THE DCIT., CENTRAL CIRCLE, Rajahmundry V. Sri P.V.Somaraju, Bhimavaram

ITA 632/VIZ/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8816 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R GOVINDARAJAN
• Keywords: Search and seizure; Bonafide belief; Reasonable cause; Tax effect
• Section: 273B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 6 3 2 / VIZ /201 3 (ASST. YEAR : 20 0 5 - 0 6 ) DCIT , CENTRAL CIRCLE, RAJAHMUNDRY . V S . PENMETSA VENKATA SOMA R AJU, D.NO. 27 - 19 - 1, ASR NAGAR, BHIMAVARAM. PAN NO. AHKPP 9872 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI R. GOVINDA RAJAN CIT DR DATE OF HEARING : 26 / 0 7 /201 7 . DATE OF PRONOUNCEMENT : 31 / 0 7 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , GUNTUR , DATED 25 /0 7 /201 3 FOR THE ASSESSMENT YEARS 200 5 - 0 6 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM PURCHASE AND SALE OF FISH, HAD FILED HIS RETURN OF INCOME ADMITTING LOSS OF 13,96,013/ - . A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE GROUP CASES OF ASSESSEE ON 19/02/2009. IN RESPONSE TO A NOTI CE UNDER SECTION 153A, THE ASSESSEE FILED HIS RETURN OF INCOME ADMITTING LOSS OF 40,01,628/ - . THE ASSESSING OFFICER HAS 2 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) ACCEPTED THE RETURN FILED BY THE ASSESSEE. SUBSE Q UENTLY, THE ASSESSING OFFICER HAS INITIATED 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 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 T H A T OUT OF TOTAL LOAN AMOUNT FROM SMT. P. SHILPA, AN AMOUNT OF 18 LAKHS WAS ACCEPTED BY THE ASSESSEE , IN CASH ON 01/11/2004 BY MEANS OF TWO RECEIPTS BEARING NO. 93 & 94 FOR 9 LAKHS EACH . THE BALANCE AMOUNT OF 19,35,000/ - WAS ACCEPTED ON 02/11/2004 THROUGH BANK CHEQUE BEARING NOS. 95324 & 95325 FOR AN AMOUNT OF 9,85,000/ - & 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 VIOLA T ED 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 T H A T THE TRA N S ACTION BETWEEN FATHER AND DAUGHTER IS NOT ATTRACT S THE PROVISION OF SECTION 269SS AND, THEREFORE, HE IS NOT LIABLE FOR PENALTY UNDE R SECTION 271D OF THE ACT. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, OBSERVED THAT AS PER THE STATUTE WHERE ANY PERSON ACCEPTS ANY LOAN OR DEPOSIT OTHER THAN BY AN ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT AND IF THE AMOUNT IS MO RE THAN 20,000/ - , 3 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) THEN PENALTY WILL BE IMPOSED UNDER SECTION 271D OF THE ACT. ACCORDINGLY, THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS AND IS LIABLE FOR PENALTY OF AN AMOUNT EQUAL TO THE AMOUNT OF LOAN , SO TAKEN OR ACCEPTED AS PER SECTION 271D OF THE ACT. ACCORDINGLY, ASSESSING OFFICER LEVIED PENALTY OF 18 LAKHS UNDER SECTION 271D OF THE ACT. 3 . ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED A DETAILED EXPLANATION, WHICH IS REPRODUCED AS UNDER: - 1. THE ASSESSEES FAMILY CONSISTS OF HIS SPOUSE SMT. P. UMA , HIS DAUGHTER SHILPA AND HIS SON RAM D EEPAK VARMA BESIDES HIMSELF; HIS FATHER SRI P.KRISHNAM RAJU ALSO RESIDES WITH THE ASSESSEE 'S FAMILY (HIS MOTHER PASSED AWAY ABOUT 12 YEARS BACK AND TILL HER DEAT H SHE WAS ALSO RESIDING WITH THE ASSESSEE) 2. BOTH THE ASSESSEE & PARENTS HIS SPOUSE AND ALSO THE ASSESSEE OWN EXTENSIVE LANDS IN WHICH FISH CULTURE S CARRIE D ON. THE ASSESSEE DAUGHTER SHIL PA ALSO OWNS L ANDS WHICH ARE PARTLY INHERITED BY HER ON THE DEATH O F ASSESSEE'S MOTHER AND PARTLY FROM OUT OF THE ASSESSEE S ACCUMULATED INCOMES AS DULY D IS CLOSED IN THE BOOKS . 3. THE ASSESSEE IS REGULARLY ASSESSED TO INCOME TAX BOTH IN HIS INDIVIDUAL STATUS AND IN THE STATUS OF HIS HUF FOR MORE THAN 20 YEARS. HE HAS ALWAYS HAVE BEEN FILING THE RETURNS OF HIS INCOME VOLUNTARILY AND IN GOOD FAITH . 4. THE ASSESSEE HAS BEEN C ARRYI NG ON BUSINESS IN FISH FOR ABOUT 15 YEARS AGO AS A PROPRIETOR IN THE NAME OF C OASTAL AQUA AGENCY AT BHI MA VARAM. HOWEVER, SINCE THE YEAR 2002 I N THE SAID BUSINESS HE SUSTAINED HUGE LOSSES WHICH ARE AS FOLLOWS : - ASST YEAR LOSS RETURNED (RS.) 2003 - 04 2,45,101 2004 - 05 39,75,435 2005 - 06 42,45 , 615 2006 - 07 82,39,039 2007 - 08 7,79,084 THE ASSESSE E'S DAUGHTER, NAMELY, SHIPLA , WHO WAS BORN ON 7.9.1986, ATTAINED MAJORITY ON 7 . 9.2004. IN ORDER TO PROVIDE FUNDS FO R HER MARRIAGE 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 4 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) FATHER, NATURALLY MANAGED ALL THE AFFAIRS PERTAINING TO HER B USINESS [ 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 CONS IDERABLE FINANCIAL STRINGENCIES, IN OCTOBER, 2004 FOR FINANCING THE FISH CULTURE ACTIVITIES HE ARRANGED A LOAN IN H ER NAME FROM CORPORATION BANK, B HIMAVARAM 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 THEREOF FOR THE PURPOSES OF FISH CULTURE FOR THE BENEFIT OF HIS DAUGHTER, THESE AMOUNTS WERE CREDITED IN HER NAME AS CASH RECEIVED BY HIS ACCOUNTANT [WHO MISTAKENLY RECORDED THEM AS HAND LOANS THOUGH THE ASSESSEE NEVER PAID HER ANY INTEREST] IN THE BOOKS OF HIS PROPRIETA RY CONCERN, NAMELY, COASTAL AQUA AGENCY . 7. HOWEVER, ON THE NEXT DAY, ON SECOND THOUGHT, THE ASSESSEE CONSULTED HIS CHARTERED ACCOUNTANT WHO ADVISED HIM TO TAKE THE AMOUNTS ONLY THROUGH ACCOUNT PAYEE CHEQUES TO BE ON THE SAFER SIDE NOT WI THSTANDING THE ASSESSEE'S DUAL ROLE, ONE AS FATHER, CARE TAKER, REPRESENTATIVE AND MANAGER OF HER BUSINESS AND THE OTHER AS THE PROPRIETOR OF COASTAL AQUA AGENCY. AS SUCH, ON 2.11.2004 THE ASSESSEE TOOK FURTHER AMOUNTS DRAWN FROM HER LOAN ACCOUNT WITH CORPORATION BANK TH ROUGH CHEQUES AND THESE AMOUNTS ALSO WERE CREDITED IN HER ACCOUNT BY HIS ACCOUNTANT. 8. THE AMOUNTS SO CREDITED IN THE BOOKS OF THE ASSESSEE TO HIS DAUGHTER'S ACCOUNT WERE USED FROM TIME TO TIME FOR CARRYING OUT FISH CULTURE ACTIVITIES BY THE ASSESSEE ON BEHALF OF HIS DAUGHTER. 