards the purchase consideration of the house and the remaining Rs. 50,000 was invested by the assessee. The assessing officer opined that alleged contribution by Smt. Sneh Lata and Shri Anil Kumar was advancement of loans or deposits in cash and not as contribution. Consequently, the assessing officer initiated proceedings under section 271D of the Act. Show-cause notice was issued to the assessee. In response to the show-cause notice, the assessee submitted that the amounts given by Smt. Sneh Rani and Shri Anil Kumar were contribution and not a loan or deposit and the same was not returnable to the assessee. In support of the above contention, the assessee had submitted affidavits of both the parties confirming that the amount in question was not the loan and was a contribution towards the purchase of house. The assessing officer rejected the above contention of the assessee and imposed the penalty of Rs. 1 lakh, i.e., @ 100 per cent of the amount given in cash and in contravention of the provisions of section 269SS of the Income Tax Act, 1961.
3. Being aggrieved, the assessee appealed to the Commissioner (Appeals). Before the Commissioner (Appeals), the assessee filed written submissions, which read as under :
"l. The levy of penalty for alleged violation of provisions of section 269SS is not justified as the assessee has not committed any offence by accepting contribution from his wife and son for purchase of residential house in cash. It is not uncommon that family members pool their resources to purchase a property. The contributions so made by the family members are contributions/ gifts and not loans. The provisions of section 269SS are, therefore, not applicable to such contributions/gifts.
2. The learned Jt. Commissioner has failed to note and appreciate clear distinction between a loan and a contribution. In a transaction of loan and deposit, there, is a clear understanding that the amount has to be returned. In this respect reliance is placed on CIT v. Bazpur Co-operative Sugar Factory Ltd. (1989) 177 ITR 469 (SC) and CIT v. Bazpur Co-operative Sugar Factory Ltd. (1988) 172 ITR 321 (SC).
As against this "to contribute" means "to give or supply in common with other, give to a common fund or for a common purpose. It is of the nature of help". The wife and son of the appellant gave the amounts in question as a help and not as a loan.
3. The appellant also submits that the learned Jt. Commissioner has not been justified in holding the amounts in question as loans. The appellant submits that the nature of a transaction has to be inferred from the surrounding facts and circumstances of the case. Here, in the case of the appellant the amount has been given by the wife and son of the appellant for a common purpose, i.e., to purchase a residential house with a clear intention of pooling their resources and not with the intention of giving loans. These surrounding circumstances and the intentions of parties also lead to the conclusion that only contributions have been given and there is no transaction of loan. The provisions of section 269SS have, therefore, been wrongly invoked and the levy of penalty is unlawful.
4. The persons who have contributed funds for purchase of property have also filed their affidavits wherein they have stated on oath that the amount given by them to the appellant was not a loan but was a contribution by them towards purchase of house. The affidavits filed by the contributors have remained unrebutted by the department. Therefore, the correctness of the assertions made in the affidavit to the effect that no loans have been given have remained unchallenged. The Supreme Court in Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) has held that if the person who gave the affidavit is not cross-examined it is not open to the revenue to challenge the correctness of the statements made in the affidavit. Relying upon the said judgment the Allahabad High Court in AIR 1962 All 407 has held that it is not open to a party to brush aside the averments in the affidavit by merely stating that the allegations were untrue.
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5. The penalty order is also not sustainable as it is a non-speaking order. The only reason given for holding the amounts in question as loans/deposits is that the property has been purchased in the individual name and not in the name of HUF. The appellant submits that the mere fact that the property has been purchased in individual name and not in the name of HUF cannot lead to the conclusion that the contributions are deposits/loans and not the contributions/ gifts. The other reason given by the learned Jt. Commissioner that the appellant is not maintaining books of account is also not relevant to hold that the said contribution is loan/deposits moreso when it is admitted that the wife and the son have made the contributions. The another reason given by the learned Jt. Commissioner to hold the contributions as loan/deposit is that the amounts were advanced in cash though both the parties were maintaining bank accounts. In this respect it is submitted that the question posed by the learned Jt. Commissioner may be relevant to decide the genuineness of the cash credit but when the amounts in question have been accepted genuine and it is admitted that contributions have been made by wife and son, the poser is not relevant.
