2014 (2) TMI 564 - HC - Income Tax

Advances not submitted as per section 269SS and 269T of the Act - Penalty u/s 271E of the Act Held that - What the respondent received from the prospective buyers was advance money simplicitor which was neither a loan nor a deposit even within the meaning of the said term assigned to under section 269T of the Act - When such amount is returned that too without interest, section 269T cannot be made applicable - Section 273B of the Act provides that notwithstanding anything contained in section 271E, no penalty shall be imposable on the person or the assessee as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure Relying upon Commissioner of Income Tax v. Rugmini Ram Ragav Spinners P. Ltd. 2007 (7) TMI 237 - MADRAS HIGH COURT . If the assessee proves that there is a reasonable cause, he is not subject to levy of penalty - the amount received by the assessee is only for the purpose of allotment of shares and it is not a deposit or loan - the assessee was under the bona fide belief that the money received is only for the purpose of allotment of shares - there is no material or evidence or any compelling reason produced by the Revenue to prove that the money received is a deposit or loan It is a question of fact and the order of the Tribunal is not a perverse one - The findings given by both the authorities below is based on valid materials and evidence Relying upon CIT Vs. P. Mohanakala 2007 (5) TMI 192 - SUPREME Court - whenever there is a concurrent finding by the authorities below, no interference should be called for by the High Court thus, there was no error or legal infirmity in the order of the Tribunal Decided against Revenue.

Issues Involved:
1. Applicability of Sections 269SS and 269T of the Income Tax Act to advances received for booking shops/offices.
2. Legitimacy of the penalty imposed under Section 271E of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Applicability of Sections 269SS and 269T of the Income Tax Act:
The primary issue revolves around whether the advances received by the assessee for booking shops and offices constitute "deposits" under Sections 269SS and 269T of the Income Tax Act. The Revenue argued that these advances should be treated as deposits, thus attracting the provisions of Section 269T, which mandates repayment through account payee cheques or bank drafts. However, the assessee contended that these amounts were neither loans nor deposits but were merely booking advances that were later refunded upon cancellation of the bookings.

The Tribunal and CIT(Appeals) both concluded that the advances received were earnest money for the booking of shops/offices/flats and not deposits or loans. The Tribunal noted that the advances were reflected in the assessee's balance sheet and had been accepted by the Department in earlier years. The Tribunal also emphasized that the amounts refunded did not include any interest, reinforcing the view that these were not deposits or loans.

The Tribunal referred to the case of CIT vs. Rugmini Ram Ragav Spinners P. Ltd., where it was held that the provisions of Sections 269SS and 269T are intended to prevent tax evasion through concealed income disguised as cash loans or deposits. Since the advances in question were neither deposits nor loans, Sections 269SS and 269T were deemed inapplicable.

2. Legitimacy of the Penalty Imposed under Section 271E:
The Revenue imposed a penalty under Section 271E for the repayment of advances in cash, arguing that this violated Section 269T. However, the CIT(Appeals) and the Tribunal found that the nature of the transactions did not constitute loans or deposits, thereby nullifying the applicability of Section 269T and, consequently, Section 271E.

The Tribunal highlighted that the term "loan or deposit" as defined in Section 269T includes money repayable after notice or after a period. In this case, the advances were not accepted with any preconditions of repayment after a notice period or interval, thus falling outside the purview of "loan or deposit."

Furthermore, the Tribunal referenced Section 273B, which provides that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. The Tribunal found that the assessee had a reasonable cause, as the advances were for booking purposes and not deposits, and the repayments were made without interest.

The Tribunal also cited the case of Commissioner of Income Tax v. Top Media Entertainment Ltd., where the Court confirmed the deletion of a penalty under Section 271E in similar circumstances, reinforcing the view that the advances were business transactions and not deposits or loans.

Conclusion:
The High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the advances received for booking shops/offices were not deposits under Sections 269SS and 269T. Consequently, the penalty under Section 271E was deemed unjustified. The Court emphasized that the advances were business transactions, and their repayment in cash did not attract the provisions of Section 269T or the penalty under Section 271E.

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