Madras High Court
Ms.Nanda Kumari vs The Income Tax Officer on 20 December, 2018
Author: T.S.Sivagnanam
Bench: T.S.Sivagnanam
1 In the High Court of Judicature at Madras Dated : 20.12.2018 Coram :
The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice N.SATHISH KUMAR Tax Case Appeal No.968 of 2018 Ms.Nanda Kumari ...Appellant Vs The Income Tax Officer, Non-
Corporate Ward 1(4), Chennai-34 ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 26.5.2017 in ITA No.3410/Mds/2016 on the file of the Income Tax Appellate Tribunal Madras 'A' Bench for the assessment years 2008-09.
For Appellant : Mr.M.Veerabathiran Prasanth for
Mr.R.Sivaraman
For Respondent : Mrs.R.Hemalatha, SSC
Judgment was delivered by T.S.SIVAGNANAM,J This appeal by the assessee under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 26.5.2017 in ITA.No.3410/Mds/2016 passed by the Income Tax Appellate Tribunal, Chennai 'A' Bench (for brevity, the Tribunal) for the assessment year 2008- 09. http://www.judis.nic.in 2
2. This appeal has been filed by the assessee raising the following substantial questions of law :
“i. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the levy of penalty under Section 271D of the Income Tax Act without appreciating the fact the loan in cash was taken from near relatives and the same was accounted in the appellant's and relatives' books of accounts ? And ii. Whether, on the facts and in the circumstances of the case, the Tribunal was right in not considering that the appellant has had a reasonable cause as stipulated under Section 273B to substantiate taking loan in cash from relatives to pay the advance for sale of land?”
3. The short issue, which falls for consideration, is as to whether the Assessing Officer was right in levying penalty under Section 271D of the Act on the ground that the assessee accepted money in contravention of the provisions of Section 269SS of the Act.
4. Section 273B of the Act sets out circumstances, under which, the penalty should not be imposed. The said provision commences with a non obstante clause stating that notwithstanding anything contained in the provisions of various Sections including Section 271D of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was http://www.judis.nic.in 3 reasonable cause for the said failure.
5. Thus, it has to be seen as to whether the assessee had shown reasonable cause for accepting the amount of Rs.3 lakhs in cash.
6. The assessee is an individual and is engaged in the business of pawn broking. The assessment for the year under consideration namely 2008-09 was completed on 30.3.2015. During the course of assessment, the Assessing Officer noticed that the assessee received loan from certain creditors in cash amounting to Rs.3 lakhs during the previous year relevant to the assessment year 2008-09. Having noticed the same, the Assessing Officer referred the case to the Additional Commissioner of Income Tax, NCR- 1 for initiating penalty proceedings under Section 271D read with Section 269SS of the Act. Accordingly, a notice dated 21.7.2015 was issued to the assessee under Section 274 read with Section 271D of the Act to show cause as to why penalty should not be levied under Section 271D of the Act.
7. The assessee's case was that she had received an advance amounting to Rs.50,000/- from one Mr.Natesan on 01.4.2007 for the sale of an immovable property. However, the registration could not be done within time and hence, she borrowed a sum of Rs.1 lakh from one Mr.Kishanlal HUF, who was none other than her uncle (mother's brother) on 31.5.2007 for repayment of the said advance. The further case of the assessee was that the said Mr.Natesan requested for additional three months' time for getting the property registered in his name and also agreed to pay higher sale http://www.judis.nic.in 4 consideration. Owing to that, she received an additional sum of Rs.2 lakhs as advance from the said Mr.Natesan on 31.12.2007. However, the sale transaction did not fructify and therefore, she had to refund the advance received from the said Mr.Natesan. It was also the case of the assessee that she borrowed from her maternal uncle and maternal aunt a sum of Rs.2 lakhs and this was done with a view to repay the said Mr.Natesan for the advance paid by him. The borrowal was stated to be on account of extraneous circumstances for emergency purposes and the same was done within the close family relatives. With these facts, the assessee requested to drop the penalty proceedings.
8. However, the Assessing Officer did not agree with the stand taken by the assessee, confirmed the proposal in the show cause notice and levied penalty. The assessee was unsuccessful before the Commissioner of Income Tax (Appeal) as well as the Tribunal.
