2023 (7) TMI 271 - AT - Income Tax

Levy of penalty u/s 271D - cash transaction in connection with violation of section 269SS - Sale of residential flats to an agriculturist in cash - Scope of reasonable cause - HELD THAT - As assessee sold immovable property to an agriculturist from a small village, wherein Banking facilities are not available. However the above cash sale consideration is very much reflected in the Registered Sale Deed as executed by the Purchaser. When the Purchaser was summoned u/s. 133(6) of the Act by the A.O. he was satisfied with the reply of the Purchaser and passed the assessment order accepting the Returned Income without making any additions. Thus, the grievance made out by the assessee is found to be genuine and reasonable cause. Levy of penalty under Section 271D in our considered opinion is unwarranted. Levy of penalty is discretionary and not automatic - A careful reading of Section 273B encompasses that certain penalties shall not be imposed in cases where reasonable cause is successfully pleaded. As in the case of Maa Khodiyar Construction 2014 (7) TMI 137 - GUJARAT HIGH COURT held that no penalty is leviable u/s. 271D for cash loans exceeding Rs. 20,000/- from agriculturists living in remote areas when transaction were not doubted. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the issue of levy of penalty under section 271D of the Income Tax Act, 1961 for violating the provisions of Section 269SS in relation to a cash transaction during the Assessment Year 2017-18.

Summary:
The Assessee, engaged in the business of repairing gold/silver ornaments, filed a Return of Income for A.Y. 2017-18, declaring total income of Rs. 4,82,280. The case was selected for scrutiny due to cash deposits during demonetization. The Assessing Officer accepted the returned income after verifying the source of cash deposit. Subsequently, a penalty under section 271D was levied for a cash transaction related to the sale of immovable property. The Assessee contended that the cash transaction was duly reflected in the sale deed and return of income, and there was no awareness of the violation. The penalty was confirmed by the Commissioner of Income Tax (Appeals), leading to an appeal before the Tribunal.

The Tribunal considered the submissions and relevant legal provisions. It noted that the cash consideration for the property transfer violated Section 269SS, and the Assessee failed to demonstrate a reasonable cause for the violation. The Assessee's appeal primarily focused on the violation of Section 269SS and the plea to delete the penalty based on reasonable cause. The Counsel cited relevant case laws to support the appeal, while the Revenue supported the lower authorities' decision.

After careful consideration, the Tribunal found that the Assessee had a genuine and reasonable cause for the cash transaction due to the purchaser's rural background and lack of banking facilities. The Tribunal highlighted the discretionary nature of imposing penalties under Section 271D and the importance of proving a reasonable cause for non-compliance. Referring to precedents, the Tribunal emphasized that penalties should not be imposed for technical breaches without loss of revenue. Consequently, the Tribunal allowed the Assessee's appeal and canceled the penalty under Section 271D.

In conclusion, the Tribunal allowed the appeal filed by the Assessee, canceling the penalty under Section 271D. The judgment was pronounced in open court on 17-05-2023.