2016 (4) TMI 1090 - AT - Income Tax

Penalty u/s 271D - Held that - It is an undisputed fact that the father of the assessee and his aunti and cousin have entered into an agreement with one Nathu Lal for sale of land and on account of sale of land, a sum of ₹ 19,50,000/- was received in cash. It is also an admitted fact that the amount of ₹ 19.50 lakhs was deposited by the assessee in his bank account as the father of the assessee was not having the PAN. Moreover, the said amount was not accepted by the banker of the father. The amount was thereafter deposited in the bank account on 16.12.2008 by the assessee. Immediately after depositing the amount, the amount of ₹ 10,00,000/- was transferred to the bank account of the father of the assessee Shri Niranjan Lal Sharma and the remaining amount was deposited by the assessee through account payee cheque in the accounts of Smt. Vinita Devi W/o late Shri Mahesh Kumar and Shri Ashish Sharma son of late Shri Mahesh Kumar. The assessee has also filed an affidavit with the Assessing Officer. The father of the assessee appellant has also declared sale transaction in his Income Tax return for A.Y. 2009-10. In our view, the assessee has given a reasonable cause for receiving the amount in his account and thereafter subsequently transferred the said amount to the account of his father and also the account of aunti Smt. Vinita Sharma and in the account of Shri Ashish Sharma, cousin of the assessee. In our view, since the assessee has given a reasonable cause for not complying with the provisions of section 271D, and the reasonable cause given by the assessee is plausible, in view thereof we have no hesitation to uphold the order passed by ld. CIT (A) by virtue of which the ld. CIT (A) has deleted the penalty under section 271D. - Decided against revenue

Issues Involved:
1. Imposition of penalty under Section 271D of the IT Act.
2. Violation of Section 269SS of the IT Act.
3. Reasonable cause for depositing cash in the bank account.
4. Genuineness of the transaction.

Issue-wise Detailed Analysis:

1. Imposition of penalty under Section 271D of the IT Act:
The Assessing Officer (AO) imposed a penalty of ?19,00,000 under Section 271D of the IT Act due to a cash deposit in the bank account, which was considered a violation of Section 269SS. The AO observed that ?19,00,000 was deposited in cash in The Bank of Rajasthan, Kota, and required the assessee to explain the source of the deposit. The assessee explained that the amount was from the sale of immovable parental property and was deposited in his account because his father did not have a PAN number at that time.

2. Violation of Section 269SS of the IT Act:
The AO noted that the cash deposit violated Section 269SS, which mandates that deposits or loans above ?20,000 should be accepted only through an account payee cheque or bank draft. Despite the genuine source of the deposit being established, the AO initiated penalty proceedings under Section 271D for accepting the deposit in cash.

3. Reasonable cause for depositing cash in the bank account:
The CIT (A) deleted the penalty, observing that the appellant had a reasonable cause for depositing the cash in his account. The appellant's father received ?19,50,000 in cash from the sale of agricultural land but could not deposit it in his account due to the absence of a PAN number. The amount was deposited in the appellant's account and later transferred to the father's and aunty's accounts through cheques. The CIT (A) emphasized that penalty imposition is not automatic and must consider the surrounding facts and circumstances.

4. Genuineness of the transaction:
The CIT (A) and the Tribunal noted that the transaction was genuine and the cash deposit was necessitated by the father's lack of a PAN number. The amount was promptly transferred to the rightful owners' accounts. The Tribunal upheld the CIT (A)'s decision, citing various judgments which supported the view that genuine transactions with reasonable cause for cash deposits should not attract penalties under Section 271D. The Tribunal referred to Section 273B, which exempts penalties if the assessee proves reasonable cause for the failure to comply with the provisions.

Conclusion:
The Tribunal dismissed the revenue's appeal, agreeing with the CIT (A) that the assessee had a reasonable cause for the cash deposit and that the transaction was genuine. The penalty under Section 271D was deemed uncalled for and was thus cancelled. The judgment referenced several supporting cases, reinforcing the principle that penalties should not be imposed for genuine transactions where reasonable cause is established.

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