The main legal point established is that a non-commercial and personal transaction, which does not amount to a loan or deposit, does not warrant penalty under section 271D of the Income Tax Act, 1961.

K.S. Jhaveri, J.

1. By way of this Appeal, the Appellant has challenged the order and judgment dated 16.11.2006 of the Income Tax Appellate Tribunal, Rajkot (SMC) Bench, Rajkot in ITA No. 393/RJT/2006 for the Assessment Year : 2003-2004 whereby the Tribunal reversed the order and judgment of the CIT (Appeals).

2. While admitting the matter on 28.11.2007, the following substantial question of law was framed by the Court for consideration:-

"Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal was right in law in confirming the penalty u/s. 271D of the Income Tax Act, 1961 even though the transaction of accepting Rs. 2 lacs from appellant's son was non-commercial and personal in nature, apart from otherwise found to be genuine?"

3. The facts of the case are that the appellant an individual has income from medical practice and agriculture. The appellant had filed his return of income for Assessment Year : 2003-2004 on 31.03.2004. During the course of assessment proceedings, the Assessing Officer noticed that the appellant had accepted a sum of Rs. 2,00,000/- from his son; the appellant's son had issued a cheque in the name of the appellant, but the son had encashed the same and the cash so received by the appellant was deposited by the appellant in his own account and a draft was taken out in favour of the motor car dealer. The appellant received delivery of the vehicle on 25.11.2005. The respondent made a reference to the Additional CIT, Gandhidham Range for initiating penalty proceedings u/s. 271D on the ground that the aforesaid sum was taken in cash instead of a/c. Payee cheque from the appellant's son. In this manner, it was alleged that the appellant had acted in contravention to the provisions of section269SS of the Act. The appellant later clarified that the amount so received from his son was neither a loan nor a deposit within the meaning of section 269SS of the Act and it was received in cash in view of urgent necessity. The Additional CIT imposed a penalty of Rs. 2,00,000/- on the ground that the appellant being a learned person and well aware of the provisions could not have ignored the law or could have taken the assistance of an income tax counsel.

Being aggrieved and dissatisfied with the above order, an appeal was preferred before the CIT(A) at Rajkot which deleted the penalty holding that the transaction was between a father and son, to meet the urgent requirement of depositing the margin money in the bank account for buying a vehicle for personal use and thus, it was neither a loan nor deposit nor had anything to do with evasion of tax. Against this order, the respondent came in an appeal before the Appellate Tribunal wherein the penalty was confirmed. Being aggrieved by this order, the above Appeal is preferred.

4. Learned Advocate for the appellant has taken this Court to the facts of the case and has referred to Paragraph 6 of the judgment and order of the CIT (Appeals) which reads as under:-

"I have carefully considered the submission made by the appellant alongwith the case record and the material brought to my notice. I have also considered the various judicial authorities the appellant has sought support from. The undisputed fats which has emerged from the records are that the appellant received the sum of Rs. 2,00,000/- from his son Dr. Mahesh Akhani who is also assessed to tax. The amount was paid by a bank cheque bearing No. 52276 issued on ICICI Bank of Bhuj. This transaction has been considered and accepted by a Department as the genuine transaction. However, the Department Circular No. 387 dated 6th July 1984 clarifies that the provision was brought in to cover those situations where unaccounted cash found in the course of search or was explained by the tax payers as representing loans taken or deposits made to various persons. This particular section was brought in with a view to counter such tactics of the assessee in question. The clarification given in the