TMI Blog2003 (3) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... Sou. Chandralekha R. Khivansara Rs. 50,000 (5) Sou. Zankarbai Khivansara Rs. 50,000 (6) Sunil M. Kasliwal (HUF) Rs. 2,78,000 -------------- ₹ 5,44,150 -------------- The ITO Ward 1(3) Nashik, assessing the assessee, referred the matter to the Dy. CIT, Range I Nashik for levy of penalty under section 271D read with section 274(1) of the Income-tax Act. The Dy. CIT accordingly issued a show-cause notice and the assessee filed written submissions on 11-12-1993 stating therein, inter alia, as follows: (1) He is the karta of his family consisting of his son, daughter and his wife. This HUF is also engaged in similar business as that of the assessee. Thus, there is a dual role to be performed to carry on business in his individual and HUF capacities. The cash (Rs. 2,78,000) of the HUF business has been used by his individual business and that being so, section 269SS is not applicable. (2) The cash gifts made to his two minors were accepted by him and credited in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. Both the parties are aggrieved by the order of the CIT(A) and accordingly are in appeal before this Tribunal. 5. Shri S.K Rastogi, the learned D.R. strongly supported the order of the CIT(A). He submitted that from the facts of the case it was very clear that the assessee had contravened the provisions of section 269SS and accordingly, the assessee was liable to be penalised under section 271D. Merely because money was lying in the account with the assessee or that the assessee was working in dual capacity as individual and HUF would not make any difference so far as application of provisions of section 269SS is concerned and similarly the fact that some of the gifts received by the relatives of the assessee were genuine is also of no significance. He accordingly submitted that the levy of penalty is fully justified and the CIT(A) is not justified in retaining only a paltry amount of ₹ 41,500. In support of his contentions, he placed reliance on the following decisions: (i) Bhushan Chemicals v. Dy. CIT [1995] 54 ITD 5 (Pune), (ii) Prabhavshali Chit Fund Co. (P.) Ltd v. CIT [1994] 49 ITD 566 (Delhi), (iii) ITO v. Narsingh Ram Ashok Kumar [1993] 47 ITD 38 (Pat.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that merely because two gifts were not accepted as genuine that does not mean that cash was not available for deposit in the books of account and in any case, there is no evasion of tax involved. In support of his contentions, he relied upon Muthoot M. George Bankers v. Asstt. CIT [1993] 46 ITD 10 (Cochin) and ITO v. Lakshmi Enterprises [1990] 185 ITR 595 (AP). 7. We have considered the rival submissions and perused the facts on record. From the facts of the case, it is evident that when the assessee required money for purchase of machinery, he took such amounts in cash from the HUF of which he was the karta, from his wife Smt. Pramila S. Kasliwal and from his two children, namely, Shri Ankush S. Kasliwal and Anuja S. Kasliwal, who were all living under one roof and from his two close relatives (Sou. Chandralekha R. Khivansara ₹ 50,000 and Sou. Zankarbai Khivansara ₹ 50,000). So, it was under the bona fide belief that the assessee got the amounts from his own family members and close relatives and there is only a technical/venial breach of the provisions of law. The provisions of section 269SS were brought on statute book to counter evasion of tax in certain cases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty would be leviable if the person concerned proves that there was reasonable cause for the said failure, clearly indicate that these provisions give a discretion to the authorities to impose the penalty or not to impose the penalty. Such a discretion has to be exercised with wisdom and in a just and fair manner having regard to the entire, relevant facts and material existing on records. Accordingly, we hold that the CIT(A) has rightly deleted the penalty to the tune of ₹ 5,02,650. 8. As regards the retention of penalty by the CIT(A), he has done so on the ground that the two gifts of ₹ 20,500 and ₹ 21,000 received by Kum. Anuja and Smt. Premila S. Kasliwal have been treated as income of the assessee from undisclosed sources. The reasoning given by the CIT(A) has no legs to stand, because when the two amounts have been treated as income of the assessee from undisclosed sources, then these two amounts lose character of a loan or a deposit. Accordingly, provisions of section 269SS will not be applicable. Under the circumstance, we see no justification for retention of penalty, to the tune of ₹ 41,500. The same is accordingly deleted. 9. Coming to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12. As regards the reliance placed by the ld. D.R. on the three judgments of the High Courts, viz. Chamundi Granites (P.) Ltd. v. Dy. CIT [1999] 239 ITR 694 (Kar.), Sukhdev Rathi v. Union of India [1995] 211 ITR 157(Guj.) and K.R.M.V.Ponnuswamy Nadar Sons(Firm)v. Union of India [1992] 196 ITR 431 (Mad.) we note the issue before the three High Courts was with regard to the constitutional validity of section 269SS and the Hon'ble High Courts upheld the constitutional validity. There is no dispute in this regard that provisions of section 269SS are constitutionally valid and accordingly, these three judgments do not advance the cause of the Revenue so far as levy of penalty in this case is concerned. 13. In the light of above discussion, we uphold the finding of the CIT(A) deleting the penalty to the tune of ₹ 5,02,650 and delete the penalty of ₹ 41,500 retained by him. 14. In the result, Revenue's appeal is dismissed and the cross objection of the assessee is allowed. Per U.B,S. Bedi, Judicial Member- 15. I have had an occasion to go through the proposed order of the learned Accountant Member and despite my best persuasion to myself, I have not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying upon the decision in the case of Hindustan Steel Ltd. on the point that penalty in a given case should not be imposed for a mere technical or venial breach of provisions of a particular section, CBDT Circular No. 387 dated 6-7-1984 and relying upon the decision of the Cochin Bench of the Tribunal in the case of Muthoot M. George Bankers v. Asstt. CIT [1993] 46 ITD 10 it was pleaded for deletion of the entire penalty. The learned CIT(A) accepted the contention as raised by the assessee with respect to all other amounts except the cash gift of ₹ 41,500 involved in the cash transaction which has been treated as unexplained and upheld the penalty with respect to this amount and deleted the penalty with respect to other amounts. 