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Facts
The assessee, Chiranjjeevi Wind Energy Limited, filed its return for AY 2017-18 declaring a loss. The case was selected for scrutiny, and penalty proceedings were initiated under Section 271D for cash received amounting to Rs.1,02,41,780/-. The assessee contended that this amount was a refund of a trade advance, not a loan or deposit.
Held
The Tribunal condoned the delay in filing the appeal. It noted that the assessee provided documentation for the cash receipt being a refund of trade advance. The Tribunal set aside the order of the CIT(A) and remitted the issue back to the competent authority for verification of documents and fresh decision.
Key Issues
Whether the cash receipt by the assessee constitutes a loan or deposit attracting penalty under Section 271D r.w.s. 269SS, or if it is a refund of a trade advance.
Sections Cited
271D, 269SS, 143(3), 250
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
�ी मनु कुमार �ग�र, �याियक सद�य एवं �ी एस.आर.रघुनाथा, लेखा सद�य के सम� BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1857/CHNY/2024 िनधा�रण वष�/Assessment Year: 2017-18 Chiranjjeevi Wind Energy Limited, The Assistant Commissioner 26a, Kamaraj Road, Vs. of Income Tax, Mahalingapuram, Corporate Circle -1, Pollachi, Coimbatore. Coimbatore – 642 002. PAN: AAACC 8761H (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri R. Vijayaraghavan, Advocate ��यथ� क� ओर से/Respondent by : Ms. Anitha, Addl.CIT सुनवाई क� तारीख/Date of Hearing : 03.04.2025 घोषणा क� तारीख/Date of Pronouncement : 08.04.2025 आदेश /O R D E R
PER S.R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 22.04.2024 for the Assessment Year 2017-18.
At the outset, we find that there is a delay of 13 days in appeal filed by the assessee, for which petition for condonation of delay along with reasons for delay has been filed. After considering the petition filed by the assessee and also hearing both the parties, we find that there is a reasonable cause for the assessee in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit appeal filed by the assessee for adjudication.
3. The assessee has raised the following grounds of appeal:-
1. The order issued u/s 271D of the Income Tax Act, 1961 ("the Act") by the Commissioner of Income Tax (Appeals) is opposed to law, facts and circumstances of the case.
2. The Ld. Commissioner of Income Tax has erred in passing the penalty order u/s 271D by placing the reliance on the judgement of Hon'ble Allahabad High Court in the case of Chaubey Overseas Corporation vs. Commissioner of Income Varanasi (2008) 170 Taxman 9 (Allahabad) wherein it is held that the word "any deposit" includes trade deposits which is irrelevant in the case of the Appellant company. In fact, the Appellant Company has not accepted any deposit from the party but the cash receipts were settlement of the amount outstanding as receivable from the party.
The Ld. Commissioner of Income Tax has failed to consider the fact that there is an outstanding amount receivable from the parties reflected in the audited financial statements for the year ended 31.03.2016 and 31.03.2017 and the amount disputed as cash receipts during the year is mere settlement of advances already given by the Appellant company in the earlier previous years.
4. The Ld. Commissioner of Income Tax has also failed to consider the fact that the Appellant Company has advanced money to the parties during the previous financial years only through banking channels by means of several payments and it is purely a trade advance.
5. The Ld. Commissioner of Income Tax has failed to understand the provisions of section 269SS of the Act wherein it specifies that "No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified Sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.
The Hon'ble Commissioner of Income Tax has erred in passing the penalty order u/s 271D of the Act without satisfying the basic precondition of Section 269SS of the Act i.e., the provisions would arise only if there exists a loan or deposit within the meaning of the said provisions. It is legally incorrect to tax the cash received by the Appellant company though it fails to meet the basic precondition of Section 269SS of the Act.
The Ld. Commissioner of Income Tax has failed to consider the reliance placed by the Appellant Company on the judgement passed by the High Court of Gujarat in the case of Income tax Officer, Baroda Vs Hostel 2012) wherein it is held that the, on a plain reading of the provisions of section 269SS and 269T of the Act. it is amply clear that the said provisions would be attracted when loans or deposits in excess or twenty thousand rupees are made or repaid. Thus, a basic precondition for falling within the ambit of the said provisions is the existence of a loan or deposit."