9. SEARCH PROCEEDINGS U/S. 132 OF THE INCOME TAX ACT, 1961, WERE CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 19.22009. CONSEQUENTLY, ASSESSMENTS FOR SIX PRECEDING YEARS, INCLUDING THE ASSESSMENT YEAR 2005 - 06, WERE REOPENED U /S. 153 A AND ALL SUCH ASSESSMENTS WERE COMPLETED UNDER THE SAID SECTION ACCEPTING THE LOSSES RETURNED BY THE ASSESSEE. 10. THE SOURCE OF THE AMOUNTS CREDITED, BEING THE LOAN GIVEN BY CORPORATION BANK, WAS DULY ESTABLISHED AND THE TRANSACTIONS WERE ACCEPTED AS GENUINE IN THE 'COURSE OF THE ASSESSMENT PROCEEDINGS. 11. THE ADDL. COMMISSIONER OF INCOME TAX, CENTRAL RANGE, VISAKHAPATNAM, INITIATED PENALTY PROCEEDINGS U/S.271 D OF THE INCOME TAX ACT, 1961 AND, NOTWITHSTANDING THE OBJECTIONS OF THE ASSESSEE, LEVIED PENAL TY TO THE TUNE OF RS. 18 L AKHS. 12. AGAINST THE LEVY OF THE PENALTY, THIS PRESENT APPEAL IS BEING FILED . 5 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) 4 . THE LD. CIT(A) AF T ER CONSIDERING THE SUBMISSION S MADE BY THE ASSESSEE HELD THAT SECTION 269SS DO NOT APPLY IN ASSESSEES CASE AND THEREFORE, NO PENALTY CAN BE LEVIED UNDER SECTION 271D OF THE ACT AND PENALTY LEVIED BY THE ASSESSING OFFICER IS CANCELLED BY OBSERVING AS UNDER: - 5.5 THE APPELLANT HAS SOUGHT RELIEF ON TWO GROUNDS (A) THAT THE 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 OB TAINED 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 PROV ISIONS 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 T O ALL KINDS OF DEPOSITS RECEIVED AN D NOT MERELY INTEREST BEARING LOANS. HOWEV ER, 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. ADD L. CIT, ELURU ITA NO.69 & 70/VIZAG/2008 AND IN THE CASE OF ADD L. CIT, RAJAHMUNDRY VS. HARSHAVARDHANA RAJU ITA NO.208/V I ZAG/2011. IN BOTH DECISIONS, THE HONBLE ITAT HAS HELD THAT 'SINCE ASSESSEE HAS TAKEN A LOAN FROM HIS DOSE RELATIVES WITHOUT REAL/SING THE LEGAL IMPLICATIONS, HE SHOUL D BE GIVEN BENEFIT OF THIS SECTION' KEEPING IN VIEW THE FACT THAT THE TRANSACTIO N IS BONAFIDE, THE AMOUNT HAS BEEN RECEIVED FROM HIS OWN DAUGHTER, THE FACT THAT THE AMOUNT IS ACTUALLY A BANK LOAN OBTAINED BY THE APPELLANT IN THE NAME OF HIS DAUGHTER, AND THE FACT THAT AFTER THE IMPUGNED TRANSACTION ON 01.11.2004, THE BALANCE TRANSACTI ON ON 02.11.2004 WERE CARRIED OUT BY ACCOUNT PAYEE CHEQUES GIVES AMPLE REASON TO HOLD THAT THE R EASONABLE CAUSE FOR FAILURE TO FOLLOW THE PROVISIONS OF SECTION 269SS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, VISAKHAPATNAM BENCH REFERRED TO ABOVE, THE PENALTY UNDER SECTION 271D AMOUNTING TO 18 LAKHS LEVIED IN THE CASE OF THE APPELLANT IS DELETED. 6 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) 5. ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL . 