Any Contravention of sections 269SS and 269T if Cash is received by assessee from Commission Agent against the crops?

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Any Contravention of sections 269SS and 269T if Cash is received by assessee from Commission Agent against the crops?

Short Overview : Where the amount received by assessee from the commission agent was against the sale of crops so it was neither the loan nor the deposit, therefore the provisions of sections 269SS and 269T were not applicable and as such penalty levied by the AO under sections 271D and 271E was not justified, accordingly the same was deleted.

AO levied penalty under section 271D on the allegation that assessee had accepted cash loan, thereby violated section 269SS. Further, AO also levied penalty under section 27IE as assessee had made repayment of the amount received by him against the crop from commission agent in cash. Assessee contended that the amount received by assessee was an advance against the agricultural crops which were to be sold through the Commission Agent, therefore, the provisions of section 269SS were not applicable, since it was neither loan nor a deposit taken by the assessee. He further contended that the AO himself accepted that assessee was an agriculturist and accepted the returned income shown by him therefore, the penalty under section 271D was not leviable.

It is held that: Since the amount received by assessee from the Commission Agent was against the crops, therefore, it could not be said that the assessee had received or paid amounts in cash as a deposit or loan rather the amounts received in cash were against the agricultural crops, therefore, the provisions of sections 269SS and 269T were not applicable. Accordingly, penalty under sections 271D and 271E could not be levied.

Decision: In assessee’s favour.

Referred: Pr. CIT v. M/s. Tehal Singh Khara & Sons (2018) 400 ITR 0243 (P&H) : 2017 TaxPub(DT) 2067 (P&H-HC), CIT v. Shri Manohar Lal Thakral (2018) 93 taxmann.com 156 (P&H) : 2018 TaxPub(DT) 2376 (P&H-HC), CIT v. Bombay Conductors and Electricals Ltd. (2008) 301 ITR 0328 (Guj) : 2008 TaxPub(DT) 1633 (Guj-HC), CIT v. Maheshwari Nirman Udyog (2008) 302 ITR 201 (Raj) : 2008 TaxPub(DT) 0846 (Raj-HC), CIT v. Hissaria Brothers (2007) 291 ITR 244 (Raj) : 2007 TaxPub(DT) 0413 (Raj-HC), CIT v. Idhayam Publications Ltd. (2006) 285 ITR 221 (Mad) : 2006 TaxPub(DT) 1251 (Mad-HC), CIT v. Saini Medical Store (2005) 277 ITR 420 (P&H) : 2005 TaxPub(DT) 1415 (P&H-HC), Mohanjeet Singh v. JCIT (2016) 70 taxmann.com 335 (Chd-Trib) : 2016 TaxPub(DT) 3070 (Chd-Trib), Baldev Singh, Prop. M/s. Guru Nanak Jewellers v. Addl. CIT (2018) 93 taxmann.com 212 (Chd-Trib) : 2018 TaxPub(DT) 2520 (Chd-Trib), ITO v. M/s. Shiv Enterprise [ITA No.2911/Ahd/2009, dt. 14-10-2011], ITO v. Bharadiya Trading Co. (2003) 85 ITD 42 (Pune-Trib) : 2003 TaxPub(DT) 0185 (Pune-Trib), Harpal Singh Jaswant Singh v. ITO (1995) 82 Taxman 81 (Asr-Trib) : 1995 TaxPub(DT) 0251 (Asr-Trib).

IN THE ITAT, CHANDIGARH BENCH

N.K. SAINI, V.P.

Hardeep Singh v. JCIT

ITA No. 70 & 71/Chd/2019

2 August, 2019

Assessee by: Rakesh Marwaha, CA and Nikhil Goyal, CA

Revenue by: Chandrakanta, Sr. DR

ORDER

N.K. Saini, V.P.

These two appeals by the assessee are directed against the separate Orders, dt. 12-11-2018 and 13-11-2018 of the learned Commissioner (Appeals)-1 Chandigarh.