In any case the fact that in spite of keeping bank account amount is given in cash cannot lead to the conclusion that the amounts in question are loans/deposits. The appellant, therefore, submits that the learned Jt. Commissioner has not been justified to hold that the amounts in question are loans/deposits. The amounts were contributions and not loans/deposits. The penalty, therefore, has wrongly been imposed.
6. The appellant also submits that in any case the contributions were made under bona fide opinion that as the amount is available in cash and they are not giving the amount as loans it is not required to be paid by account payee cheque. Similarly, the appellant also honestly believed that as the amounts in question are being given by his family members with a clear understanding that they are not the loans and he has not to return them as they are mere contributions. Assuming there is default, the default is of venial nature. The honest belief of the appellant that the contributions made by the family members are not the loans constitute reasonable cause and no penalty on the facts and circumstances of the case is sustainable."
4. After considering the above submissions, the learned Commissioner (Appeals) confirmed the penalty imposed by the assessing officer. He further noted that as per the assessment order, the assessee had later on sold the said property as a sole owner and the whole sale proceeds were credited in his bank account. Furthermore, the assessee had declared capital gain on the sale in his individual return of income. He further opined that the transaction in question appears to be a purely commercial transaction whereby the assessee has purchased the property just like any other commercial transaction for earning the profit and even declared the profit thereon in the form of capital gains.
5. Before us, Shri Subash Dutt, advocate, the learned counsel for the assessee, reiterated the submissions made before the authorities below. He further submitted that the assessee had received contribution from his wife and son for purchasing a house. It was prosperity of family and transaction did not involve any interest element, and there was no promise to return amount with or without interest. He, therefore, submitted that the provisions of section 269SS would not apply and it can safely be held that there was a reasonable cause within the meaning of section 273B of the Income Tax Act, 1961. Accordingly, it was submitted that no penalty should be levied for violation of the provisions of section 269SS of the Act. He further submitted that the transaction, in question, was a genuine transaction and there was no scope for suspicion. It was also submitted that the assessee has entretained a bona fide belief that he had received contribution from his family members and, therefore, there was no violation of the provisions of section 269SS of the Act. In support of the above contention, the learned counsel for the assessee relied on the following decisions:
(1) Harpal Singh Jaswant Singh v. ITO (1995) 51 TTJ (Asr) 383.
(2) Dr. B.G. Panda v. Dy. CIT (2000) 111 Taxman 86 (Cal)(Mag) ITA No. 2742/Cal/1993, dated 10-3-1998).
6. Shri Kuljit Singh, the learned departmental Representative, supported the orders of the authorities below. He further submitted that the assessee had purchased the house in his individual capacity. According to the learned departmental Representative, had the assessee taken the amount of Rs. 50,000 each from his wife and son as contribution, the above property should have been in the name of HUF and not in the individual name of the assessee. He further submitted that the provisions of section 269SS are applicable even where transaction is between the husband and wife or parents and children. According to him, there is no such distinction that provisions of section 269SS could not be applicable to the transaction entered into between the husband and wife or son and father. He, therefore, submitted that the Commissioner (Appeals) was fully justified in confirming the penalty.
7. We have considered the rival submissions and have also gone through the orders of the authorities below. It is noticed that the assessee purchased house during the assessment year under consideration. He had invested Rs. 1,50,000. The assessee received contribution of Rs. 50,000 each from his wife, Smt. Sneh Rani and Shri Anil Kumar. It is an admitted position that the house was purchased by the assessee himself and in his own name. It is true that though the assessee had expended the amount of Rs. 1,50,000 and property was purchased in his own name, it could not be said that the wife and son of the assessee had no interest over the property. In fact, in the instant case, the wife and soh contributed the funds for purchase of house, which was naturally a joint family effort in acquiring the property. There is no material on record to suggest that the transaction between the assessee and his wife or between the assessee and his son was in the nature commercial transaction. In our view, there is merit in this contention of the learned counsel for the assessee that the transaction was neither loan nor deposit as no 'interest' element was involved. There is no material on record to show that the assessee had returned the amount received from wife and son or he had paid the interest thereon. At this stage, we may refer to a case which was decided by the Calcutta Bench of the Tribunal in the case of Dr. B.G. Panda v. Dy. CIT (supra). The Calcutta Bench of the Tribunal made the following observations :
"In the instant case, the wife gave money to husband for construction of a house which was naturally a joint venture for the property of the family only. The transaction was not for commercial use, The amount directly received by the husband, i.e., the assessee, was to the extent of Rs. 17,000 only and the balance amount of Rs. 26,000 was given by payment directly to the supplier of the material required for the construction of the house. Though the expenditure was apparently incurred by the husband being the Karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no 'interest' element was involved and there was no promise to return the amount with or without interest. It was clear that the money given by the wife was a joint venture of the family. Taking into consideration overall facts and circumstances of the case, it could be said that the aforesaid. piece of legislation was not applicable in the instant case. By taking the liberal view and applying the golden rule of interpretation, the assessee had a reasonable cause within the meaning of section 273B. Therefore, the penalty should be deleted."
