2020 (5) TMI 457 - AT - Income Tax

Appeal overturns penalty order for cash deposits deemed advances, emphasizing correct authority for penalties.

Suresh Kumar Dapkara Versus The Add. CIT, Range-1, Kota.

The appeal was filed against a penalty order under Section 271D for the assessment year 2012-13, challenging its legality and initiation. The penalty was ... Penalty u/s 271D - violation of provisions of section 269SS - notice barred by limitation u/s 275 - HELD THAT:- We find that there is no dispute that the assessee has supplied electrical goods to M/s Shri Om Sai Stones Industries vide sale bill no. 237 dated 24.05.2012 for a sum of ₹ 4,58,430/-. It is also not in dispute that the cash amount of ₹ 1 lac received earlier from M/s Shri Om Sai Stones Industries during the last quarter of the impugned financial year has been adjusted against the said sales and only the balance amount of ₹ 3,58,430/- has been received by the assessee. The nature of amount so received is the cash advance against supply of goods and not loan/deposit or specified sum in relation to transfer of an immoveable property and the same cannot therefore be subject to the rigour of the provisions of section 269SS of the Act. The consequent penalty u/s 271D so levied is hereby directed to be deleted and the matter is decided in favour of the assessee. Issues Involved:- Appeal against penalty order under Section 271D- Validity of penalty order under Section 271D- Jurisdiction to levy penalty under Section 271D- Nature of cash received as advance or loan under Section 269SSIssue 1: Appeal against penalty order under Section 271DThe appeal was filed by the assessee against the penalty order passed under Section 271D for the assessment year 2012-13. The grounds of appeal included challenging the legality of the penalty order, claiming it was against natural justice, and questioning the initiation and confirmation of the penalty by the Assessing Officer and CIT(A) respectively.Issue 2: Validity of penalty order under Section 271DThe penalty under Section 271D was imposed on the assessee for accepting cash deposits/loans in violation of Section 269SS of the Income Tax Act. The assessee argued that the cash receipts were advances from a customer for the sale of goods and not loans/deposits. However, both the Assessing Officer and CIT(A) upheld the penalty, considering the cash receipts as loans/deposits, leading to the imposition of the penalty.Issue 3: Jurisdiction to levy penalty under Section 271DThe jurisdiction to levy the penalty under Section 271D was a crucial point of contention. The Assessing Officer lacked the authority to levy the penalty and thus sent a proposal to the Add. CIT, who subsequently initiated and imposed the penalty after reviewing the case. The Tribunal emphasized that the authority with the jurisdiction to levy the penalty must be the one to initiate the penalty proceedings, ensuring a single authority is responsible for the decision.Issue 4: Nature of cash received as advance or loan under Section 269SSThe core issue revolved around determining whether the cash received by the assessee was an advance against the supply of goods or a loan/deposit, as per the provisions of Section 269SS. The Tribunal analyzed the transaction details and concluded that the cash amount received was indeed an advance against the supply of goods, not a loan/deposit. Therefore, the penalty under Section 271D was deemed unjustified, leading to the decision in favor of the assessee, resulting in the deletion of the penalty.This detailed analysis of the judgment highlights the key legal issues involved, the arguments presented by the parties, and the Tribunal's decision on each issue, providing a comprehensive overview of the case.