  1. These appeals relating to the same assessee were heard together, so these are being disposed off by this common order for the sake of convenience and brevity. At the first instance I will deal with the appeal inITA No. 70/Chd/2019 wherein following grounds have been raised :
  2. That the learned Commissioner (Appeals) has erred in confirming the penalty of Rs. 8,50,000 under section 271-D of the Income Tax Act, 1961.
  3. That the learned Commissioner (Appeals) has also erred in considering the fact that the cash transaction as made by the assessee is so called loan taken from the M/s. Kundan Lal & Sons, (Commission Agent).
  4. That the learned Commissioner (Appeals) has erred in not considering the submissions of the assessee.
  5. That the penalty as confirmed by the Commissioner (Appeals) is against the facts and circumstances of the case.
  6. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
  7. Facts of the case in brief are that the assessee, e-filed the return of income on 19-2-2015 declaring an income of Rs. 2,32,600 + agriculture income of Rs. 4,55,000 which was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). Later on the case was selected for scrutiny and the assessment was framed under section 143(3) of the Act, at the returned income. Thereafter the assessing officer noticed from the assessment record that the assessee had accepted cash loan from M/s. Kundan Lal & Sons, Panchkula otherwise than by an account payee cheque or bank drafts as required under the provisions of section 269SS of the Act as per following details:
Sr.No. Date of accepting loan Amount
1. 8-5-2013 4,50,000
2. 11-5-2013 4,00,000
  1. The assessing officer issued the notice under section 271D read with section 274 of the Act. In response the assessee submitted that the amount was not received as a loan but in normal course of business in anticipation that the crop during the period shall be sold and the amount so realized on sale of crop shall be adjusted against the amount received in account which was a common practice in agriculture sector where Commission Agent gave money on account to the agriculturists so that the crop was sold through them. It was further submitted that against the receipt of Rs. 8,50,000 received in advance, the assessee sold crop wroth Rs. 1,02,354 to the Commission Agent namely M/s. Kundan Lal & Sons and in order to settle the account, balance amount of Rs. 7,47,646 was paid back, the assessee also furnished the account statement from the Commission Agent. The reliance was placed on the following case laws:

— CIT v. Maheshwari Nirman Udyog (2008) 302 ITR 201 (Raj) : 2008 TaxPub(DT) 0846 (Raj-HC)

— CIT v. Idhayam Publications Ltd. (2006) 285 ITR 221 (Mad) : 2006 TaxPub(DT) 1251 (Mad-HC) 

  1. The assessing officer however did not find merit in the submissions of the assessee and levied the penalty of Rs. 8,50,000 under section 271D of the Act.
  2. Being aggrieved the assessee carried the matter to the learned Commissioner (Appeals) and furnished the written submissions which read as under:

“In this case the assessee filed his return electronically declaring an income of Rs. 2,32,600 and agricultural income of Rs. 4,55,000 on 19-2-2015 which was processed under section 143(1) of the Income Tax Act. The case was selected for scrutiny through CASS under limited scrutiny. The assessing officer, Ward-3(5), Chandigarh passed the assessment order on 22-8-2016 accepting the return as it is.

After that on 19-9-2016 assessee received notice under section 271D read with section 274 of the Income Tax Act, 1961 from JCIT, Range-3, Chandigarh stating that assessee has accepted cash loan of Rs. 4,50,000 on 8-5-2013 and Rs. 4.00.000 on 11-5-2013 from M/s. Kundan Lal & Sons. Panchkula for which the reply was submitted on 6-6-2016 in which it was expLalned in detail that this was a normal business transaction between Mr. Hardeep Singh (agriculturist and small property dealer and aggrieved assessee) and M/s. Kundan Lal & Sons (Commission Agents).

The facts of this case were that assesssee sold agricultural produce worth Rs. 1,02,354 on 20-4-2013 to M/s. Kundan Lal & Sons, commission agent and further promised to sell the whole produce to them and took Rs. 8,50,000 advance. But, due to natural calamity he could not get the enough produce and the balance amount of Rs. 7.47.646 (Rs. 8,50,000 – Rs. 1,02,354) was returned by aggrieved assessee to the commission agent on 15-6-2013. Copy of ledger a/c as given by M/s. Kundan Lal & Sons is attached with reply for your reference.

Sir, assessee received advance on 8-5-2013 and 11-5-2013 and returned the balance on 15-6-2013. In this case the assessee returned the money in less than one month’s time period. So, it is just a normal business transaction between an agriculturist and a commission agent and not an unsecured loan. According to basic principles of accounting definition of business is – it refers to activities and events that affect the financial position of a business and are capable of being assigned monetary values and an unsecured loan is a loan that is issued and supported only by the borrower’s creditworthiness, rather than by any type of collateral. So, from this we can derive that in this transaction between agriculturist and commission agent there is financial activity which makes it a normal business transaction and no reference of borrower’s creditworthiness & collateral which can make it an unsecured loan.

