2016 (8) TMI 810 - AT - Income Tax

Penalty levied U/s 271D - Held that - The revenue has accepted the explanation of cash deposit in the bank account , in the quantum proceedings , therefore no penalty proceeding were initiated in the quantum proceedings. Since the revenue has accepted the explanation of cash in the assessment proceedings, therefore, the same set of facts and documents cannot be made basis for imposition of penalty. The assessee, has submitted the reasons for accepting the cash in the quantum proceedings and the said reasons were accepted by the A.O and the same reasoning should have been accepted in penalty proceeding as well. In our view, now in the quantum proceedings U/s 271D of the Act, the officer, is not permitted to reopen and reexamine the reasoning given by the assessee. It is correct that the assessment proceedings and proceedings for violation of Section 269SS of the Act are independent proceedings but in the cases like in the hand, the revenue is not permitted to take contrary stand. The judgment in the case of Dimple Yadav 2015 (8) TMI 992 - ALLAHABAD HIGH COURT was sought to be distinguished by the ld DR on the premise that the money after accepting from the creditor was not routed through the banking channel for the payment to the seller. In our view, this argument is not available to the revenue as the revenue has neither challenged the registration of the sale deed in favour of the assessee nor has challenged the cash consideration paid by the assessee to the seller at the time of registration before the Sub-Registrar of sale deed. In our view the case of the Dimple Yadav is squarely applicable to the facts and circumstances of the case. In the light of the above, we are of the view, the assessee has shown the reasonable cause within the meaning of Section 273B of the Act, therefore, the penalty order of the lower authorities is quashed and the appeal of the assessee is allowed.

Issues Involved:
1. Legality and maintainability of the penalty levied under Section 271D of the Income Tax Act.
2. Timeliness of the initiation of penalty proceedings under Section 271D.
3. Satisfaction and explanation provided by the assessee regarding the cash transactions.
4. Applicability of reasonable cause under Section 273B to waive the penalty.

Detailed Analysis:

1. Legality and Maintainability of the Penalty under Section 271D:
The appeal challenges the order of CIT(A) confirming the penalty of ?22,20,000/- imposed under Section 271D for violation of Section 269SS of the Income Tax Act. The assessee argued that the penalty order is illegal and not maintainable, contending that the Additional Commissioner initiated penalty proceedings without proper consideration of relevant facts.

2. Timeliness of the Initiation of Penalty Proceedings:
The assessee argued that the initiation of penalty proceedings by the Additional Commissioner on 24/10/2013 was barred by limitation, citing judgments from the Hon’ble Delhi High Court and Mumbai High Court, which held that penalty proceedings should be initiated within a reasonable period, not exceeding four years.

The Revenue countered that the statute does not provide a specific time limit for initiating penalty proceedings under Section 271D. The CIT(A) relied on the Special Bench judgment in Diwan Chand Amritlal, which stated that there is no prescribed limitation for initiating penalty proceedings under Sections 271D and 271E, and the penalty must be completed within six months of initiation as per Section 275(1)(c).

The Tribunal upheld the CIT(A)’s view, agreeing that no specific time limit for initiation exists and the proceedings were initiated within the permissible period.

3. Satisfaction and Explanation Provided by the Assessee:
The assessee contended that no satisfaction was recorded by the A.O. or Additional Commissioner before issuing the notice for penalty. The assessee argued that the explanation provided during the assessment proceedings, which was accepted by the A.O., should suffice for penalty proceedings as well. The assessee had submitted confirmation letters from creditors to prove the genuineness and source of cash deposits.

The Tribunal noted that the assessment order had accepted the explanations for cash deposits, and thus, the same reasoning should apply to penalty proceedings. The Tribunal emphasized that the assessment and penalty proceedings are independent, but the Revenue cannot take a contrary stand in penalty proceedings if the explanation was accepted during assessment.

4. Applicability of Reasonable Cause under Section 273B:
The assessee argued that there was a reasonable cause for accepting cash, invoking Section 273B, which provides that no penalty shall be imposed if there is a reasonable cause for the failure. The Tribunal referred to various judgments, including the case of CIT vs. Dimple Yadav, where penalties were deleted based on reasonable cause.

The Tribunal concluded that the assessee had shown a reasonable cause within the meaning of Section 273B, as the cash transactions were accepted during the assessment proceedings. Consequently, the penalty order was quashed, and the appeal was allowed.

Conclusion:
The Tribunal allowed the appeal, quashing the penalty order under Section 271D, as the assessee demonstrated a reasonable cause for the cash transactions, and the explanation was accepted during the assessment proceedings. The initiation of penalty proceedings was deemed within the permissible period, and the Revenue was not permitted to take a contrary stand in penalty proceedings.

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