2023 (4) TMI 622 - AT - Income Tax

Levying penalty u/s 271D - violation of section 269SS - reasonable cause u/s 273B - assessee sold that property unauthorized construction work was being carried out at the assessee s plot to the unauthorized occupant of the assessee s plot and out of total consideration assessee received part by demand draft and balance amount in cash - HELD THAT - The assessee has filed return for assessment year 2017-18 u/s 139(1) and declared the long term capital gain out of sale of the impugned property and paid the tax liability on it - The assessee in this case has no intention to evade the tax and it has truly disclosed all the details for the purpose of assessment and there was no loss to the Government exchequer. Due to compulsion, assessee received an amount of Rs.15.70 lakhs in cash. The assessee has accepted the cash due to compelling circumstances and had the assessee waited for the demand draft to receive, assessee might have suffered further loss from the unauthorized occupant of the assessee s plot. The assessee in this case settled the dispute with the unauthorized occupant by selling the property to them to avoid any further litigations as the assessee has been staying in Mangalore and also a retired person, having not much strength to fight with unauthorized occupant of the assessee s plot and the assessee pleaded that this is the reasonable cause for accepting an amount of Rs.15.70 lakhs by cash. As per section 273B of the Act, no penalty would be leviable if the person concerned proves that there is reasonable cause or said failure clearly indicates the bonafideness of the assessee, then it gives a discretion to the authority to impose the penalty or not to impose penalty. Such discretion has to be exercised in a just and fair manner having regard to the entire facts and material existing on record. Ordinarily, a plea has to be ignorance of law cannot support the breach of a statutory provision. Such technical breach due to ignorance of the relevant provision of law on account of bonafide belief coupled with the fact that the transaction in question is genuine and bonafide transaction are undertaken during the regular course of its business will not result in levy of penalty u/ 271D of the Act. Thus provisions of section 269SS of the Act cannot be applied as the assessee s transaction is genuine and also constituted with reasonable cause and in such case, default on the part of assessee is merely a technical and venial nature and no penalty u/s 271D of the Act could be levied. Decided in favour of assessee.

Issues Involved:
1. Penalty imposed under section 271D of the Income Tax Act for accepting cash as part of sale consideration.
2. Jurisdictional concerns regarding the authority passing the penalty order.
3. Reasonable cause defense under section 273B of the Act.
4. Application of precedents and legal interpretations to support the appellant's case.
5. Timeliness of penalty initiation and levy.

Detailed Analysis:

Issue 1: Penalty under section 271D
The appeal challenged the penalty imposed under section 271D for accepting cash as part of the sale consideration. The appellant argued that the penalty was unjustified as there was a reasonable cause for accepting the cash, as demonstrated by the immediate deposit of the cash into a bank account and proper disclosure in the tax return.

Issue 2: Jurisdictional Concerns
There was a contention regarding the jurisdiction of the authority passing the penalty order. The appellant argued that the order was passed by the National Faceless Assessment Center, whereas the power for penalty imposition rested with a different authority. This raised concerns about the validity of the penalty order and the correct procedure for such penalties.

Issue 3: Reasonable Cause Defense
The appellant invoked section 273B of the Act, claiming a reasonable cause for accepting the cash amount. The appellant's argument was supported by the immediate deposit of the cash, voluntary disclosure in the tax return, and the circumstances leading to the acceptance of cash due to compelling reasons related to a property dispute.

Issue 4: Precedents and Legal Interpretations
The appellant cited legal precedents and interpretations to support their case. Reference was made to decisions by the Hon'ble Supreme Court and High Courts, emphasizing the importance of genuine belief, bonafide transactions, and reasonable cause as factors to consider in penalty imposition cases under the Act.

Issue 5: Timeliness of Penalty Initiation
A procedural issue was raised regarding the timeliness of penalty initiation and levy. The appellant argued that the penalty was initiated after a significant delay from the completion of the assessment, raising concerns about the validity of the penalty imposition based on the limitations prescribed in the Act.

In conclusion, the Appellate Tribunal, after considering the arguments and evidence presented, ruled in favor of the appellant. The Tribunal found that there was a reasonable cause for accepting the cash, the penalty order raised jurisdictional concerns, and the precedents supported the appellant's position. The Tribunal also noted the timely deposit of cash, proper disclosure, and the genuine nature of the transaction as factors in favor of the appellant. As a result, the penalty under section 271D was deleted, and the appeal of the assessee was allowed.

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