2023 (3) TMI 761 - AT - Income Tax

Penalty u/s. 271-D - sale proceeds of a specific flat were received in cash by the assessee on five different occasions - statutorily relief as specifically provided u/s. 273-B - HELD THAT - The supporting argument for the justification in accepting cash on 5 different occasions canvassing that the assessee's action was prudent as she could not rely upon the purchaser to make payments by cheques which may or may not be honoured and as argued before FAA that getting the amount deposited by way of RTGS/Cheque in her Jagraon account and then travelling with cash withdrawn at Jagraon to Delhi to make purchases was considered to be unsafe/impractical and alternatively/simultaneously it is seen that as per record, it is also pleaded possibly that there was a limit of cash withdrawals from ATMs. These submissions on record even if canvassed by hind sight to justify that the assessee chose the simplest and surest way of accepting the sale proceeds in Delhi and used the same for making purchases in Delhi for the oncoming marriage of her daughter also in Delhi remain un-rebutted. Ignorance of law - As it is necessary to keep in mind the provisions of law invoked. The issue is not to be decided on the plea of ignorance of law and is to be considered under the umbrella provision of Section 273B of the Income Tax Act, 1961. Thus, the pleading that the assessee was in ignorance of law at best can be considered to be a submission so as to argue that it is not a case of willful and deliberate defiance of law on the part of the assessee. In this case admittedly the assessee has led sufficient explanations consistently on record with evidence which remains unrebutted to plead a reasonable cause. No doubt, what would constitute a reasonable cause cannot be specifically defined by any clear definition it is to be considered on the basis of all the possible factors which may come into play for the actions of the assessee. The very expression 'reasonable cause' itself cannot be satisfactorily defined for all purposes, times and situations. The simple dictionary meaning of 'reasonable' is fair, practical and sensible. Over a period of time, it has been seen that a reasonable cause is a standard of proof that is applied to a set of facts or actions to prove whether a reasonable person would have come to the same conclusion or acted in the same way given the totality of the circumstances. Thus, it can be fairly described as an exercise to determine whether a rationale basis for action taken is available on record or not. It may be necessary to also weigh judiciously whether the actions are excessive or moderate to address the situation. Applying these yardsticks, considering the consistent explanation available on record, we are satisfied that the assessee has successfully made out a case demonstrating that there was a reasonable cause for her to accept payments on the specific dates and thus, the bona fide explanation offered by the assessee in the peculiar facts of the present case - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty under Section 271-D of the Income Tax Act, 1961.
2. Denial of statutory relief under Section 273-B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271-D:

The assessee sold a property for Rs. 9,10,000 and accepted the sale proceeds in cash on five different dates, which led to the imposition of a penalty under Section 271-D for contravening Section 269SS of the Income Tax Act, 1961. The Assessing Officer (AO) did not accept the assessee's explanation for the cash transactions, stating that the assessee had ample time to accept the sale consideration through an account payee cheque, bank draft, or electronic clearing system. The AO imposed a penalty of Rs. 9,10,000, which was confirmed by the First Appellate Authority, citing that the assessee failed to justify the reasonable cause for accepting cash payments.

2. Denial of Statutory Relief under Section 273-B:

The assessee argued that the cash was accepted due to urgent financial needs for her daughter's marriage and the buyer's inability to pay in lump sum. The assessee also cited various judicial precedents to support her case. Despite these arguments, both the AO and the First Appellate Authority did not find the explanation satisfactory and upheld the penalty. The assessee further contended that the transactions were bona fide and genuine, without any intention of tax evasion, and thus should be covered under the reasonable cause provision of Section 273-B.

ITAT's Findings:

The ITAT considered the consistent explanation provided by the assessee, including the medical incapacity of her husband, the urgent need for funds for her daughter's marriage, and the buyer's inability to pay in a lump sum. The ITAT noted that the assessee's explanation was supported by documentary evidence, including an affidavit, purchase bills, and bank statements, which remained unrebutted. The ITAT emphasized that the reasonable cause for failure to comply with Section 269SS must be judged based on the totality of circumstances and the practical difficulties faced by the assessee.

The ITAT concluded that the assessee had successfully demonstrated a reasonable cause for accepting cash payments, thereby fulfilling the conditions of Section 273-B. The penalty imposed under Section 271-D was quashed, and the appeal was allowed.

General Observations:

The ITAT highlighted the need for the tax administration to disseminate relevant information to the public, especially marginal taxpayers, to ensure compliance and avoid similar issues in the future. The ITAT suggested that the tax authorities should take proactive steps to educate taxpayers about legal requirements and acceptable modes of transactions.

Conclusion:

The ITAT allowed the assessee's appeal, quashing the penalty imposed under Section 271-D, and directed the Registry to forward a copy of the order to the Chairman, CBDT, for appropriate action to enhance taxpayer awareness and compliance.