AO can’t levy penalty in absence of jurisdictional fact that assessee accepted cash loan from wife: ITAT

Case Details: ITO v. Sudhir Kumar Rawat - [2023] 148 taxmann.com 155 (Jabalpur-Trib.)

Judiciary and Counsel Details

• • Sanjay Arora, Accountant Member & Manomohan Das, Judicial Member
  • Sapan Usrethe, Adv. & Apoorva Agrawal, CA for the Appellant.
  • Ravi Mehrotra, Sr. DR for the Respondent.

Facts of the Case

Assessee, an individual, was show-caused for levy of penalty for violation of Section 269SS for receiving around Rs. 15 Lakhs in cash from his wife. In response, the assessee replied that his wife sold a property during the relevant assessment year, and the buyer deposited the purchase consideration in his account. This money was then returned to her by the assessee as the same belonged to her.

Further, the assessee demonstrated that he and his wife maintained books of accounts and that the corresponding debit and credit transactions in the books of accounts were not in relation to any loan or deposit of money. However, contending it as a violation of Section 269SS, the Assessing Officer (AO) levied a penalty under section 271D.

On appeal, CIT(A) cancelled the penalty order, and the matter then reached the Jabalpur Tribunal.

ITAT Held

The Tribunal held that the entire payment was only in satisfaction of the amount standing to the credit of the assessee’s wife, who was only receiving back her money from the assessee. It may attract penalty under section 271E for contravention of section 269T, but there was no question of contravention of section 269SS.

The penalty levied under section 271D was unsustainable in law due to the absence of jurisdictional fact i.e., the acceptance of money in cash by the assessee from his wife. The ledger accounts of the assessee and his wife reveal that the assessee had paid that amount in cash to his wife, and, further, it was the only cash transaction between the two.

Incorrectly mentioning a section of law does not necessarily invalidate the judicial action if the authority has the power to take such action. However, if the incorrect section was mentioned and the underlying facts do not support the intended action, then the action is invalid.

For instance, if an assessee received cash from their spouse, which should attract a penalty under section 271D, but the authority mentioned section 271E incorrectly, the action would still be valid as long as the facts support the intended action.

Accordingly, the penalty under section 271D cannot be imposed without the proper jurisdiction. However, the AO was at liberty to initiate penalty under section 271E.

List of Cases Reviewed

• • Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 5)
  • Deep Chand Kothari v. CIT [1987] 35 Taxman 223/[1988] 171 ITR 381/167 CTR 117 (Raj) (para 5) followed.

List of Cases Referred to

• • Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 5)
  • Deep Chand Kothari v. CIT [1987] 35 Taxman 223/[1988] 171 ITR 381/67 CTR 117 (Raj.) (para 5).