2021 (2) TMI 275 - AT - Income Tax

Penalty u/s 271D - amount accepted by the assessee in cash - advance received against sale of land - violation of provision of Section 269SS - HELD THAT - From the orders of the sub ordinate Authorities, it is crystal clear that though on one hand, they disbelieved the evidences placed on record specifically confirmation letter of C.B. Oswal, however, they themselves have not conducted any specific enquiry or examination with regard to the facts of the case. The entire addition has been made on the premises of guess work and suspicion It is the contention of the assessee that some land sale transactions were to be made with C.B. Oswal, for which, the advance amount was paid in cash to the assessee. That however, when this transaction did not materialize, the assessee refunded the said amount of ₹ 5,00,000/- in cheque back to C.B. Oswal. These facts were never enquired or examined or verified by the Department. Section 269SS refers to the loan or deposit received in cash and since it was an advance taken, the amount, therefore would not be within the rigours of Section 269SS of the Act and hence, there cannot be any penalty leviable u/s. 271D of the Act on the assessee. Assessee could not be penalized for the inaction of the Department in verifying the facts of the case wherein both the Assessing Officer and the CIT(Appeal) has made the addition based on mere surmises and guess work and therefore, penalty u/s. 271D of the Act cannot be sustained. Accordingly, we direct the Assessing Officer to delete the penalty from the hands of the assessee. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271D of the Income Tax Act, 1961 based on acceptance of cash amount and repayment by cheque, dispute over whether the amount was a loan or an advance against sale of land.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune stemmed from the order of the Ld. CIT(Appeal) regarding the penalty of ?5,00,000 imposed on the assessee under section 271D of the Income Tax Act, 1961 for the assessment year 2012-13. The primary contention of the assessee revolved around the penalty imposed and the grounds of appeal highlighted various aspects challenging the decision.

The case involved an individual and agriculturist engaged as a retailer in the sale of sweets and namkin. The assessee filed the return of income for the relevant assessment year, declaring total income. During the scrutiny, it was revealed that the assessee had accepted ?5,00,000 in cash from a party and repaid the same amount by cheque. The assessee claimed that the amount was an advance against the sale of land, which did not materialize, leading to the repayment. The Revenue, however, viewed the transaction as a loan due to the absence of specific documentation and imposed the penalty under section 271D.

The Ld. CIT(Appeal) upheld the penalty, noting the lack of documentary evidence supporting the assessee's claim that the amount was an advance and not a loan. The confirmation letter provided by the party from whom the cash was received was also questioned by the authorities. Despite these findings, no specific inquiry or verification was conducted by the authorities, leading to the imposition of the penalty based on suspicion and guesswork.

Upon reviewing the case records and arguments, the Appellate Tribunal found that the penalty under section 271D could not be sustained. The Tribunal emphasized that the transaction was related to an advance against a land sale, not falling under the purview of section 269SS of the Act concerning loans or deposits received in cash. The Tribunal highlighted the failure of the Department to verify the facts of the case and concluded that the penalty could not be upheld based on mere surmises and guesswork.

As a result, the appeal of the assessee was allowed, and the Appellate Tribunal directed the Assessing Officer to delete the penalty from the hands of the assessee. The judgment was pronounced on January 29, 2021, in favor of the assessee.