6 . THE L EARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 7 . PER CONTRA, L EARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THIS CASE THE TRANSACTION IS IN BETWEEN FAT H ER AND UNMARRIED DAUGHTER AND THEREFORE , SECTION 269SS HAS NO APPLICATION. HE RELIED ON THE FOLLOWING DECISION S OF THE COORDIN A TE BENCH OF THE TRIBUNAL : - A) ACIT VS. BH. HARSHAVARDHANA RAJU IN ITA NO. 208/VIZ/2011 BY ORDER DATED 13/07/2011 B) G. NARASINGA RAO VS. JCIT IN ITA NO. 318/VIZ/2008 BY ORDER DATED 13/04/2010 C) DR. DUTTA SIVA SANKARA RAO VS. ACIT IN ITA NO. 69 & 70/VIZ/2008 BY ORD E R DATED 13/08/2009. 8 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW . 9. IN THIS CASE, T HE ASSESSEE IS CARRYING ON THE BUSINESS OF BUYING AND SELLING OF FISH , HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003 - 04, 2004 - 05 & 2005 - 06, 2006 - 074 & 2007 - 08 BY DECLARING LOSS FROM THE ABOVE BUSINESS . THE ASSESSEES DAUGHTER APPLIED FOR LOAN IN CORPORATION BANK, BHIMAVARAM, FOR THAT ASSESSEE HIMSELF STOOD GUARANTOR . THE LOAN AMOUNTS WERE PARTLY DISBURSED ON 01/11/2014. WHEN THE LOAN WAS DISBURSED IN THE NAME O F HIS DAUGHTER P. SHILPA, WHO WAS STUDYING AT THE RELEVANT POINT OF TIME, THE ASSESSEE HA D RECEIVED 9 LAKHS , 9 LAKHS AND ALSO RECEIVED 19,35,000/ - THROUGH BANK CHEQUE. THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE WAS OF 7 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) 37,35,000/ - . THE ENTIRE TRANSACTION 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 TRANS A CTION, 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 . F OR THE PUR P OSE OF BUSINESS, ASSESSEES DAUG H TER OBTAINED LOAN , FOR WHICH ASSESSEE STOOD GUARANTOR . T HE LO A N 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 TRANS A CTION 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 C OORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF BH. HARSHAVARDHANA RAJU (SUPRA) , HAS CONSIDERED THE SCOP E 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 2 ND YEAR'S RETURN OF INCOME. IT IS ALSO NOT DISPUTED THAT ALL THE AFFAIRS OF THE ASSESSEE AS WELL AS OTHER FAMILY MEMBERS ARE LOOKED AFTER BY HIS GRANDFATHER. THE ASSESSEE HAS FILED CONTRA ACCOUNT COPIES O F THE IMPUGNED TRANSACTIONS AND THE SAME ARE PLACED IN PAGES 8 TO 11 OF THE PAPER BOOK COMPILED BY THE ASSESSEE. THESE ACCOUNT COPIES SHOW THAT THE AMOUNTS RANGING FROM RS.17,000/ - TO RS.19,000/ - HAVE BEEN TRANSFERRED FROM THE ACCOUNT OF THE FAMILY MEMBERS ON VARIOUS DATES TO THE ACCOUNT OF THE ASSESSEE. THE AMOUNT SO TRANSFERRED ON EACH OCCASION DID NOT EXCEED RS.20,000/ - AND THE SAME VINDICATES THE SUBMISSION OF THE ASSESSEE THAT HIS GRANDFATHER WAS UNDER BONAFIDE BELIEF THAT SUCH KIND OF TRANSFERS ARE PE RMISSIBLE UNDER THE ACT. ON SUCH A BELIEF ONLY, THE FUNDS AVAILABLE WITH THE OTHER FAMILY MEMBERS APPEAR TO HAVE BEEN TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE ON VARIOUS DATES. THE LEARNED