2020 (11) TMI 935 - AT - Income Tax

Levy of penalty u/s 271D - assessee had received the amounts in cash as loan from HUF - CIT(A) found that the transactions between the assessee company and the HUF were trade transactions and the same cannot be held as loan between the assessee and the HUF - sufficient and reasonable cause for receiving the cash from HUF - HELD THAT - It is undisputed fact that HUF is undertaking gold savings scheme and has been collecting the subscriptions from subscribers and advancing amount to the company for jewellery redemption purchases made by scheme subscribers. Though it is placed under the unsecured loans, prima facie, it is business transaction since, HUF has deposited the amounts with the assessee company for redemption of jewellery purchases under the scheme. Therefore, though the assessee has placed the same as unsecured loans, the cash receipts were trade transactions. Department has not brought on record to show that the cash receipts accepted by the company do not represent the scheme subscriptions for redemption of the jewellery as stated by the assesse. The bank transaction stated to have been examined by the Ld.CIT(A) and given a finding that the company has made payments on behalf of the HUF. The same was not controverted by the Ld.DR during the appeal hearing. All the deposits were settled with sale of jewellery or the account transfers and thus proved to be trade transactions. The department also did not bring any material to show that the cash received by the company was subsequent to the revival of the bank account in the case of HUF and the transactions were not the trade transactions - there cannot be any better reason for receipt of cash deposits than the death of Karta or Managing Director of the company. It is also not disputed that all the cash receipts were duly accounted in the books of the assesse as well as the HUF. There were no unaccounted transactions. Therefore, we are of the view that there was a sufficient and reasonable cause for accepting the cash deposits. - Decided against revenue.

Summary

Issues:
Levy of penalty under section 271D of the Income Tax Act, 1961 for contravention of provisions of section 269SS of the Act.

Analysis:

Issue 1: Levy of Penalty under Section 271D
The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) related to the levy of penalty under section 271D of the Income Tax Act, 1961. The Assessing Officer initiated the penalty due to cash receipts as loans during a specific period. The assessee explained that the cash receipts were trade transactions due to unforeseen circumstances, including the murder of the Managing Director. The Additional Commissioner did not accept the explanation and levied the penalty. The CIT(A) found that the transactions were trade transactions, not loans, and cancelled the penalty. The Tribunal upheld the CIT(A)'s decision, emphasizing the reasonable cause for accepting cash during the interim period and the business nature of the transactions. The Tribunal concluded that there was no reason to interfere with the CIT(A)'s order, dismissing the revenue's appeal and the assessee's cross objections.

Conclusion:
The Tribunal maintained that the cash receipts were trade transactions due to the death of the Managing Director, supporting the cancellation of the penalty imposed under section 271D. The judgment highlighted the business nature of the transactions and the reasonable cause for accepting cash during the specified period, leading to the dismissal of both the revenue's appeal and the assessee's cross objections.