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TMI Blog2019 (2) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... rief facts of the case are that the assessee is a private limited company in the business of retail trade of metal alloys, adhesives, plywood, glass, tiles, etc. It filed return of income of Rs. 5,37,923 for AY 2007-08 which was processed u/s. 143(1) of the Act. Under scrutiny assessment, an order u/s. 143(3) of the Act was passed making certain disallowances and penalty proceedings were initiated u/s. 271D for violation of the provisions u/s. 269SS of the Act. 3. In the penalty proceedings, the assessee submitted that there were no instances of cash loans received and the cash appearing in its books were merely advances received for goods in furtherance of trade and commerce. To substantiate the same, it was further submitted that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t documentary evidence to prove that the goods were contracted to be sold were not furnished and hence the said deposits are to be considered as a loan and the penalty levied by the AO under section 271D of the Act was to be confirmed on the facts and circumstances of the case. 4. The learned CIT(A) was not justified in relying on the audit report in coming to a conclusion, that the deposits were also in the nature of loans and attracted the provisions of section 269SS of the Act, while the same audit report has categorically stated that the said advances to have been received in respect of goods on the facts and circumstances of the case. 5. The learned CIT(A) was not justified in ignoring the confirmations filed which depicted the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the audit report. It was further submitted that the there was a difficulty in the supply of the tiles due to non-availability of particular design, colour, etc. as proposed by the customers and the said advance was refunded to the customers for non-fulfilment of the specific product requirements of the customers. The amounts received in cash are trade advances and the same was accounted in a proper manner in the audit report. The amounts reflected in the balance sheet as loans are in the nature of trade advances received by the assessee and the balance sheet alone ought not to have been considered in isolation, but the audit report also ought to have been considered to come to the conclusion that the loans were mere trade advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits also attracted the provisions of section 269SS of the Act since the audit report clearly mentions that eh said monies were "Advances received from customers", which were outside the ambit of loan. It was submitted that a mere mention in the Form 3CD does not automatically attract penalty u/s. 271D. For the purpose of invoking section 269SS of the Act, the true nature of the receipts has to be examined. The information in Form 3CD in respect of cash advances is out of abundant caution and goes to the bonafides of the assessee that it was making true and complete disclosure as required by law. But for the mention in Form 3CD, it would not have even come to the attention of the AO. For these reasons, the order of the CIT(A) in sustaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 269SS of the Act. The words are not defined in Explanation (iii) below section 269SS, except saying that 'loan' or 'deposit' means loan or deposit of money. The terms 'loan' and 'deposit' are not mutually exclusive, there are a number of common features between the two. It was held by the Hon'ble Madras High Court in the case of Abdul Hamid Sahib v. Rahmat Bi, AIR 1965 Mad. 427, that a loan is repayable the moment it is incurred while it is not so with the deposit. In a deposit, unlike a loan, there is no immediate obligation to repay. Normally a deposit is for a fixed tenure. 11. In the present case, the amounts received by the assessee are as trade advances and there is no evidence that there was any stipulation as to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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