CIT (A) HAS ALSO CONSIDERED THIS ASPECT WHILE DELETING THE IMPUGN ED PENALTY. FOR THE SAKE OF 8 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) CONVENIENCE, WE EXTRACT BELOW THE DECISION OF THE LEARNED CIT (A): '5.4 APPLYING THE AFORE - STATED FACTORS AND CIRCUMSTANCES IN THE APPELLANT'S CASE, IT COULD BE OBSERVED THAT THE APPELLANT IS AN ABSENTEE ASSESSEE WHOSE TAX MATTERS ARE BEING LOOKED AFTER BY HIS PATERNAL GRANDFATHER, WHO APPEARS TO HAVE EITHER NO KNOWLEDGE OR SEMI KNOWLEDGE OF THE PROVISIONS OF THE ACT RELATING TO TRANSACTIONS INVOLVING ACCEPTANCE AND REPAYMENT OF LOANS AND DEPOSITS IN CASH EXCEEDING THE PRESC RIBED LIMIT OF RS.20,000/ - . NO DOUBT, SUCH GRANT FATHER OF THE APPELLANT ALONG WITH OTHER MEMBERS OF HIS FAMILY INCLUDING THE APPELLANT WERE NOT THE FIRST TIME ASSESSEES BUT HAD BEEN ENROLLED AS ASSESSEES FROM THE EARLIER YEARS, AND, PERHAPS, MIGHT HAVE OB TAINED THE SERVICES OF ANY TAX PRACTITIONER IN FILING THEIR PAST RETURNS. BUT THEN SOMETIMES, IT SO HAPPENS THAT THE ASSESSEES TEND TO UNDERTAKE TRANSACTIONS IN CERTAIN SITUATIONS WITH THEIR LIMITED KNOWLEDGE OF THE LEGAL PROVISIONS AND PROCEDURE, WITHOUT, REALIZING THAT THEIR MISPLACED ACTION COULD LEADING TO DEFAULTS, THEREBY ATTRACTING PENAL PROVISIONS. IN THE INSTANT CASE, IT APPEARS TO BE SUCH A CASE OF MISCALCULATED ADVENTURE RESULTING IN DEFAULT UNDER SECTION 269SS OF THE ACT ON THE PART OF THE APPEL LANT. SINCE THERE IS NO DOUBT ABOUT THE FACT THAT THE APPELLANT HIMSELF, ON ACCOUNT OF HIS PURSUANCE OF STUDIES 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, HE CANNOT BE ENTIRETY BLAMED FOR THE DEFAULT COMMITTED BY HIS GRAND FATHER 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 I N COMMITTING DEFAULT IN ACCEPTING CASH LOANS EXCEEDING THE PRESCRIBED LIMIT FROM HIS FAMILY MEMBERS IN CONTRAVENTION OF THE PROVISIONS OF THE SEC TION 269SS OF THE ACT. ACCORDINGLY, THE APPELLANT DESERVED A LENIENT VIEW ON THE ISSUE AND, CONSEQUENTLY, PENAL TY 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 AS SESSEE, 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 R ELATIVES OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE EXPLANATION OF THE ASSESSEE THAT THESE TRANSACTIONS HAVE BEEN ENTERED INTO WITH A BONAFIDE BELIEF THAT THERE WILL BE NO VIOLATION OF THE PROVISIONS OF SEC. 269SS OF THE ACT, CAN BE TAKEN AS A REASONABLE CAUSE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED CIT(A) AND ACCORDINGLY UPHOLD HIS ORDER. 