Opportunity of Hearing Denied: ITAT Directs De Novo Hearing on Rs. 3.30 Crore Penalty on Matri Bhumi Agritech LLP [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata ‘C’ Bench, has partly allowed the appeal filed by Matri Bhumi Agritech LLP and set aside the order of the Commissioner of Income Tax (Appeals)-NFAC. The Tribunal has remanded the matter to the Assessing Officer for a de novo (fresh) hearing, observing that the assessee was denied a proper opportunity to be heard and produce evidence to contest the penalty.

The Department had levied a penalty of Rs. 3,30,77,252 under Section271D of the Income Tax Act, 1961 for the Assessment Year 2017-18. The penalty was initiated because the assessee, a cold storage operator, had received an amount of Rs. 3.30 Crores in cash from farmers in contravention of Section 269SS, which prohibits accepting loans or deposits in excess of Rs. 20,000 in cash.

The Commissioner (Appeals) confirmed the penalty, holding that the cash receipts, booked as "return of loans" from farmers, constituted the acceptance of loans or deposits by the assessee.

The Assessee, represented by G. Banerjee, AR, contended that the receipts were not loans or deposits taken from the farmers, but were repayments of advances/loans given by the assessee to the farmers against bank loans. It was argued that since the assessee was the lender, the provisions of Section 269SS (which apply to accepting loans) were not attracted. The Assessee further submitted that they were not granted an opportunity of hearing before the penalty was imposed and were unable to produce a balance sheet to prove the nature of the advances.

The Coram of George Mathan (Judicial Member) and Rakesh Mishra (Accountant Member) observed that the assessee had requested an opportunity to file evidence showing that the money received was a repayment of loans previously advanced to the farmers. The Bench noted that required evidence could not be filed on record and that the assessee's contention regarding the denial of a hearing needed to be examined in the interest of justice.

The Tribunal held that the assessee must be granted one more opportunity to be heard and to produce evidence supporting the claim that the funds were loan repayments.

The Tribunal set aside the order of the CIT(A) and remanded the issue to the JCIT/ACIT to reconsider the matter afresh, allow the filing of evidence, and pass a fresh order if required or delete the penalty if the assessee's claim is substantiated.

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