Criteria for levy of penalty u/s 271D of the Income Tax Act

This judgement clarifies the conditions under which a penalty can be levied under Section 271D of the Income Tax Act for accepting cash loans. The Income Tax Appellate Tribunal ruled that while accepting cash in contravention of Section 269SS can attract penalties, a reasonable explanation for such transactions is crucial. In this specific case, the Tribunal found the assessee's explanation for receiving cash from her husband for purchasing property to be justifiable, leading to the deletion of the penalty.

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘A’ JAIPUR

BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM

ITA No. 1201/JP/2019

Smt. Meera Devi Kumawat,
JMC-72, Vijaybari, Path No. 7, Sikar
Road, Jaipur

vs

Joint Commissioner of
Income Tax,
Range-4, Jaipur

Assessee by : Sh. Rahul Sanghi (CA)

Revenue by : Smt. Monisha Choudhary (JCIT)

Date of Hearing : 09/09/2021

Date of Pronouncement: 21/10/2021

ORDER

This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Jaipur dated 28.06.2019 pertaining to A.Y 2009-10 wherein the assessee has challenged the confirmation of levy of penalty u/s 271D of the Act.

2. During the course of hearing, the ld. AR submitted that the Appellant is an illiterate individual having income from renting of marriage garden situated at Vijay Bari, Sikar Road, Jaipur. The case of her husband Sh. Babu Lal Kumawat for the AY 2009-10 had come up for inquiry before ITO (Inv), Jaipur. In the inquiry before ITO (Inv), Jaipur, it has been
submitted by Shri Babu Lal Kumawat that he has given loan of Rs. 9,00,000/- to his wife. Thereafter, ITO (Inv), Jaipur reported the matter to JCIT, Range 4, Jaipur and a notice u/s 274 r.w.s. 271D of Income Tax Act, 1961 was served on the assessee by JCIT, Range – 4, Jaipur on 15.03.2016. The assessee was asked to show cause as to why penalty u/s 271D should not be levied. In response to the show- cause notice, the assessee has submitted that she has received Rs. 6,00,000/- from her husband by way of demand draft for payment towards purchase of plot no. 356 and remaining Rs. 3,00,000/- was received in cash as the assessee is wife of Sh. Babu Lal Kumawat and cash of Sh. Babu Lal Kumawat remains in custody of the assessee and cannot be treated as loan. The assessee has also submitted that the cash of husband and wife cannot be separated as it is in joint custody therefore cannot be taken as loan. The assessee has also submitted that in the case of husband and wife, repayment is not mandatory and there is no interest burden
therefore it is not justifiable to impose penalty u/s 271D. It was submitted that not appreciating the submissions made by the assessee, the JCIT, Range – 4, Jaipur has raised a demand of Rs. 3,00,000/- by levying penalty u/s 271D of the Income Tax Act, 1961.

3. It was further submitted that the assessee has nowhere able to demonstrate the urgency to receive loan in cash. It was submitted that the assessee must prove beyond the shadow of the doubt that there existed a reasonable cause for not complying with the conditions contained in section 269SS and in the instant case, no plausible explanation was ever
furnished nor the circumstances under which the cash was accepted was explained. It was accordingly submitted that it is a clear case the contravention of provisions of section 269SS of the Act. Thus, penalty u/s 271D of the Act has been rightly levied by the JCIT and confirmed by the ld. CIT(A). It was accordingly submitted that the order so passed by the
ld. CIT(A) deserve to be confirmed as section 269SS nowhere provides exemption in respect of cash loan taken from husband and the appeal of the assessee be dismissed.

4. Further, the assessee has explained the payment of construction expenses which are also required to be incurred in cash towards the purchase of construction material and payment to labourers. We therefore find that the assessee has offered reasonable explanation justifying the cash transactions and thus, in the entirety of facts and circumstances of the case and considering various decisions cited at the Bar which also support the case of the assessee especially the decision of the Coordinate Bench in case of Tuhinara Begum where there was a reverse situation where the wife gave money to husband for construction of house which was held not exigible for levy of penaty u/s 271D, we are of the considered view that the assessee doesn’t deserve to be punished by way of levy of penalty u/s 271D for receiving money from her husband for purchase of family property and hence, the same is directed to be deleted. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 21/10/2021.

Please find attached the enclosed file for the full judgement.