18. The revenue is in appeal against the deletion of penalty order passed by the learned CIT(A) and it was pleaded that section 269SS makes a mention about acceptance about taking or accepting of any loan or deposit otherwise than by account payee cheque or account payee bank draft by a person from the other persons and therefore, the HUF and the individual are separate legal entities under the taxation laws as such relief allowed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to transaction in the amount of ₹ 2,78,000 at item Nos. (vi) above has rightly been found to be not exigible by the learned CIT(A) and his action to this extent is confirmed. So far as transactions at item No. (i), (ii), (iv) and (v) above to the extent of ₹ 2,24,650 are concerned, these cannot be equated with the transaction between the assessee and sister concern having similar type of business. Therefore, in my considered view, the penalty with respect to these amounts taken or accepted from wife, minor son, minor daughter and one of the relatives of the assessee, who are only relatives of the assessee, cannot be equated with transaction between the HUF, of which the assessee is karta and having the same business as that of the assessee in order to take these amounts out of the purview of penalty under section 271D of the Act, for violation of section 269SS as their case is distinct and different than that of the sister concern. Therefore, while accepting the appeal of the revenue partly, I set aside the order of the learned CIT(A) with respect to penalty of ₹ 2,24,650 relatable to transactions with relatives of the assessee and restore the order of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (minor son of the assessee) (2) Anuja S. Kasliwal Rs. 41,150 (minor daughter of the assessee) (Rs. 61,650 minus ₹ 20,500) (3) Smt. Pramila S. Kasliwal Rs. 20,500 (wife of the assessee) (Rs. 41,500 minus ₹ 21,000) (4) Smt. Chandralekha R. Khivansara Rs. 50,000 (5) Smt. Zankarbai Khivansara Rs. 50,000 ---------------- Rs. 2,24,650 ---------------- 3. Shri G.S. Singh, learned CIT DR, at the outset submitted that the genuine transactions, ipso facto do not fall beyond the lien of section 269SS of the Income-tax Act, 1961, it was alleged that any transaction would be either genuine or non-genuine. If genuine transaction is out of the ambit of section 269SS of the Act, then this section, ex consequenti would apply only in respect of non-genuine transactions. If this interpretation is to be followed, it would defeat the very purpose of the provision. Resultantly, the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the account books and later giving an explanation for the same. 8. From the scrutiny of the records it revealed that penalty was also maintained in respect of the loans taken by the assessee from his family members as under:- (1) Ankush S. Kasliwal, minor son ₹ 63,000 (2) Anuja S. Kasliwal, minor daughter ₹ 41,150 (3) Smt. Pramila S. Kasliwal, wife ₹ 20,500 9. The learned CIT DR relied on the decision of the Tribunal rendered in the case of Unique Constructions v. Dy. CIT [1995] 52 TTJ (Bom.) 96. In this case the Tribunal held that the assessee contravened the provisions of section 269SS of the Act, even when the amounts were received from family members, partners and sister concerns. 10. In the present case, I find that the assessee is manufacturer of building material, i.e., Neeru, Sunla, Sago, etc. He was in need of funds for his business. He borrowed the money from his minor children and wife. As far as minors are concerned, the assessee himself acted as the guardian. No other person was involved. In the capacity of the guardian of the minor children, he has given the loan and accepted it in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see at ₹ 1,25,000 was cancelled due to the assessee's non-attendance on 16-8-1989. Two assessment orders in respect of these two ladies were also submitted before the Assessing Officer. It transpired from the perusal of the said assessment orders that the returns were filed on 30-11-1990, where both had wealth consisting of gold and silver. These were sold to advance monies to the assessee; on the same date, i.e., sale of ornament date and advancing of money on the same date of 15-8-1989. 12. Assessing Officer noticed that the assessee continued to generate funds till the machinery was purchased. It was only on 4-9-1989 that the assessee could go to Bombay with the cash to buy the machinery. Assessing Officer stated that the certificate from one of his co-businessmen certifying assessee's illness and cancellation of deal has no meaning unless the deal has evidenced by an instrument which could be substantiated to have existed. The evidence in the form of certificate was held to be ipse dixit. 13. In the case of CWT v. Jagdish Prasad Choudhary [1995] 211 ITR 472 (Pat.) (FB) Hon'ble High Court has held that for the existence of a reasonable cause the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Taking into consideration the entire conspectus of the case, I am of the opinion that there existed no reasonable cause for accepting the loan of ₹ 1,00,000 i.e., ₹ 50,000 each from Smt. Chandralekha R. Khivansara and Smt. Zankarbai Khivansara. Penalty can therefore be maintained protanto. I, therefore, agree partly with the learned JM and partly with the learned AM. 16. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority. Per U.B.S. Bedi, Judicial Member - As there was a difference of opinion between the Accountant Member and the Judicial Member, following question was referred to a Third Member: Whether on the facts and in the circumstances of the case, the CIT(A) is justified in deleting the penalty levied by the Assessing Officer under section 271D in respect of the loans aggregating to ₹ 2,24,650 raised by the assessee from his minor son, minor daughter and two close relatives, Sou. Chandralekha R. Khivansara and Sou. Zankarbai Khivansara? 2. The learned Vice-President, Shri M.K. Chaturvedi, sitting as Third Member by his opinion dated 3-3-2003 has concurred partly with the J ..... X X X X Extracts X X X X X X X X Extracts X X X X
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