The Income Tax Appellate Tribunal, Patna Bench, dismissed the assessee's appeal against a penalty of Rs.20,50,000 imposed under Section 271D read with Section 269SS of the Income Tax Act, 1961 for accepting cash loans from her husband, holding that the assessee failed to establish reasonable cause under Section 273B and that familial arrangements do not exempt compliance with cash transaction prohibitions.
Background & Facts
The Dispute
The assessee, Sippy Dubey, engaged in share trading, accepted cash deposits totalling Rs.20,50,000 from her husband during the financial year 2014-15. The Assessing Officer treated these deposits as loans in contravention of Section 269SS and initiated penalty proceedings under Section 271D. The assessee contended that the amounts were family loans, repaid later, and that she had reasonable cause under Section 273B. The Revenue argued that each spouse is an independent assessee and that the cash deposits violated the prohibition on cash loans irrespective of repayment or familial relationship.
Key Facts
- The assessee filed her return of income for AY 2015-16 on 31.07.2015, declaring income of Rs.4,81,420.
- Scrutiny under CASS revealed cash deposits of Rs.60,50,000 in her HDFC and IDBI bank accounts.
- On enquiry, she stated that Rs.10,00,000 was received via cheque on 28.01.2015 as an unsecured loan from Mr. Avinash Choudhary and the remaining Rs.50,50,000 was credited through cash and cheques.
- Bank statement examination showed that she had received Rs.20,50,000 in cash as an unsecured loan from her husband, broken down as:
- 02.04.2014: HDFC Bank account 50100023916815 - Cash Rs.8,50,000
- 17.03.2015: HDFC Bank account 50100023916815 - Cash Rs.6,00,000
- 15.01.2015: IDBI Bank account 0721104000039817 - Cash Rs.6,00,000
- The Assessing Officer completed the regular assessment on 22.12.2017, assessing total income at Rs.9,94,640.
- Penalty proceedings under Section 271D were initiated, and the JCIT imposed a penalty of Rs.20,50,000 by order dated 12.02.2018.
- The assessee appealed to the CIT(A), which confirmed the penalty, and then filed a further appeal before the ITAT.
Procedural History
- 31.07.2015: Return of income filed for AY 2015-16.
- 02.04.2014, 17.03.2015, 15.01.2015: Dates of cash deposits constituting the alleged loan.
- 28.01.2015: Date of cheque loan of Rs.10,00,000 from Mr. Avinash Choudhary.
- 22.12.2017: Assessment completed u/s 143(3).
- 12.02.2018: JCIT order imposing penalty of Rs.20,50,000 u/s Section 271D.
- Date not specified: Appeal to CIT(A) and its order confirming penalty.
- Date not specified: Appeal filed before ITAT.
- 21.09.2026: Date of hearing before the ITAT Patna Bench.
- 24.09.2026: Date of pronouncement of the order.
Relief Sought
The assessee sought to set aside the penalty order of 12.02.2018, delete the penalty of Rs.20,50,000, and obtain a refund of any amount paid, together with interest and costs.
The Legal Issue
The central question was whether the acceptance of a cash loan from a spouse constitutes a contravention of Section 269SS of the Income Tax Act, 1961 attracting penalty under Section 271D, and whether the assessee can avail the defence of reasonable cause under Section 273B on the ground of a family arrangement.
Arguments Presented
For the Appellant/Petitioner
The assessee, through counsel Shri Abhi Sarkar, argued that the cash deposits were loans from her husband, a family member, and therefore did not attract Section 269SS. She contended that the loan had been repaid by cheque, showing no mala fide intention, and that she had reasonable cause under Section 273B due to urgent business needs in share trading. Reliance was placed on the principle that penalty cannot be imposed when a reasonable cause is shown and there is no fraudulent intent.
For the Respondent/State
The Revenue, represented by Shri Ravi Kant Chowdhary, Sr. DR, countered that each spouse is an independent assessee under the Income Tax Act, and that familial relationships do not create an exception to the cash transaction prohibitions. It was submitted that the assessee failed to substantiate reasonable cause under Section 273B, especially since her husband had also given her a larger loan by cheque without explanation, indicating that cash was not necessary. The Revenue emphasized that the provisions of Section 269SS apply at the moment of taking or accepting the loan, and subsequent repayment does not negate liability.
The Court's Analysis
The Tribunal examined the interplay between Sections 269SS, 271D and 273B. It observed that Section 269SS prohibits taking or accepting any loan or deposit otherwise than by an account payee cheque, bank draft or electronic clearing system, and that penalty under Section 271D is attracted for contravention. The Tribunal noted that the assessee had not disputed the receipt of Rs.20,50,000 in cash from her husband, as evidenced by the bank statements. Regarding reasonable cause, the Tribunal held that the defence under Section 273B must be established at the time of the transaction and cannot be based on subsequent repayment or familial convenience. It emphasized that the Income Tax Act treats every assessee as an independent entity, stating:
"Since in the Income-tax provisions, each and every assessee are an independent assessee. Even they are residing in one house or in jointly family simultaneously. Every assessee is liable for income tax independently."
The Tribunal further pointed out that the assessee’s husband had extended a larger loan by cheque, undermining the claim that cash was necessary due to urgency. Consequently, the Tribunal found that the assessee had not established reasonable cause and that the penalty was correctly imposed. The appeal was dismissed on these grounds.
The Verdict
The Income Tax Appellate Tribunal, Patna Bench, dismissed the appeal of the assessee, upholding the penalty of Rs.20,50,000 imposed under Section 271D read with Section 269SS of the Income Tax Act, 1961. The Tribunal confirmed that the assessee failed to establish reasonable cause under Section 273B and reiterated that each spouse is an independent assessee, so familial arrangements do not excuse compliance with cash transaction prohibitions. No additional interest or costs were awarded.
What This Means For Similar Cases
Familial Relationship Does Not Excuse Cash Transaction Violations
Practitioners must note that loans or deposits between spouses, or any family members, are subject to the same restrictions under Section 269SS as transactions with third parties. The Tribunal’s holding that every assessee is an independent liable entity means that advice to clients should stress compliance with cash limits irrespective of familial ties.
Reasonable Cause Must Be Demonstrated at the Time of Transaction
The defence under Section 273B requires a contemporaneous showing of reasonable cause; subsequent repayment or later justification cannot retroactively sanitize a cash loan. Tax advisors should ensure that clients document the necessity of cash transactions at the time they occur, preserving evidence such as urgent business needs and lack of banking facilities.
Independent Tax Liability of Spouses
The judgment reinforces that husbands and wives are separate taxable units. Consequently, structuring loans through cash to avoid scrutiny is ineffective, and professionals should recommend using account payee cheques or electronic transfers for any loan or deposit, even within the family, to avoid attracting penalties under Section 271D.
