2023 (12) TMI 403 - AT - Income Tax

Penalty u/s 271D - assessee has accepted cash as part of sale consideration on sale of immovable property - contravention of the provisions of section 269SS - HELD THAT - We find that the AO has enquired about the cash deposits made by the assessee and he convinced and accepted the explanation given by the assessee. Further, it is pertinent to mention that the Ld.AO has not recorded the satisfaction regarding the initiation of penalty proceedings while passing the assessment order u/s. 143(3) of the Act which is a prerequisite for initiation of penalty u/s. 271D of the Act. We are of the considered opinion that issuing a notice u/s. 274 r.w.s 271D of the Act is nothing but an afterthought of the Ld. AO. As case of CIT Vs Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT we are of the considered view that the penalty order passed u/s. 271D deserves to be quashed. Appeal of the assessee is allowed.

Summary

Issues involved:
The appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) regarding penalty under section 271D of the Income Tax Act, 1961 for the AY 2017-18.

Delay in filing appeal:
The assessee sought condonation of delay of 34 days due to the appellant's ill health, which was diagnosed as AFI with Thrombocytopenia with Jaundice, leading to complete bed rest as advised by the doctor. The Tribunal found the explanation to be a 'reasonable and sufficient cause' and condoned the delay to proceed with adjudicating the appeal on merits.

Background and Assessment:
The assessee, engaged in business activities, e-filed the return of income for AY 2017-18, which was processed under limited scrutiny. The assessee explained cash deposits during demonetization period were from the sale of inherited property, supported by evidence. The Ld. AO accepted the explanation and assessed the total income. Subsequently, a penalty under section 271D was imposed for accepting cash in violation of section 269SS, which the assessee contested before the Ld. CIT(A)-NFAC.

Grounds of appeal:
The assessee appealed against the sustained penalty, contending that the penalty was contrary to facts and law, not justified, and fell within the scope of reasonable cause under section 273B. Additional grounds raised included the limitation and validity of the penalty under section 271D.

Legal Arguments and Decision:
The Ld. AR argued that the penalty order was unsustainable as the Ld. AO did not record satisfaction for penalty proceedings during the assessment. Citing relevant case law, the Tribunal found that the penalty order lacked a prerequisite initiation and was an afterthought, thus quashing the penalty under section 271D. The decision was based on the Supreme Court's observation in a similar case. Consequently, the appeal was allowed in favor of the assessee, rendering other grounds of appeal academic and dismissed.

Conclusion:
The Tribunal allowed the appeal of the assessee, pronouncing the decision in open court on 29th November 2023.