Tuesday, 29 October 2013

Disbursement of cash to farmers through discounting of cheque doesn't violate sec. 269SS or sec. 269T

When it was not proved that by cheque discounting business assessee had taken any loan or deposit from agriculturists and/or he had repaid any loan to agriculturists, neither section 269SS nor section 269T were attracted
Facts of the case:
  • Assessee, engaged in business of cheque discounting, received certain amount through post-dated crossed cheques from farmers who were selling their produce to traders.
  • Assessee's case was that such traders made payment to farmers traditionally by way of post-dated crossed cheques and since farmers normally did not maintain any bank account, they used to take such cheques to assessee for discounting same for cash.
  • Assessing Officer held that there was contravention of sections 269SS and 269T and, accordingly, levied penalty on assessee under sections 271D and 271E.
  • Aggrieved by order of AO, assessee filed an appeal before CIT(A).
  • CIT(A) quashed and set aside the orders of penalty imposed under Section 271D and Section 271E of the Act.
  • On appeal by revenue to ITAT, ITAT rightly confirmed the order passed by the CIT(A).
  • Revenue was in appeal before High Court against order of ITAT.
Gujarat High Court held and observed that:
  • Revenue was not in a position to satisfy the Court how by the aforesaid transaction of cheque discounting it could be said that there was any loan or deposit taken by the Assessee.
  • In any case, when it not proved and/or established that by cheque discounting business the assessee had taken any loan or deposit from the agriculturist and/or they have repaid any loan to the agriculturist, neither Section 269SS nor Section 269T of the Act was attracted
  • Under the circumstances, no error and/or illegality has been committed by the ITAT in confirming the orders passed by the CIT quashing and setting aside orders of penalty passed under Section 271D and Section 271E of the Act.
  • Appeal was accordingly dismissed.- CIT V. DINESHCHANDRA SHANTILAL SHAH (HUF) (2013) 37 TAXMANN.COM 307 (GUJARAT)

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