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2013 (7) TMI 486 - HC - Income TaxPenalty u/s 271E - Advances repaid by assessee - Contravention of Section 269T - Whether the Appellate Tribunal has substantially erred in holding that advances against the booking of shops and offices is not deposit within the meaning of section 269SS and 269T - Held that - amount of returned by the assessee to various parties was by of advance and the assessee also reflected the said amount of advance received in its balancesheet, which came to be accepted by the Department in the earlier years, it is rightly held that section 269T of the Act would not be applicable and, therefore, no penalty under section 271E of the Act can be levied for breach of section 269T - No reason to interfere with the impugned judgment and order passed by the ITAT in confirming the order passed by the CIT(A) - Following decision of CIT vs. Rugmini Ram Ragav Spinners P.Ltd. 2007 (7) TMI 237 - MADRAS HIGH COURT - Decided against Revenue.
Issues:
Challenge to ITAT order confirming CIT(A) decision on penalty under section 271E of the Income Tax Act. Analysis: The case involved a challenge by the Revenue against the ITAT order confirming the CIT(A) decision on the penalty imposed under section 271E of the Income Tax Act. The dispute arose from the repayment of certain deposits in cash exceeding Rs. 20,000, which the Assessing Officer considered a violation of section 269T of the Act, leading to penalty proceedings. The CIT(A) allowed the appeal by the assessee, quashing the penalty, stating that the amounts repaid were advances from customers, not loans or deposits. The ITAT upheld this decision, emphasizing that the nature of the repayment did not fall under the category of loan or deposit, as clarified by the assessee's representative. The ITAT also highlighted that the amounts refunded did not include any interest, further supporting the argument that it was not a loan or deposit. The ITAT referenced the case of CIT vs. Rugmini Ram Ragav Spinners P.Ltd., where it was held that the penalty under section 271E is not automatic and should be levied only in the absence of reasonable cause. The provisions of section 269SS and 269T aim to prevent tax evasion through cash loans or deposits, applicable only in specific cases. In this scenario, the advance money received by the assessee was not accepted with conditions of repayment, leading to the conclusion that it was not a loan or deposit. The ITAT also highlighted that the AO had not applied the provisions of section 271D and that there was no prohibition in the Act against accepting cash for the sale of an immovable asset. Moreover, the ITAT mentioned the case of Shiv Enterprises, where it was established that receiving and repaying advances is a business transaction, distinct from loans and deposits covered by section 269SS. The ITAT concluded that the nature of the transactions in this case did not warrant the application of section 269T, supporting the decision to dismiss the Revenue's appeal. The court found no reason to interfere with the ITAT's decision, as the amounts in question were rightly considered advances and not subject to penalty under section 271E. Consequently, the Tax Appeal was dismissed, with no substantial question of law arising from the case.
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