By TIOL News Service

NEW DELHI, DEC 17, 2018: THE issue is - Whether if there are loan transactions in cash beyond permissible limits between spouses, penalty is imposable. And the answer is NO.

Facts of the case

The assessee engaged in the business of metal trading and sale-purchase of livestock filed its return. The assessee had taken loan from his wife. However, the assessee claimed that mistakenly an additional amount of Rs.3 lakhs was also shown as loan from wife. The AO, on account of unsatisfactory explanation of such amount by assessee, made addition of Rs. 3 lakhs to his income. So aggrieved, the assessee appealed to CIT(A), who further made an addition of Rs.55 lakhs as unexplained cash amount u/s 68. Further aggrieved, the assessee appealed before ITAT.

On hearing the appeal, the ITAT held that-

Whether penalty can be imposed for loan given in cash in excess of the permissible limit for cash transactions, but where such transaction happens between spouses - NO: ITAT

++ The tribunal noted that the amount of Rs. 58 lacs was transferred by the assessee through banking channel only. The account ledger of the Axis Bank of M/s Paramount Trading Co. was also filed by the assessee before the CIT(A) to explain that the amount was transferred out of the explained sources of the assessee. However, there was no incidence of pre cash deposit before transfer, neither any such incidence was discussed by the CIT(A). The tribunal also noted that the provisions of section 68 are applicable in case where the credit was received by the assessee. However, in the present case, the position is entirely different, as the amount of Rs. 58 lacs was not received by the assessee rather the amount was paid by the assessee to his wife out of his explained sources. Hence, the addition in dispute made in the hands of the assessee should not be taxed and therefore, the same should be deleted and accordingly, the appeal of the assessee stands allowed.

++ The tribunal heard both the parties and perused the records, especially the impugned order as well as the ITAT, ‘G’ Bench decision dated 20.6.2018 in the case of Sunil Kumar Sood vs. JCIT. It noted that 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. It further noted that there was 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, It deleted the penalty in dispute and allowed the appeal of the assessee.

(See 2018-TIOL-2417-ITAT-DEL)