Provisions of S. 269SS not applicable to Loan Transaction between Husband and Wife: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of section 269SS of the Income Tax Act will not be applicable to loan transaction between husband and wife.

While completing assessment against the assessee, the Assessing Officer found that the assessee has shown loan of Rs. 88,00,000/- from his wife, Mrs. Shahina Quereshi, during the year under consideration. Out of Rs. 88,00,000/-, the assessee explained that Rs. 63,000/- was received from Mrs. Shahina Qureshi directly and Rs. 22,00,000/- received by the assessee as advance against sale of his proty and Rs. 3,00,000/- was wrongly considered in the name of his wife rather the same was transferred by assessee’s own account and hence, should be considered as capital not unsecured loan.

On second appeal, the Tribunal observed that the assessee received advance money of Rs. 22 lacs from the four parties for the property no. 3498, Gali Sangrasha, Bara Hindu Rao, Delhi – 6. Due to some reasons, the deal was not materialized and the purchaser parties agreed to take another property which is in the name of assessee’s wife. The said amount was transferred to his wife’s account i.e., Mrs. Shahina Qureshi.

“I further note that there is no denial on the part of the AO that the amount of Rs. 22 lacs was received by the assessee from his wife, Mrs. Shahina Qureshi. However, while levying the penalty u/s. 271D of the Act, the AO did not appreciate the fact that the provisions of section 269SS of the Act are not applicable on the loan transaction between husband and wife. Thus, the question of levying of penalty u/s. 271D of the Act does not arise on the impugned transaction, hence, I delete the penalty in dispute and allow the appeal of the assessee,” the Tribunal said.

The Tribunal further noticed the decision in the case of Sunil Kumar Sood vs. JCIT wherein it was held that since the assessee had taken the loan from his wife for the purchase of house which is for the benefit of the whole family, the penalty levied undersection 271D of the Act is not leviable.

“The ratio laid down in the aforesaid decision is clearly applicable to the facts and circumstances of the present case as the transaction in the present case was also between husband and wife. As laid down in the aforesaid decision, penalty in the facts and circumstances of the case ought not to have levied u/s 271D of the Act and penalty levied u/s 271D of the Act is directed to be cancelled and the appeal of the assessee is allowed,” the Tribunal said.