2016 (8) TMI 471 - AT - Income Tax

Tribunal upholds Revenue's appeal on penalties for cash transactions as advances, not loans

The Tribunal allowed both appeals by the Revenue against the deletion of penalties under sections 271D and 271E of the Income-tax Act, 1961. The Tribunal ... Penalty levied u/s 271D and 271E - whether the amount received by the assessee were advances and not loan or deposits ? - CIT(A) delted penalty - Held that:- Commissioner of Income-tax( Appeals) has decided issue in dispute on the basis of the agreements to sale of the inherited property between the assessee and Sh OmPrakash Dhama. He has also mentioned that it was brought on record by the assessee that the agreements could not be executed because of dispute about ownership of the inherited properties which was ultimately settled by the courts order dated 05/07/2009. Whereas, the Revenue has failed to bring anything on record which could contradict the evidences submitted by the assessee and therefore the allegation of the Revenue of manipulation are baseless and without any supporting evidence. In view of the above, we do not find any infirmity in the order of the Ld. Commissioner of Income-tax( Appeals) in treating the amounts in dispute as advance and not as loans or deposit and we uphold the same, accordingly the grounds raised in both the appeals are allowed in favour of assessee Issues involved:- Penalty under sections 271D and 271E of the Income-tax Act, 1961 for assessment year 2007-08.- Condonation of delay in filing appeals.- Interpretation of transactions involving cash loans and repayments in the ledger account of a company.- Justification for deleting the penalties by the Commissioner of Income-tax (Appeals).- Consideration of agreements for the sale of inherited property as evidence.Condonation of Delay:The Tribunal considered an application for condonation of delay in filing the appeals, which were filed seven months and eight days after the last date for filing. The delay was attributed to a procedural error, and the Tribunal, in the interest of natural justice, condoned the delay.Interpretation of Transactions:During scrutiny proceedings, it was noted that cash loans were received and repaid in the ledger account of a company, raising concerns about violations of sections 269SS and 269T of the Act. The Assessing Officer contended that the entries should have been in the assessee's capital account and not in the business-related entity's account. The assessee explained that the entries were related to advance payments for the sale of inherited property, supported by agreements. The Commissioner of Income-tax (Appeals) accepted this explanation, ruling that the amounts were advances, not loans or deposits, and hence, no penalties were warranted.Justification for Penalty Deletion:The Commissioner of Income-tax (Appeals) deleted the penalties under sections 271D and 271E based on the agreements for the sale of inherited property, which were subsequently canceled due to ownership disputes. The Commissioner held that the amounts received were advances, not loans or deposits, as evidenced by the agreements. The Revenue's allegations of manipulation were deemed baseless due to lack of contradictory evidence. The Tribunal upheld the Commissioner's decision, finding no fault in treating the amounts as advances and not subject to penalties.Conclusion:Both appeals by the Revenue against the deletion of penalties under sections 271D and 271E were allowed by the Tribunal. The Tribunal upheld the Commissioner's decision based on the agreements for the sale of inherited property, which supported the assessee's claim that the transactions were advances and not loans or deposits. The Tribunal found no infirmity in the Commissioner's order and ruled in favor of the assessee.