Further we would like to submit that cash transaction between agriculturist and commission agent is normal trade practice. Besides this, we would like to bring to your kind notice that if the agriculturist receive money in cash, money lender also gave him the money in cash and vice versa. These figures can be reconfirmed from Kundan Lal and Sons books and income tax returns.

To prove this point we put reliance on the cases of —

— Pr. CIT v. M/s. Tehal Singh Khara & Sons, village Changli Jaded PO Sherkahanwala, Distt. Ferogepur, CIT v. M/s. Idhayam Publications and CIT v. Bombay Conductors & Electricals Ltd.

  1. The learned Commissioner (Appeals) after considering the submissions of the assessee sustained the penalty by observing in para 5.3 of the impugned order as under:

5.3. It is in the common parlance that Khasra Girdawari is a document, in which the patwari enters the name of owner, name of cultivator, land/khasra number, area, kind of land, cultivated and non-cultivated area, source of irrigation, name of crop and its conditions, revenue and rate of revenue, minimum twice in a year.

On perusal of Girdawri dated 20-7-2018, it is apparent that the name of the appellant, i.e., Shri Hardeep Singh nowhere figures in Column No. 3 under the head “Name of Cultivator”. There is a cLalm in the affidavit that Shri Jarnail Singh, Shri Ajaib Singh and Shri Gurbhag Sing have given land of 20 Acre to the appellant for cultivation on rent amounting to Rs. 22,000 per annum for five years and one year rent about Rs. 2,64,000 has been received in advance. No such evidence has been submitted. The absence of appellant’s name in the “Girdawri” and any further corroborating evidence clearly establishes that explanation of the appellant is an afterthought. Further, explanation of the appellant that he has sold agricultural produce worth Rs. 1,02,354 on 20-4-2013 to M/s. Kundan Lal & Sons, Commission Agent and further promised to sell the whole produce to them and took Rs. 8,50,000 advance in cash, but, due to natural calamity he could not get the enough produce and the balance amount of Rs. 7,47,646 (Rs. 8,50,000 — Rs. 1,02,354) was returned by him to the commission agent on 15-6-2013 also does not hold good for the reason that no evidence of natural calamity has been filed before the JCIT/Commissioner (Appeals). Even if for the sake of argument it is accepted that there is natural calamity, then how come he was able to return amount of Rs. 7,47,646 to the Commission Agent on 15-6-2013 that too after paying alleged advance payment of Rs. 2,64,000 to owners of the 22 Acre Land.

It is clear that the appellant who is in fact a PROPERTY DEALER has not come clean on explanation to cash receipt from the Commission Agent with any cogent evidence. The case laws relied by the appellant are on different footings.

The appellant has failed to establish that there was any business exigency to make the transaction in cash. The learned JCIT has rightly held that acceptance of cash loan by appellant amounting to Rs. 8,50,000 from M/s. Kundan Lal & Sons, Panchkula during the F.Y. 2013-14 is in contravention of the provisions of section 269SS of the Act and imposed penalty under section 271D of the Act at Rs. 8,50,000. The Ground of Appeal No. 3 is dismissed.

  1. Now the assessee is in appeal.
  2. The learned Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the amount received by the assessee was an advance against the agricultural crops which were to be sold through the Commission Agent, therefore the provisions of section 269SS were not applicable, since it was neither loan nor a deposit taken by the assessee. It was further submitted that the assessing officer himself accepted that the assessee was an agriculturist and accepted the returned income shown by the assessee therefore the penalty was not leviable under section 271D of the Act. The reliance was placed on the following case laws :–

— CIT v. Manohar Lal Thakral (2018) 93 taxmann.com 156 (P&H) : 2018 TaxPub(DT) 2376 (P&H-HC)

— Baldev Singh v. Addl. CIT (2018) 93 taxmann.com 212 (Chd-Trib) : 2018 TaxPub(DT) 2520 (Chd-Trib)

— ITO v. M/s. Shiv Enterprise in ITA No. 2911/Ahd/2009 (Ahd-Trib)

— CIT v. Hissaria Bros (2007) 291 ITR 244 (Raj) : 2007 TaxPub(DT) 0413 (Raj-HC)

