Case Law Details
All Fresh Supply Management Pvt. Ltd. Vs ACIT (ITAT Delhi)
In the case of All Fresh Supply Management Pvt. Ltd. versus Assistant Commissioner of Income Tax (ITAT Delhi), the Income Tax Appellate Tribunal (ITAT) Delhi ruled in favor of the appellant, deleting the penalty imposed under section 271DA of the Income Tax Act, 1961.
All Fresh Supply Management Pvt. Ltd., engaged in the trading of fruits and dealing with small farmers as well as retailers, voluntarily reported cash transactions exceeding Rs. 2 lakhs in Form 61A for the financial year 2017-18. The transactions involved cash receipts from small retailers/traders who were not aware of the income tax provisions and hence deposited cash directly into the appellant company’s bank account. Subsequently, the Assessing Officer imposed a penalty under section 271DA, equal to the amount of such receipts, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].
During the appeal before the ITAT Delhi, the appellant argued that the cash receipts were duly recorded in the books of accounts, and there was no intention of tax evasion or malafide intent involved in the transactions. The appellant also emphasized that they promptly communicated with the parties involved to ensure compliance with the new legislation prohibiting cash transactions exceeding Rs. 2 lakhs.
The ITAT Delhi considered these arguments and observed that the transactions were duly recorded in the appellant company’s books of accounts, with the identity and confirmation of the parties involved on record. There was no evidence of unaccounted money or tax evasion. Additionally, the company’s operations were aimed at improving farmers’ incomes by providing them direct access to markets for their produce.
The tribunal noted that penalizing a bona fide mistake related to a new legislation could adversely affect the company, potentially leading to losses for the farmers they were dealing with. Considering these circumstances as constituting a “reasonable cause” within the meaning of section 273B read with the provision of Section 271DA of the Act, the ITAT Delhi allowed the appeal and quashed the impugned penalty.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal is filed by the assessee against order dated 10.05.2023 of Learned Commissioner of Income Tax (Appeals)-23, New Delhi [hereinafter referred to as ‘Ld. CIT(A)’] who has sustained the penalty imposed by Learned Assessing Officer under section 271DA of the Income Tax Act, 1961 (hereinafter called “the Act”).
2. Heard and perused the records.
3. Appellant company, is engaged in the business of trading in fruits and dealing with small farmers as well as with small retailers/traders. The appellant company voluntarily reported the 3 parties cash transactions in Form 61A under clause cash receipt exceeding Rs. 2 lacs for sale of goods for the F.Y. 2017-18. It is claimed that these retailers/traders were not aware of the income tax provision and deposited the cash in appellant company bank account directly since they received cash only from retail customers after selling the fruits. On the basis of aforesaid transactions, Assessing Officer has issued the penalty notice regarding failure to comply with prevision of section 269ST by the appellant company and later on the AO has passed the order u/s 271DA of the Act wherein penalty was imposed of Rs. 1,450,936/-, i.e. a sum equal to the amount of such receipts which is sustained by CIT(A).
4. Ld. AR has pointed out that the 3 parties (Ambrish, Paramdeep Khurana and B Kranthy Prabhat Reddy) have deposited cash directly in appellant company bank account Rs. 206,000/- Rs. 944,936/- Rs. 300,000/- respectively and appellant company came to know the transactions after cash deposited by the aforesaid parties. Ld. AR has submitted that thereafter, the appellant company duly communicated to all parties and ensure that no cash deposited/acceptance from any vendor for more than 2 lakhs as per the new law enactment from financial year 2017-18. The aforesaid transactions were reported by appellant company on self-declaration basis through SFT transactions since the small retailers/traders were not aware about the new section 269ST which prohibits to accept cash more than Rs. 2 lakhs. All the aforesaid cash deposited directly in the bank account by such retailers/traders have been duly considered in books of accounts ie. in financial statement and moreover the appellant company is having huge losses. Further, it is submitted that the company is dealing in trading of agricultural produce like fruits which is one of the priority sectors for Indian economy.
5. We have taken into consideration the facts and circumstances and it comes up that the transaction is duly recorded in books of accounts of appellant company. Identity and confirmation of parties to the transaction is on record. No unaccounted money/tax evasion/malafide intention is involved in the transaction. The company is helping in improving farmer’s incomes by way of providing them direct access to market for their fruits by purchasing and supplying the same to external market. It is a very young company started by first time entrepreneurs. Penalizing a bonafide mistake related to a new legislation will adversely affect the company which eventually may cause losses to large number of farmers with whom the company is dealing. These circumstances constitutes a “reasonable cause” within the meaning of section 273B read with provision to Section 271DA of the Act.
6. The appeal is allowed. The impugned penalty is quashed.
Order pronounced in the Open Court on 21/05/2024.
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