The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the penalty for cash transactions cannot be imposed on genuine transactions.
In the instant case, the Assessing Officer initiated penalty proceedings under section 271D and section 271E of the Income Tax Act on the ground that the assessee has received loans in cash and also repaid the loans in cash in violation of the provisions of section 269SS and 269T of the Income Tax Act.
The assessee submitted that his family members had intended to purchase a property and therefore, they entered into an agreement of sale and had requested the assessee to take out a D.D and consequently had received a sum of Rs.6,29,000 and the assessee had taken out the DD accordingly. But, since the transaction did not go through, the DDs were cancelled and the amounts were repaid to his children, and therefore, the transaction is not a loan and the penalty is not leviable.
While considering the second appeal preferred by the assessee, the Tribunal bench noted that the assessee had furnished all the necessary details of the transaction before the CIT (A), but the CIT (A) has failed to consider the details filed by the assessee.
“On examination of the documents filed by the assessee, we are convinced that the amount received and repaid by the assessee subsequently is not a loan. This is a transaction done on behalf of his children to accommodate than in obtaining DD’s without charges and cannot be considered as taking of loan or repayment of loan in cash.”
The bench further noted the decisions in CIT vs. Deccan Designs (India) P Ltd and also in the case of Director of Income Tax (Exemption) vs. All India Deaf and Dumb Society wherein it was held that where the transactions are genuine and enough reasons are offered by the assessee to justify the cash transaction, the penalty is not leviable both u/s 271D and 271E of the Act.
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