— ITO v. Bharadiya Trading Co. (2003) 85 ITD 42 (Pune-Trib) : 2003 TaxPub(DT) 0185 (Pune-Trib) 

— ITO v. Harpal Singh Jaswant Singh (1995) 81 Taxman 42 (Asr-Trib)

— Harpal Singh Jaswant Singh v. ITO (1995) 82 Taxman 81 (Asr-Trib) : 1995 TaxPub(DT) 0251 (Asr-Trib)

— CIT v. Saini Medical Store (2005) 277 ITR 420 (P&H) : 2005 TaxPub(DT) 1415 (P&H-HC) 

— Mohanjeet Singh v. JCIT (2016) 70 taxmann.com 335 (Chd-Trib) : 2016 TaxPub(DT) 3070 (Chd-Trib) 

  1. I have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the assessee is an agriculturist and shown the agriculture income of Rs. 4,55,000 for the year under consideration which has been accepted as such by the assessing officer. In the present case, copy of the account of the assessee in the books of M/s. Kundan Lal & Sons, Panchkula (which is placed at page No. 17 of the assessee’s compilation) revealed that the assessee received in cash Rs. 4,50,000 and Rs. 4,00,000 on 8-5-2013 and 11-5-2013. The assessee also sold crop of Rs. 1,02,354 on 20-4-2013 and thereafter also the crops amounting to Rs. 2,29,264, Rs. 86,560, Rs. 69,874, Rs. 1,99,878 and Rs. 2,05,878 were sold on 7-10-2013, 12-10-2013, 16-10-2013, 23-10-2013 and 4-11-2013 respectively through the aforesaid commission agent. The assessee from the said party M/s. Kundal Lal & Sons also received Rs. 3,00,000, Rs. 2,00,000 Rs. 1,42,437, Rs. 2,00,000 and Rs. 3,70,000 on 19-10-2013, 22-10-2013, 23-10-2013, 26-11-2013 and 23-10-2013 respectively. The balance outstanding was Rs. 4,20,983 as on 31-3-2014. From the aforesaid narrated facts it is clear that assessee is an agriculturist selling his crop through M/s. Kundan Lal & Sons, Panchkula and he was receiving the amount against the crops from the said Commission Agent, therefore it cannot be said that the assessee received or paid amounts in cash as a deposit or loan rather the amounts received in cash were against the agriculture crops, therefore the provisions of section 269SS and 269T of the Act were not applicable to the facts of the assessee’s case. On a similar issue the Hon’ble Rajasthan High Court in the case ofCIT v. Hissaria Bros (2007) 291 ITR 244 (Raj) : 2007 TaxPub(DT) 0413 (Raj-HC) held as under :–

“that the assessing authorities were bound by the general instructions contained in the circular issued by the Board in respect of dealings of kachcha adhatiya of the nature found by the assessing officer in the present case. Therefore, there was hardly any occasion for invoking sections 269SS and 269T on the supposed omission on the part of the assessee to comply with the requirement of the said provisions for inviting application of penalty provisions. The provisions of sections 271D and 271E could not have been invoked. Even assuming that the provisions of sections 269SS and 269T could be invoked, the findings of the Tribunal that reasonable cause existed for the failure to comply with the provisions of sections 269SS and 269T were findings of fact which did not give rise to any question of law. Penalty under sections 271D and 271E was not imposable and was rightly set aside by the Tribunal.”

  1. In the present case also the amount in question was received by the assessee against the sale of the crops so it was neither the loan nor the deposit, therefore the provisions of section 269SS of the Act were not applicable and as such penalty levied by the assessing officer and sustained by the learned Commissioner (Appeals) under section 271D of the Act was not justified, accordingly the same is deleted.
  2. InITA No. 71/Chd/2019 the penalty amounting to Rs. 7,47,646 (Rs. 8,50,000.00 – Rs. 1,02,354.00) under section 271E has been levied for contravention of the provisions of section 269T of the Act i.e.; for making the payments of the amount received by the assessee against the crop from the Commission Agent. As I have already mentioned in the former part of this order while deciding the issue relating to the levy of penalty under section 271D of the Act, that the transactions between the assessee and the Commission Agent were relating to the sale of agriculture crops, therefore, there was no receipt or repayment of loan or deposit, accordingly penalty levied by the assessing officer and sustained by the learned Commissioner (Appeals) under section 271E of the Act is also deleted.
  3. In the result, both the above appeals of the assessee are allowed.

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