8. The Ld. Commissioner of Income Tax has erred in dismissing the appeal preferred by the Appellant Company stating that the Appellant has not submitted any evidence to prove its claim. Whereas, the Appellant Company has appropriately accounted for all the transactions in the books of account maintained by the Appellant company and has provided the ledger copies of the same during the Course of assessment proceedings.
For these and such other grounds that may be adduced at the time of hearing, it is prayed that the order u/s 250 may kindly be set aside.
Brief facts of the case are that the assessee is a public limited company, carrying on the business of manufacturing and selling windmills. The assessee filed its return of income for the assessment year 2017-18 on 26.10.2017 by declaring a loss of Rs.98,12,000/-.
The assessee’s case was selected for ‘complete scrutiny’ under CASS and completed the scrutiny by passing an order u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) on 26.12.2019 by accepting the returned loss. Further, the penalty proceedings were initiated u/s.271D of the Act by the competent authority for cash received by assessee amounting to Rs.1,02,41,780/- and levied equal amount of penalty u/s.271D of the Act by passing an order dated 25.03.2022. Aggrieved, the assessee preferred an appeal before the ld.CIT(A).
4.1 Before the ld.CIT(A), the assessee submitted that the amount received in cash by the assessee from M/s.Aanjaneya Energy Ltd. during the impugned assessment year is not a loan or deposit but it is a refund of trade advance, which was given by the assessee in earlier years, by way of cheque. However, the ld.CIT(A) was not convinced with the submissions made by the assessee and dismissed the appeal of the assessee by confirming the penalty order passed by the NFAC, Delhi. Aggrieved, the assessee is in appeal before us.
Before us, the Ld.AR for the assessee submitted that the Ld.CIT(A) has not understood the transaction of cash receipt by the assessee from M/s. Aanjaneya Energy Ltd., and considered it as loan accepted by the assessee. On the contrary, the impugned transaction is a refund of trade advance given by the assessee in earlier years through banking channel was refunded in cash during the impugned assessment year. In support of that, the Ld.AR submitted a paper-book of 33 pages consisting of details of receipts, ledger account of Aanjaneya Energy Ltd., in the assessee’s books, written submissions and financials of the assessee as on 31.03.2016 & 31.03.2017, wherein the trade advance paid to Aanjaneya Energy Ltd., has been shown in (schedule) Note No.10. Further, the Ld.AR submitted that the transactions of cash receipt received by the assessee from M/s.Aanjaneya Energy Ltd., does not come in the ambit of the transactions of section 269SS of the Act and hence, the penalty levied u/s.271D of the Act is not in accordance with law. The said transaction is a refund of trade advance but not an acceptance of loan or deposit by the assessee to cover u/s.269SS of the Act. In support of his arguments, the Ld.AR filed a paper book of case laws also.
6. Per contra, the Ld.DR stated that the penalty order of NFAC and also the Ld.CIT(A) is in accordance with the provisions of section 269SS r.w.s 271D of the Act and hence, the same may please be confirmed.
7. We have heard both the parties, perused materials available on record, all the paper books and gone through orders of the authorities below along with the judicial decisions relied on. Admittedly, the assessee’s case was selected for scrutiny and the order was passed u/s.143(3) of the Act. In the course of assessment proceedings, the AO noticed that the assessee has received cash of Rs.1,02,41,780/- and reduced the same amount from loans and advances in the audited financials as on 31.03.2017. Therefore, the competent authority had initiated penalty proceedings u/s.271D of the Act and passed the penalty order by levying penalty of Rs.1,02,41,780/- for violation of provisions u/s.269SS. The said penalty has been confirmed by the Ld.CIT(A) also. We note that the assessee has furnished the details of the ledger account along with the audited financials and stated that these amounts have been received as refund of trade advance paid in earlier years to the supplier. Further, submitted that the transaction of cash receipt is not an acceptance of loan or deposit by the assessee during the impugned assessment year. Therefore, the cash receipt in the form of refund of trade advance cannot be termed as acceptance of loan and hence, the provisions of section 269SS r.w.s. 271D of the Act is not applicable to the instant case. Further, we find that the documents filed by the Ld.AR have not been verified by the competent authority before levying the penalty u/s.271D of the Act. Therefore, in the present facts and circumstances of the case, we set aside the order of the Ld.CIT(A) and we remit back the issue to the file of the competent authority to verify the relevant documents filed by the assessee and decide the issue on merits afresh.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 8th April, 2025.