1 1 . IN THE CASE OF G. NARASINGA RAO (SUPRA) THE TRIBUNAL HAS CONSIDERED THE SCOPE OF SECTION 269SS AND HELD AS UNDER: - 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THERE IS A FAMILY LOAN AND THE ASSESSEE HAS CONSTRUCTED THE PROPERTY WHICH IS USED BY THE ASSESSEE AND HIS SON FOR WHICH HE TOOK A LOAN FROM HIS SON FOR THE PURCHASE OF V ARIOUS RAW MATERIALS. WE HAVE ALSO 9 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) EXAMINED THE ORDER OF THE TRIBUNAL IN THE CASE OF VANAMADI SATYANARAYANA, KAKINADA VS. ACIT (SUPRA) AND WE FIND THAT TRIBUNAL HAS EXAMINED THIS ISSUE OF LOAN FROM THE FAMILY MEMBERS AND HAVE CONCLUDED THAT IN CASE OF FAM ILY TRANSACTIONS, BONAFIDE OF THE ASSESSEE SHOULD NOT BE DOUBTED. THE OBSERVATION OF THE TRIBUNAL FOR THE SAKE OF REFERENCE ARE EXTRACTED HEREUNDER: HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES THE JUDG MENTS REFERRED TO, WE FIND THAT THE ASSESSEE HAS TAKEN A LOAN WITHOUT INTEREST FROM HIS FATHER AND HIS WIFE WHEN HE WAS BURDENED WITH THE OBLIGATION OF BORROWED FUNDS OF THE OUTSIDERS. IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (SUPRA) THE LORDSHIP OF PUNJAB & HARYANA HIGH COURT HAS HELD THAT FAMILY TRANSACTIONS BETWEEN TWO INDEPENDENT ASSESSEES BASED ON AN ACT OF CASUALNESS, ESPECIALLY IN A CASE WHERE THE DISCLOSURE THEREOF IS CONTAINED IN THE COMPILATION OF ACCOUNTS, AND WHICH HAS NO TAX EFFECT, ESTAB LISHES REASONABLE CAUSE U/S 273B FOR NOT INVOKING THE PENAL PROVISIONS OF SECTION 271D AND 271E. THE RELEVANT OBSERVATIONS OF THE PUNJAB & HARYANA HIGH COURTS ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: THE TRIBUNAL WAS RIGHT IN RECORDING ITS C ONCLUSION THAT A REASONABLE CAUSE HAD BEEN SHOWN BY THE ASSESSEE. THE TRIBUNAL RELIED ON THE FACT THAT THE ASSESSEE HAD PRODUCED HIS CASH BOOKS, DEPICTING LOANS TAKEN BY HIM UNILATERALLY BEFORE THE REVENUE IN THE INSTANT ACTION OF THE ASSESSEE IN AS MUC H AS THE ASSESSEE DID NOT ATTEMPT BY THE IMPUGNED ACT TO AVOID ANY TAX LIABILITY. FURTHERMORE, 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 TH E 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, ESTAB LISHES 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) AGAINS T 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 ASS ETS, 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 10 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) CIRCULAR NO.387 DATED 6.7.84 ISSUED BY THE CBDT A ND HAS HELD THAT THE OBJECT OF INTRODUCTION FOR PROVISIONS OF SECTION 269SS AND 269T WAS TO CURB THE TRANSACTION OF BLACK MONEY. IT SHOULD NOT BE INVOKED FOR A VENIAL BREACH OR TECHNICAL DEFAULT. FROM A CAREFUL PERUSAL OF THE AFORESAID JUDGEMENTS, WE AR E OF THE VIEW THAT PROVISIONS OF SECTION 269SS AND 269T WERE INTRODUCED WITH THE INTENTION TO CURB THE TRANSACTIONS OF THE BLACK MONEY. WHILE LEVYING A PENALTY U/S 271D ONE HAS TO EXAMINE THE SURROUNDING CIRCUMSTANCES UNDER WHICH THE LOAN IN CASH WAS OBTA INED BY THE ASSESSEES. IN CASE OF FAMILY TRANSACTIONS, THE BONAFIDE OF THE ASSESSEES SHOULD NOT BE DOUBTED AS HELD IN THE CASE OF CIT VS. SUNIL KUMAR GOEL (SUPRA). IN THE INSTANT CASE, ASSESSEE HAS MADE OUT A CASE THAT THE FAMILY LOAN WAS OBTAINED TO CLE AR THE LOAN LIABILITIES OF THE OUTSIDERS AND REVENUE HAS NOT PLACED ANYTHING ON RECORD TO FALSIFY THE CLAIM OF THE ASSESSEES. UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE INVOCATION OF PROVISIONS OF SECTION 271D IS NOT PROPER. WE THEREFORE, FOLLOWING THE AFORESAID JUDGEMENTS SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE PENALTY. