MAMAN SINGH,DELHI vs. JCIT, GURGAON

2. The facts in brief are that in the course of scrutiny proceedings, the Assessing Officer observed cash deposits of Rs. 10 lacs and 8 lacs in the bank account of the assessee. The assessee explained that these amounts represented advance received from buyer parties against agreement to sale of property, however, due to non-materialization of the sale deed, the assessee withdrew the money from the bank and returned the same to the parties. In view of the Assessing Officer, once the sale deed was cancelled, the nature of advance received against sale of property ipso facto became the deposit and therefore according to the Assessing Officer, the said amount was to be returned by the assessee through account payee cheque or bank draft as per the provisions of Section 269T of the Act. As the Assessing Officer observed that the payment of Rs. 18,00,000/- was returned in cash, therefore, he referred the matter to the Joint Commissioner of Income Tax for levy of penalty under Section 271E of the Act. The Joint Commissioner of Income Tax issued a show cause notice for levy of penalty under Section 271E of the Act on 22.10.2013. However, neither the assessee, nor any person on behalf of the assessee attended before the Joint Commissioner of Income Tax and, therefore, he levied penalty of Rs. 18,00,000/- equivalent to the amount returned back in cash. Aggrieved, the assessee filed an appeal before the learned Commissioner of Income Tax (Appeals). Before the learned Commissioner of Income Tax (Appeals), the assessee contended that the penalty under Section 271E of the Act for violation of provisions of Section 269T of the Act could not be levied in case of repayment of advance money as held in the case of Commissioner of Income Tax-VI Vs. Madhav Enterprises (P) Ltd (2013) 365 ITR 588 ( Guj) . Further, he also relied on the decision of a Tribunal in the case of Shiv Enterprises (ITA No. 291/Ahd/2009, order dated 14.10.2011) that receiving advance and repayment of advance is a business transactions and the provisions of Section 269SS are confined only to loan and deposits and does not extend to purchase/sale transaction. Further, the assessee contended that there was no tax evasion in the facts of the assessee, whereas the provisions of Section 269SS and 269T were brought to the statute book to counter the evasion of tax whereby huge transactions were made outside the books of account by way of cash.

The learned Commissioner of Income Tax (Appeals), however, did not accept the plea of the assessee relying on the judgment of the Hon’ble Allahabad High Court in the case of Choubely Oversees Corporation Vs. Commissioner of Income Tax , (2008) 303 ITR 9 (Allahabad), where in similar circumstances, the return of advance for supply of silk fabrics was held as return of deposits and levy of penalty was sustained. Further, the learned Commissioner of Income Tax (Appeals) referred the findings of the Hon’ble Allahabad High Court in the case of Choubey Oversees Corporation (supra) holding that the applicability of Section 269T was not dependent on facts as to whether the transactions was a genuine one or doubtful character and even the genuineness of deposits were also covered under Section 269T of the Act. In view of the above findings, the learned Commissioner of Income Tax (Appeals) dismissed the appeal of the assessee. Aggrieved, the assessee is before us with the present appeals.

The sole issue of assessee’s grievance in the appeal is levy of penalty under section 271E of the Act. As all the grounds revolve around the penalty, all the ground being connected, are taken up together.

At the time of hearing before us, the learned Authorized Representative of the assessee referring to the agreement for sale as well as agreement for cancellation of sale deed submitted that the advance received against the sale of property was returned due to non-materialization of the sale. He further submitted that the entire transaction of receipt of advance and return was bonafide transaction and genuineness was never doubted either by the Joint Commissioner of Income Tax or by the Commissioner of Income-tax(Appeals). He also referred to the recent amendment in Section 269T w.e.f. 01.06.2015 wherein return of any specified advance has been made liable for violation under Section 269T of the Act and thus, the return of advance in cash before the said amendment was beyond the purview of Section 269T of the Act. Further, he submitted that there was genuine difficulty in returning the advance. He accordingly submitted that in view of the reasonable cause for non-compliance of the provisions of Section 269T, the penalty could not have been imposed in terms of Section 271E of the Act. He further requested that as the Commissioner of Income Tax (Appeals) had not considered the request of reasonable cause, the issue might be set aside for reconsideration by the learned Commissioner of Income Tax(Appeals). The learned Senior Departmental Representative, on the other hand, relied on the orders of lower authorities.

We have heard the rival submissions and perused material available on record. We find that in view of number of judgments including judgements in the cases of CIT Vs Trimph International Finance Ltd (2012) 345 ITR 270( Bom) and CIT Vs T. Perumal (INDL) (2015) 370 ITR 313(Mad), it is settled law that the penalty levied under Section 271D/271E for violation of the provisions of Section 269SS and 269T is not justified, where the assessee is able to successfully demonstrate the reasonable cause for non-compliance of the conditions of section 269SS/269T of the Act. In the case under hand, we have observed that the assessee has submitted of having genuine difficulty in returning of deposits to the buyer parties , however, the lower authorities have not examined this aspect, therefore whether, the reasonable cause exits or not has been not established in the case of the assessee. In view of the precedents available, we are of the opinion that the lower authorities should have examined this aspect in their decisions. Therefore, in the interest of natural justice, we restore the matter back to the file of authority who levied the penalty to examine the existence of reasonable cause and pass the order according to law.