A division bench of the Kolkata Income Tax Appellate Tribunal (ITAT), last week held that cash transactions between husband and wife would not attract section 269SS of the Income Tax Act, 1961.
As per section 269SS, a person shall not take or accept loan/deposit from other person otherwise than by the prescribed banking channels i.e. A/c payee cheque or account payee bank draft or by use of electronic clearing system so that the aggregate from such person is Rs.20000/- or more.
In the instant case, assessee’s husband wanted to purchase a property in the name of the assessee and he deposited in the savings bank account of the assessee on various dates. However, the negotiations for purchase of the property did not materialise and therefore moneys were transferred back by cheque to the assessee’s husband cash credit account. After transfer, a sum of Rs.14,50,000/- remained in the assessee’s bank account. The assessee had returned a sum of Rs.19,50,000/-.
Assessing Officer treated the above sum as repayment of loan which was received in cash attracting the provision of section 269SS of the act and consequently imposed penalty under Section 271D of the Income Tax Act.
On appeal, the first appellate authority confirmed the levy of penalty by finding that there was no reasonable cause for acceptance of loan in cash contrary to the mandate u/s 269SS of the Act and therefore the assessee was liable to pay penalty equal to the amount of loan accepted in violation of the provision of section 269SS of the Act.
Allowing the second appeal filed by the assessee, the bench relied on the decision of the ITAT Kolkata in the case of Dr.B.G.Panda wherein the bench dealt with a similar issue. In that case, the Tribunal concluded that “though the expenditure was apparently incurred by the husband being the karta/head of the family, it could not be said that the wife could not have any interest of her own in this house being constructed. The transaction was neither loan nor any gift as no ‘interest’ element was involved and there was no promise to return the amount with or without interest. It was clear that the money given by the wife was a joint venture of the family.”
Following the above decision, the bench deleted the penalty proceedings.
Read the full text of the Order below.