2016 (5) TMI 416 - AT - Income Tax

Penalty u/s 271E - Held that - We found that amount of ₹ 41 lacs is not a loan or deposit but appropriated out of booking advance of ₹ 1.49 crores. There is no liability to return the amount in question. In this case, refund is of part of booking amount, not included in loans & deposits as per Sec. 269T. Thus, penalty u/s. 271E is not leviable. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty u/s 271E of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeal was filed by the assessee against the order of CIT(A) for the assessment year 2009-10 regarding the imposition of penalty u/s 271E of the Income Tax Act, 1961. The grounds of appeal included issues such as the validity of the order, the absence of a valid notice for penalty proceedings, and the nature of the transaction in question.

2. The facts revealed that the assessee, a construction company, received a booking amount from buyers for a flat in a project. Subsequently, an additional amount was paid for extra amenities, but due to financial difficulties, the buyers canceled the amenities and received a refund. The AO initiated penalty proceedings under section 269T regarding the refund, which the assessee contested based on the nature of the transaction not falling under loans or deposits as per section 269T.

3. The CIT(A) affirmed the AO's decision to levy the penalty, leading to the appeal before the ITAT. The arguments presented included the limitation for imposing the penalty, the nature of the payment being a booking advance and not a loan or deposit, and the applicability of relevant judicial precedents.

4. The ITAT considered the contentions of both parties, reviewed the orders of the lower authorities, and analyzed the judicial pronouncements cited. It was noted that the AO's actions constituted initiation of penalty proceedings, which preceded the actual imposition of the penalty, as per the decision in the case of Lodha Builders Pvt. Ltd. The issue of limitation was thus resolved in favor of the assessee based on this precedent.

5. Regarding the merit of the penalty, the ITAT concluded that the amount in question was not a loan or deposit but part of the booking advance. Referring to relevant case law, it was established that the refund did not fall under loans & deposits as per section 269T, making the penalty u/s 271E inapplicable. Consequently, the ITAT allowed the appeal of the assessee, ruling against the imposition of the penalty.

6. The judgment was pronounced in the open court on 30th March 2016, with the ITAT deciding in favor of the assessee based on the legal and factual analysis presented during the proceedings.