The facts of the present case are also similar to the facts of Dr. B.G. Panda v. Dy. CIT (supra). In the same set of facts, the Hon'ble Bench of the Tribunal observed that there was a reasonable cause within the meaning of section 273B of the Act, i.e., in the instant case also, both the persons have earlier filed their affidavits wherein they stated on oath that the amounts given by them to the assessee were not loan but was contribution by them towards the purchase of house. These affidavits had not been rebutted by the department. Further, the Calcutta Bench of the Tribunal in the case of Dr. B.G. Panda v. Dy. CIT (supra) had held as under :
"Section 269SS is applicable to the deposits or loan. It is true that both in the case of a loan and in the case of a deposit, there is a relationship of debtor or creditor between the party giving money and the party receiving money. In the case of deposit, the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money and the benefit normally being the earning of interest from the party who customarily accepts deposit. In the case of loan, it is the borrower at whose instance and for whose needs the money is advanced. The borrowing is primarily for the benefit of a borrower although the person who lends the money may also stand to gain thereby earning interest on the money lent. In the instant case, this condition was not applicable because there was no relationship of the depositor or a creditor as no interest was involved. This was neither a loan nor a deposit. At the same time, the words 'any other person' are obviously a reference to the depositor as per the intention of the legislature. The communication/transaction between the husband and wife are protected from the legislation as long as they are not for commercial use. Otherwise, there would be a powerful tendency to disturb the peace of families, to promise domestic broils, and to weaken or to destroy the feeling of mutual confidence which is the most enduring solace of married life."
8. Applying the above ratio to the facts of the present case, it cannot be said that there was any element of loan or deposit as alleged by the assessing officer. In the instant case, there is yet another aspect of the matter. As an alternative, it was contended that in any case, the assessee has received contribution from his wife and son under the bona fide belief that as the amount was available in cash and they were not giving the amount as loans and it is not required to be paid by account payee cheques. The ass6ssee also pleaded that as the amount, in question, was being given by his family members with a clear understanding that same is contribution for the construction of house. According to the learned counsel for the assessee, for the sake of argument that if it is assumed that there was a default, the default can be considered as venial breach of law. The Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) has held that when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. In the instant case, the assessee entertained a belief which was bona fide that the amounts received from wife and son were contributions and not loan or deposit within the meaning of section 269SS of the Act. The assessee was of the opinion that the amount, in question, did not require to be received by an account payee cheque or account payee draft. In our view, there was a reasonable cause and no penalty should have been levied. The learned Commissioner (Appeals) has referred to the observations made in the assessment order wherein it was stated that the assessee had later on sold the said property in his own name as the exclusive owner of the property and the whole sale proceeds have been credited in his bank account. In our view, the findings given in the assessment proceedings are relevant but not conclusive in the penalty proceedings. It is true that as the assessment proceedings and the penalty proceedings are two separate and independent proceedings because the consideration that arises in the penalty proceedings are different from those arising in the assessment proceedings. In fact, in that view of the matter, we have to see as to whether the assessee has violated the provisions of section 269SS of the Act. Simultaneously, we have also to see that what was the explanation of the assessee. In the instant case, the assessee took the plea that firstly, there was no violation of the provisions of section 269SS of the Act. Secondly, there was a reasonable cause. Thirdly, the assessee was under the bona fide belief that he was not required to receive the amount otherwise than by account payee cheque or account payee draft. As an alternative submissions, it was contended that the default can be considered either technical or venial breach of the provisions of law, and, therefore, no penalty under section 271D was leviable. In our view, there was a reasonable cause within the meaning of section 273B of the Act and, therefore, no penalty is leviable under section 271D of the Act. We accordingly find merit in the appeal of the assessee and delete the penalty levied by the assessing officer and confirmed by the Commissioner (Appeals).
9. In the result, the appeal is allowed.