Case Law Details
Matri Bhumi Agritech LLP Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata partly allowed the appeal filed by Matri Bhumi Agritech LLP against the order of the Commissioner of Income Tax (Appeals)-NFAC confirming penalty of Rs. 3,30,77,252 imposed under Section 271D of the Income Tax Act for alleged violation of Section 269SS.
The assessee had originally filed its return for AY 2017-18 declaring a loss, which was later assessed under Section 143(3). Subsequently, a notice under Section 274 read with Section 271D was issued alleging that the assessee accepted cash repayments exceeding Rs. 20,000 from rentiers/farmers during FY 2016-17 in contravention of Section 269SS. The penalty order was passed on 26.09.2022.
Before the CIT(A), the assessee contended that the amounts received in cash were not deposits or loans accepted from farmers, but repayments of advances earlier provided to them. The assessee also argued that no notice had been received from the National Faceless Penalty Unit and that principles of natural justice had been violated. However, the CIT(A) upheld the penalty, observing that the assessee had admitted receipt of loan repayments in cash and failed to establish any exception under Section 269SS. The CIT(A) concluded that the amounts credited in the books constituted deposits or loans received in cash and therefore attracted penalty under Section 271D.
The CIT(A) also noted that the assessee operated a cold storage business and had availed seasonal cash credit facilities from banks for on-lending to farmers. According to the findings, the loans given to farmers were repaid in cash and deposited into the bank for repayment of the assessee’s own borrowings. The authority held that such transactions retained the character of loans or deposits and fell within the ambit of Section 269SS.
Before the Tribunal, the assessee reiterated that the amounts represented recovery of advances earlier granted to farmers and not acceptance of fresh loans or deposits. It was submitted that evidences supporting the claim could not be properly placed before the authorities and an additional opportunity should be granted. The Tribunal noted that the assessee had specifically raised the issue that adequate opportunity of hearing had not been provided before imposition of penalty.
Considering the facts and in the interest of justice and fair play, the ITAT set aside the order of the CIT(A) and remanded the matter to the JCIT/ACIT for fresh adjudication after granting another opportunity of hearing to the assessee. The Tribunal directed the authority to examine evidence supporting the claim that the cash receipts were repayments of loans earlier advanced to farmers and not acceptance of loans or deposits attracting Section 269SS. It further directed that the penalty order be reframed de novo, if required, or deleted if the assessee’s contention was found correct.
On the issue relating to absence of Document Identification Number (DIN), the Tribunal dismissed the ground in view of retrospective insertion of Section 292BA by the Finance Act, 2026, clarifying that omission or defect in quoting DIN would not invalidate assessment proceedings. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 11.04.2025.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that in the facts and circumstances of the case and in law, failure to mention DIN in the notice u/s. 271D dated 09.03.2022 initiating the penalty proceedings, renders the notice invalid, non-est, ab-initio void and the subsequent proceedings culminating to order u/s. 271D dated 26.09.202 levying penalty of Rs. 33077252 are wrong, erroneous, ab-initio void and liable to be quashed/cancelled/set-aside.
2. For that in the facts and circumstances of the case and in law, opportunity of hearing was not granted by the incumbent authority before imposing penalty u/s. 271D of Rs. 33077252, rendering the impugned order wrong, erroneous, beyond jurisdiction, ab-initio, void, against principles of natural justice and equity.
3. For that in the facts and circumstances of the case and in law, the levy of penalty u/s. 271D of Rs. 33077252 on transaction of refund of advances paid by assessee including receipt of interest thereon of Rs. 77252, is wrong, erroneous, excessive, arbitrary, misconceived, perverse and liable to be quashed/cancelled/set-aside.
4. For that the assessee craves leave to amend, alter, rescind, substitute and/or submit additional ground/grounds of appeal at the time of hearing of appeal.”