9. In our considered view, the crucial aspect to be considered is as to whether the assessee had shown reasonable cause for having received money in cash in contravention of the provisions of Section 271D of the Act. The Assessing Officer had no material to show that the case, as projected by the assessee, was false or for that matter, there was no transaction between the assessee and the said Mr.Natesan. In the absence of any material to disbelieve the said property transaction, all that is required to be seen is as to whether the explanation offered was reasonable. Admittedly, the amount http://www.judis.nic.in 5 was borrowed by the assessee from her maternal uncle and maternal aunt.
10. In more or less identical circumstances, a Division Bench of this Court granted relief to the assessee by dismissing the appeal filed by the Revenue in the case of CIT Vs. Smt.M.Yesodha [reported in (2013) 351 ITR 265]. In the said case, the assessee claimed to have taken a loan of Rs.20,99,393/- from her father in law for purchasing a property. The Assessing Officer initiated penalty proceedings under Section 271D of the Act on the ground that the assessee had obtained the said loan in cash from her father in law, which was in contravention of the provisions of Section 269SS of the Act. The assessee contended that the amount received in cash from her father in law was a gift and not a loan. The Assessing Officer rejected the said contention and found that it was a loan and not a gift because the same was shown in the balance sheet of the assessee filed along with the return of income. Accordingly, the Assessing Officer levied penalty equal to the loan amount. This was challenged by the assessee before the CIT(A), who dismissed the appeal and confirmed the order passed by the Assessing Officer. The assessee filed an appeal before the Tribunal, which allowed the assessee's appeal and while doing so, the Tribunal followed the decisions
(i) of the Tribunal in the case of M.Raju Vs. ACIT [ITA.No.899/Mds/2006];
(ii) of the Pune Bench of the Tribunal in the case of ITO Vs. Sunil M. Kasliwal [reported in (2005) 94 ITD 281]; and
(iii) of this Court in the case of CIT Vs. http://www.judis.nic.in 6 Lakshmi Trust Co. [reported in (2008) 303 ITR 99], and held that in the facts and circumstances of that case, the levy of penalty was not warranted. The Tribunal further held that the transaction between the father in law and the daughter in law was a genuine transaction and this was not in dispute because the amount was paid for purchase of a property. Before the Division Bench, the Revenue contended that the assessee had nowhere pleaded any reasonable cause as contemplated under Section 273B of the Act and that therefore, the Tribunal was not right in holding that the genuineness of the transaction was not disputed.
11. Even before us, Mrs.R.Hemalatha, learned Senior Standing Counsel submits that the provision namely Section 273D of the Act uses the expression 'reasonable cause' and not the expression 'sufficient cause' and that the Authorities below rightly found that the reason given by the assessee was not a reasonable cause.
12. However, a similar contention was rejected by the Division Bench in the decision in the case of Smt.M.Yesodha wherein it was held that even though the assessee had not taken a specific plea of reasonable cause, it must be considered as applied to human action and where transactions were bona fide, penalty could not be imposed.
13. In the case on hand, the assessee had shown a cause for having received the amount in cash. Therefore, if the assessee had shown a cause, the burden shifts on the Assessing Officer to establish that the cause shown http://www.judis.nic.in 7 is not a reasonable cause by examining the cause shown and establish that it lacks bona fides. In the instant case, there is no such finding recorded by the Authorities below or for that matter by the Tribunal. Admittedly, the transaction in the instant case is between the assessee and her maternal uncle and aunt and there is nothing on record to show that the transaction lacks bona fides or the assessee came forward with a false case. In the result, we are of the considered view that the case on hand does not warrant levy of penalty under Section 271D of the Act.
14. Accordingly, the appeal filed by the assessee is allowed and the order passed by the Tribunal is set aside. The substantial questions of law are answered in favour of the assessee. No costs.
20.12.2018 Speaking (or) Non Speaking Order Index : Yes (or) No Internet : Yes (or) No To
1.The Income Tax Appellate Tribunal, Madras 'A' Bench.
2.The Income Tax Officer, Non-Corporate Ward 1(4), Chennai-34 RS http://www.judis.nic.in 8 T.S.SIVAGNANAM,J AND N.SATHISH KUMAR,J RS TCA.No.968 of 2018 20.12.2018 http://www.judis.nic.in