ITAT Deletes Penalty Under Section 271DA for Cash Deposited Directly by Customer Without Assessee’s Consent:

The assessee is M/s. Vatjat Pharma Foods Pvt. Ltd. which is engaged in the business of manufacturing, packaging, trading and retailing of basic chemicals and fertilisers. During the Assessment Year 2022-23, the company reported a total turnover of Rs. 9,48,23,828.

During the assessment proceedings, the AO noticed cash deposits aggregating to Rs. 5,29,100 in the assessee's Axis Bank account. The deposits comprised Rs. 3,28,500 on 19/06/2021 and Rs. 2,00,600 on 04/02/2022. In response, the assessee explained that the amounts represented genuine business receipts against sales made to a customer, Ms. Neeta Harish Nayak, a farmer residing in the remote location of Ankola, Maharashtra. The assessee furnished two GST invoices dated 26.05.2021 for Rs. 3,28,483 and 30/12/2021 for Rs. 2,00,600 to substantiate the transactions.  However, the AO treated the receipts as a violation of Section 269ST of the Income Tax Act and imposed a penalty of Rs. 5,29,100 under Section 271DA, equivalent to the amount received.

The CIT(A) upheld the penalty, observing that the assessee had failed to establish any reasonable cause or sufficient explanation for the cash receipts.

The Tribunal noted that the customer was a farmer residing in a remote location in Ankola, Maharashtra, and had independently deposited the cash without the consent or instructions of the assessee company. The Tribunal held that the assessee had no control over its customer and there was no finding by the Revenue that the company had directed the customer to make cash payments or had given its consent to accept cash against the sale invoices.

Considering the nature of the assessee's business, the identity of the customer, the supporting GST invoices and the fact that the disputed deposits of Rs. 5,29,100 were made by a single customer against the total business turnover of Rs. 9,48,23,828, the Tribunal found that sufficient and reasonable cause existed within the meaning of the proviso to Section 271DA(1) of the Act. Accordingly, the Tribunal directed the AO to delete the entire penalty of Rs. 5,29,100 imposed under Section 271DA.