The Pune bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri R.S. Syal, Vice President and Shri Partha Sarathi Chaudhury, Judicial Member, has held that the provisions of section 269T of the Income Tax Act, 1961 restricting cash transactions above Rs. 20,000 is not applicable to repayment of loans.
The assessee, Mr. Rajaesh Vitthal is a Tea and Coffee seller. While rejecting the return filed by the assessee, the AO made the addition of interest earned on Fixed Deposit by accepting the receipt of loan and its repayment to the two persons. During the course of the penalty proceedings, the AO recorded statement of these two persons who deposed to have paid Rs.5.00 lakh and Rs.7.00 lakh respectively to the assessee towards an agreement for purchase of land.
After hearing arguments from both sides, the Tribunal observed that it is found as an admitted position that the AO recorded statement of Mr. Sampat G. Mandhare and Mrs. Dropadabai Fakirrao Harpale, who had given sum of Rs.5.00 lakh and Rs.7.00 lakh respectively to the assessee as advance for purchase of the land. Here it is relevant to mention that the AO accepted in the assessment that the amounts were received and repaid by the assessee from these two persons, which is fortified by the fact that he did not make any addition towards the source of the deposit of FDRs in the assessment.
“Both of them appeared before the AO and admitted to have entered into an agreement with the assessee for purchase of his land and the amounts were given as advance for purchase of the land. Ultimately, the transaction did not go through and the assessee had to withdraw the amount from the bank for repaying the sums to these two persons. On the above analysis of the facts, it clearly emerges that the amount received by the assessee in cash was in the nature of receipt of advance for sale of land and not receipt of any loan violating the mandate of sections 269SS. Similar is the position qua the repayment of advances not attracting the mischief of section 269T of the Act. In that view of the matter, there can be no question of imposing or confirming any penalty on receipt of advance and its repayment against sale of property under the concerned sections,” the Tribunal said.
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