3. Brief facts of the case as culled out from the order of the Ld. CIT(A) are that the assessee had furnished the return of income on 12.09.2017 declaring total income of (-) ₹6,65,476/- which was assessed at (-) ₹6,34,305/- u/s 143(3) of the Act. The JCIT, Range-23, Hooghly issued a notice u/s 274 r.w.s. 271D of the Act dated 09.03.2022 asking the assessee to show cause as to why the penalty should not be imposed u/s 271D of the Act for refund of advance by the rentiers in cash in excess of ₹20,000/- or more in contravention of section 269SS of the Act during the FY 2016-17 relevant to AY 2017-18. Subsequently, vide order dated 26.09.2022, penalty of ₹3,30,77,252/- was imposed u/s 271D of the Act. Aggrieved with the penalty order, the assessee filed an appeal before the Ld. CIT(A) and made a written submission before him stating that the assessee did not receive any notice from the National Faceless Penalty Unit (in short ‘NFPU’) for this assessment year and the provisions of section 269SS of the Act were not applicable as the receipt of loan repayment to various parties/persons in cash was the reason for the cash receipt. It was stated that in fact it was not a refund but repayment of the loans given to the farmers and acceptance of loan did not attract the provisions of section 269SS of the Act in the hands of the assessee. The Ld. CIT(A) confirmed the penalty order as per his findings as under:
“4.3 I have considered the facts of the case, grounds of appeal, submissions of the appellant and penalty order u/s 271D of the Act. The faceless penalty scheme 2021 has been amended by Faceless Penalty (Amendment Scheme 2022 vide SO No. 2425(E) dtd. 27.5.2022. In consequence to the same and the power conferred upon the Income tax authority by virtue u/s. 129 of Income tax Act, 1961, the Addl. CIT Range-49 Kolkata continued the proceedings. The AO went into the issue threadbare and noticed after going through the written submissions furnished by the assessee to refute the allegation of infringement of the provisions laid down in section 269SS w.r.t. section 271D of the IT Act, 1961 it is observed that the assessee has unambiguously confessed about the receipt of loan repayment from various parties /persons in cash in the submission dated 19.08.2022. The assessee has referred a lot of pros and cons of the business actually carried by them but failed to bring any exceptional clause or provision of the existing law under income tax Act, 1961 which debar the assessee not to follow the provisions as laid down in section 269SS of the IT Act 1961 which attracts the penalty u/s. 271D of the IT Act. The assessee is running a cold storage for preservation of potatoes in the area of Bhastara Village. Cold storages used to issue cold storage bond to each rentier /hirer (farmer) at the time of booking of space during the month of March and while releasing potato from the cold storage from the month of May to December or January as per the agreement mentioned in the bond. While releasing the potato, rentier / hirer paid in cash rental charges and insurance charges etc.
4.3.1 It is further seen that Bank extends seasonal cash credit facility to the cold storage units to be utilized for their on lending to their respective loanee farmers against repledge of Cold storage receipts (CSRs) already pledged in favour of cold storage units by the loanee farmers / rentiers at the time of their availing of loan from the cold storage owners. This is a scheme of bank for financing cold storage for on lending to farmers to maintain the quality and extend the life of agricultural products and to reduce losses after harvest and to provide farmers an opportunity to realize better price for their produce.
4.3.2 It is clearly established from the submissions that loan given to the farmers had been recovered in cash by the cold storage assessee which was deposited to bank for repayment of their loan which was taken from bank for financing the farmers. The appellant had withdrawn seasonal cash credit loan from the bank amounting to Rs. 3,30,00,000/- during the month of March 2016 for on lending to farmers.
4.3.3 IN the submissions, it is held that the assessee cold storage had received the refund of advance from rentiers (farmers) in cash. In fact, it is not a refund but it is repayment of the loan given to farmers. Hence, it is clear that acceptance of loan in cash. The appellant had submitted the similar views before the AO and the AO held that after going through the above written contention furnished by the assessee to refute the allegation of infringement of the provisions laid down in section 269SS w.r.t. section 271D of I T Act, 1961, it is observed that the assessee has unambiguously confessed about the receipt of loan repayment from various parties/persons in cash.
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(The provisions of section 269SS, 271D and 273B of the Act have also been reproduced by the Ld. CIT(A).)
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4.3.5. That Sec. 269-SS prohibits “a person from taking or accepting from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, inter alia, the amount of such loan or deposit or the aggregate amount of such loan and deposit is Rs. twenty thousand or more”, and failure to comply entail penalty to a sum equal to the amount of the loan or deposit. At the same time, Sec. 273-B does leave discretion, if the person or the assessee, as the case may be, proves that there was reasonable cause for the said failure.
4.3.6. Indisputably, the amount as noticed by the AO was found credited in the books of account of the assessee company as having been received from time to time from rentiers. The main thrust of the observations of the AO is that admittedly when the amount has been found credited in the books of account of the assessee, that too by cash on various dates with no satisfactory explanation tendered, leaves no manner of doubt that the amounts which were received by the assessee from rentiers and shown as “advance to rentiers” are in the nature of deposit of money and once loan or deposit has been received by way of cash, it invokes Sec.269-SS and it has been rightly invoked by the AO in the instant case.
4.3.7. There is a direct nexus of the money having flown from rentiers in the books of account of the assessee, may be towards payment of cold storage activities of the assessee but it does not alter the character of deposit. The company after having received such amount was duty bound to repay back to the creditor which in the instant case may be a Bank or otherwise and it is not the case of the assessee that the amount which was received from Rentiers would remain with the company and was not repayable. The assessee company was duty bound to repay the said loan when demanded by Bank or when company had sufficient liquidity. The conduct or the entry and flowing of funds is sufficient to prove that the amount was admittedly received by cash in the account of assessee as having been received from rentiers and found credited as an “return of loan”, proves that it was in the nature of a loan and certainly such loan having been received by cash, falls within the ambit of Section 269-SS.
