Advance taken in cash against sale not loan or deposit u/s 269SS hence no penalty us/ 271D

Advance taken in cash against sale not loan or deposit u/s 269SS hence no penalty us/ 271D is leviable on the assessee

ABCAUS Case Law Citation
ABCAUS 3447 (2021) (02) ITAT ABCAUS Premium case law

In the instant case, the assessee had challenged the order passed by the CIT(A) in sustaining the order of the Assessing Officer (AO) imposing penalty u/s 271D of the Income Tax Act, 1961 (the Act).

The assessee was an individual and agriculturist doing retail business of sale of sweets/namkin etc. 

The return of income filed by the assessee case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer called for the details of unsecured loans accepted during the year. The Assessing Officer also called for the confirmation of outstanding balance of creditors. 

The AO noted that the assessee had accepted cash from one party and repaid the said amount by cheque.

When called to clarify, the assessee submitted that the said amount was not a loan or deposit but it was an advance against sale of land. 

The assessee further submitted that the advance was against sale of land which did not materialize and therefore, the advance was repaid by cheque.  In this regard, the assessee also produced the written confirmation letter of the party.

However, the AO however was of the view that since the assessee could not produce the receipt given to the party acknowledging the advance amount and that there was no written document regarding sale of land, therefore, the said amount accepted by the assessee in cash was loan and hence, there was violation of provision of Section 269SS of the Act.  Accordingly, he imposed the penalty u/s 271D of the Act

The CIT(A) even disbelieved the confirmation letter and imposed the impugned penalty u/s 271D of the Act.

The Tribunal observed that the Revenue Authorities though disbelieved the confirmation letter filed, however, they themselves did not conducted any specific enquiry or examination with regard to the facts of the case

The Tribunal opined that the entire addition was made on the premises of guess work and suspicion.  The facts submitted by the assessee were never enquired or examined or verified by the Department. 

The Tribunal stated that 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.

As a result, the Tribunal directed the Assessing Officer to delete the penalty and allowed the appeal in the favour of the assessee.

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