2023 (3) TMI 1364 - AT - Income Tax

Penalty u/s 271B - owing to the cash deposits in the bank account and the sales turnover in the ITR the revenue levied penalty considering the deposits as turnover of the assessee - assessee is a commission agent of Gujarat Milk Cooperative Federation having milk booth at Darya Ganj, Delhi and earning a commission margin @ 0.55% to 12.16% per unit on butter milk to paneer HELD THAT - Since, the assessee only a commission agent and earns margin as prescribed in Gujarat Milk Cooperative Federation rules as reflected in column 5 above , we hold that the penalty levied u/s 271B obliterated. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against CIT(A) order - Justification of appellate order - Cash deposits in bank account - Sales turnover discrepancy - Penalty under section 271B - Appellant's role as a commission agent - Gujarat Milk Cooperative Federation rules.

Analysis:
The appeal was filed against the order of the ld CIT(A)-3, National Faceless Appeal Centre (NFAC), Delhi, dated 29.03.2022. The appellant raised grounds challenging the justification of the appellate order. The main contention was that the cash receipts deposited in the regular bank account were not sales but related to the principal concern, where the appellant was to be remunerated with a fixed commission. The appellant argued that the penalty under section 271B should be kept in abeyance since the issue was mainly about the appellant being a mediator in the bank account receipts, confirmed by the principal concern. The appellant also contended that they were not liable under section 44AB. The revenue imposed the penalty under section 271B based on the cash deposits of Rs. 4.3 Cr. in the bank account, considering it as turnover.

Upon review of the material on record, it was found that the appellant acted as a commission agent for the Gujarat Milk Cooperative Federation, operating a milk booth in Delhi. The appellant earned a commission margin ranging from 0.55% to 12.16% per unit on products like butter milk and paneer. Given the appellant's role as a commission agent and the margin earned as per the Federation's rules, it was concluded that the penalty under section 271B was unwarranted. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.

In conclusion, the ITAT Delhi held that the penalty under section 271B imposed on the appellant was unjustified due to the nature of the appellant's role as a commission agent for the Gujarat Milk Cooperative Federation. The cash deposits in the bank account were not considered as turnover, and the appellant's earnings were in line with the Federation's prescribed margins. Therefore, the penalty was deemed obliterated, and the appeal was allowed in favor of the assessee.