Taxman will not breathe on you if you have taken a cash loan from a family member, provided you can explain the reasons for doing so, as per a recent tax tribunal ruling.
As per Income Tax Act, loans in excess of Rs 20,000, even from family members, cannot be taken in cash or bearer cheque.
Breach of this provision (269SS) of the Act attracts penalty same as loan amount under section 271D.
The Income Tax Appellant Tribunal (ITAT) recently cancelled the penalty imposed by the tax authorities on three relatives based in Saharanpur for violating this provision, while receiving about Rs 1.5 lakh each from their grandfather through bearer cheques to start a business venture.
Siding with the plea of these individuals to cancel the penalty imposed by the tax official, the tribunal said, "the transaction between the assessee and his grandfather can be viewed as financial help coming from elders in the family".
Taking a decision in favour of these individuals and quashing the assessing officer's order to impose penalties, the tribunal said ," After all, transactions between the assesses and their grandfather is to be viewed as a financial help coming from elders in the family."
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In fact, the Delhi bench of ITAT added that an assessee or any individual taxpayer cannot be presumed to have knowledge about the intricacies of tax laws, as in this case.
The ITAT added that for assesses, it was just a technical breach and so penalty cannot be levied for such technical or venial breach.