4.3.8 I have gone through the Notes and Clauses also which have been introduced from 1.4.1984 and the Circular of the Board, though states that the provision was brought into force taking into consideration that in survey and search proceedings whenever unaccounted cash is found in the premises of the person surveyed or searched, the claim is invariably made that the alleged amount is received from A, or B, or C, etc. and to plug such loopholes this provision was brought.
4.3.9. If there is a genuine and bona fide transaction and the loan or deposit has been received for some bona fide reason, the Authority vested with the power to impose penalty has got discretionary power not to impose the same. However, for the reasons assigned earlier, in our view no reasonable cause in the instant case is made out. In view of the above, the order of the Assessing officer is sustainable for the reasons assigned and the penalty, on the facts and circumstances, was rightly imposed by the AO and hence the penalty of Rs. 3,30,77,252/- is confirmed. All the grounds raised in this appeal are dismissed.
5. In the result, the appeal is dismissed.”
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. It was vehemently argued by the Ld. AR that the amount was neither receipt of deposit nor of loan but the advances made to the farmers were received back and therefore, the provisions of section 271D of the Act cannot be applied. Although it was stated that page 35 is a balance sheet mentioning the details of the advances made but as no such balance sheet was appearing in the paper book filed before us the Ld. AR could not buttress the claim that the same were receipt of loans which were earlier advanced to the farmers. He requested that the matter may be remanded to the Ld. AO so that the assessee may justify the claim.
6. The Ld. DR on the other hand, strongly supported the order of the Ld. CIT(A).
7. We have considered the facts of the case, the submissions made and the documents filed, gone through the provisions of sections 269SS, 271D and 273B of the Act. The assessee is running a cold storage and had given certain advances to the farmers for repayment of their loans taken from the bank by the farmers. It was stated that seasonal cash credit facility available with the bank amounting to ₹30 Crore during the month of March, 2016 had been withdrawn for lending to farmers. However, the required evidences could not be filed before us. Since the assessee has requested in Ground No. 2 that the opportunity of being heard was not granted by the authority before imposing the penalty u/s 271D of the Act, the Ld. AR requested that the matter may be remanded to the Ld. JCIT/ACIT for furnishing the required evidence that the money received was on account of repayment of loans which were earlier advanced by the assessee to the farmers and no loan or deposit was actually received from the farmers and, therefore, the provisions of section 269SS of the Act were not attracted. Hence, considering the facts of the case and in the interest of justice and fair play, the order of the Ld. CIT(A) is hereby set aside and the issue is remanded to the Ld. JCIT/ACIT for granting one more opportunity of being heard to the assessee and to consider the evidence to be filed in support of the claim that the money which was received was repayment of the loans earlier advanced to the farmers and therefore, the provisions of sec 269SS of the Act were not applicable and the penalty u/s 271D of the Act was not liable to be imposed and thereafter to reframe the penalty order de novo, if required or delete the penalty if the contention of the assessee is found to be correct as the provisions of section 269SS are attracted on receipt of loans and advance and the assessee had not received any loans or advance from the farmers but the farmers had repaid the loans/advance availed by them from the assessee. Hence, Ground Nos. 2 and 3 are allowed for statistical purposes.
8. As regards Ground No. 1, the Finance Act, 2026 (No. 4 of 2026) has inserted the following section which is deemed to have been inserted with effect from the 1st day of October, 2019, and is as follows:
“292BA. Notwithstanding anything contained in any judgment, order or decree of any court, for the removal of doubts, it is hereby clarified for the purposes of section 292B that no assessment under any of the provisions of this Act shall be invalid or shall be deemed to have been invalid on the ground of any mistake, defect or omission in respect of quoting of a computer generated Document Identification Number, if the assessment order is referenced by such number in any manner.”.
9. Hence, in view of the retrospective insertion of section 292BA of the Act, Ground No. 1 of the appeal is dismissed. Moreover, the show cause notice for penalty u/s 271D of the I.T. Act, 1961 had been issued by the Assessment Unit (NeFAC) on 26.07.2022 vide DIN.ITBA/PNL/F/271D/2022-23/1044101033(1), as is mentioned on page 2 first para in the impugned order of the Ld. CIT(A) and no such ground was raised before the Ld. CIT(A), hence Ground No. 1 is dismissed.
10. Ground No. 4 is general in nature and does not require any separate adjudication.
11. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 5th May, 2026.
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