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW IN A SIMILAR SET OF FACTS WE FIN D NO REASON TO TAKE A CONTRARY VIEW IN THIS APPEAL. WE THEREFORE FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL HOLD THAT UNDER THE GIVEN CIRCUMSTANCES PENALTY IN THE INSTANT CASE IS NOT SUSTAINABLE IN THE EYES OF LAW. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE PENALTY. 1 2 . IN THE CASE OF DR. DUTTA SIVA SANKARA RAO (SUPRA) THE COORDINATE BENCH OF THE TRIBUNAL HAS HELD AS UNDER: - 3. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD WE FIND TAHT THE ASSESSEE HAS TAKEN A LOAN IN CASH BUT IT WAS FROM HIS CLOSE RELATIVES. SIMILAR IS THE POSITIONS WITH REGARD TO ITS PAYMENT. NOW THE QUESTION POSED BEFORE UNDER SECTI ON IS; WHETHER IT WAS DONE UNDER A BO0NAFIDE BELIEF? AND IF IT IS DONE UNDER A BONAFIDE BELIEF, WHETHER ASSESSEE IS ENTITLED FOR BENEFITS OF SECTION 273B OF THE I.T. ACT, ACCORDING TO WHICH NO PENALTY SHALL BE IMPOSABLE ON THE ASSESSEES AS THE CASE MAY BE FOR ANY FAILTURE REFERRED TO THE DIFFERENT PROVISIONS MENTIONED IN THIS SECTION IF IT P R OVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. THE FACTS OF THE CASE ARE EXAMINED IN THE LIGHT OF THIS PROVISION AND WE FIND TH A T SINCE THE ASSESSEE HAS TAKEN A LOAN FROM HIS CLOSE RELATIVES WITHOUT REAL I ZING THE LEGAL COMPLICATIONS, HE SHOULD BE GIVEN A BENEFIT OF THIS SECTION. WE ACCORDINGLY OF THE VIEW THAT THE ASSESSEE HAD A REASONABLE CAUSE FOR NOT OBTAINING THE 11 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU ) LOAN, THROUGH CHEQUE AND TRANSACTING IN CASH WITH HIS CLOSE RELATIVES. ACCORDINGLY, THE PENALTIES LEVIED U/S 271D & E ARE NOT ATTRACTED. WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE PENALTY LEVIED UNDER SECTION 271 D & E OF THE I.T. ACT. 1 3 . KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY CONS I DERING THE CASE - LAWS AS REFERRED TO ABOVE, WE ARE OF THE OPINION THAT SECTION 269SS , HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. THEREFORE, W E FIND NO INFIRMITY IN THE OR DER OF THE LD.CIT(A). 1 4 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 31 ST DAY OF JULY , 201 7 . SD/ - SD/ - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST JU LY , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - PENMETSA VENKATA SOMA RAJU, D.NO. 27 - 19 - 1, ASR NAGAR, BHIMAVARAM. 2. THE REVENUE - DCIT, CENTRAL CIRCLE, RAJAHMUNDRY. 3. THE CIT(CENTRAL), HYDERABAD. 4. THE CIT(A) , GUNTUR. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM. 12 ITA NO. 632/VIZ/2013 ( P.V. SOMARAJU )