HINDUSTAN AGENCIES PVT. LTD.,NEW DELHI vs. ADDL. CIT, NEW DELHI

This appeal filed by the assessee is directed against the order passed by the CIT(A) on 31.3.2014 in relation to the assessment year 2008-09, confirming penalty of Rs.3,58,100/- imposed by the AO u/s 271D/271E of the Income-tax Act, 1961 (hereinafter also called ‘the Act’).

Briefly stated, the facts of the case are that the assessee received certain small amounts in cash totaling to Rs.3,13,400/- from its sister concern, namely, M/s Hindustan Plywood Company and also paid to it in cash certain small amounts totaling Rs.44,700/-. On being called upon to explain as to why penalty be not imposed for violation of the provisions of section 269SS/269T of the Act, the assessee, inter alia, contended that these transactions were not on account of any loan or deposit, but, on current account. Not convinced with the assessee’s submissions, the AO imposed penalty for a sum of Rs.3,58,100/- u/s 271D and section 271A of the Act representing the amounts received and repaid in cash. The ld. CIT(A) affirmed the penalty order.

We have heard the rival submissions and perused the relevant material available on record. It is observed from the impugned order that the assessee categorically stated that it had been purchasing and selling the goods and materials from/to M/s Hindustan Plywood Company and the amounts in question were on account of trading transactions. We have perused account of M/s Hindustan Plywood Company, a copy of which has been placed on record. Its perusal indicates that it is a running account in which there are purchase and sale transactions on different dates including 2.4.2007, 24.4.2007, 13.7.2007, 16.7.2007 and 27.11.2007 etc. Apart from that, there are other receipts and payments in cash and by cheques as well. If we look at the totality of the account, it becomes clear that the same is in the nature of current account and does not primarily represent any acceptance or repayment of loans and deposits otherwise than by way of cash as contemplated u/s 269SS/269T of the Act. It goes without saying that no penalty can be imposed u/s 271D/271E of the Act in respect of receipts and repayments in cash of transactions other than loans/deposits. Under such circumstances, we set aside the impugned order and direct the deletion of the penalty.

In the result, the appeal of the assessee is allowed.