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2024 (6) TMI 813 - AT - Income TaxPenalty levied u/s. 271D - Notice initiating penalty u/s. 271DA instead of notice u/s. 271D which was levied on the assessee - HELD THAT - We find that JCIT has initiated penalty u/s. 271DA of the Act on 07.01.2022 and not u/s. 271D of the Act; and having noted so we find that only on 18th /19th July 2022 i.e. just before 13 days before levy of penalty assessee was put to notice of proposed penalty s.271D of the Act instead of u/s. 271DA of the Act. It needs to be noted s.271DA of the Act is a penalty levied for failure to comply with the provisions of Sec. 269ST of the Act whereas penalty u/s. 271D of the Act is levied for failure to comply with Sec. 269SS of the Act and both are distinct provisions; and Sec. 269ST was inserted only by Finance Act 2017 w.e.f. 01.04.2017 violation of which entail penalty u/s. 271DA of the Act. As noted (supra) after two years of passing the assessment order the Range Head/JCIT had initiated the penalty u/s. 271DA of the Act in January 2022 and only on 18th /19th July 2022 he had corrected the mistake and put the assessee on notice for penalty to be levied under a different section i.e. Sec. 271D of the Act and within 13 days he has levied penalty which action of the JCIT cannot be countenanced since initiation of notice itself is bad in law and it exposes the non-application of mind by the authority initiating penalty; and his impugned action was whimsical/arbitrary which violates Article-14 of the Constitution of India. Defective notice - as submitted by the Ld.AR the impugned notice initiating penalty u/s. 271DA of the Act could have created confusion in the assessee s mind and disabled him from defending/explaining his case effectively. Thus it results in the denial of right to adequate opportunity and fair hearing envisaged u/s. 274 of the Act. According to us in law it is not permissible to presume that the assessee knows the charge more so when proceedings are punitive. It is settled position of law that penal laws must be construed strictly that is according to the language used in the statute. Sec. 274 of the Act clearly mandates that assessee must have reasonable opportunity of hearing before the authority passes an order imposing penalty. In other words notice cannot be treated as mere formality. It in fact requires strict compliance and therefore all actions following the defective notice are vitiated and consequently penalty levied is unsustainable in law. Penalty u/s. 271D for Cash Transactions Exceeding Rs. 20, 000 - It is not a fit case for levy of penalty because assessee s assertion/explanation that in the year under consideration (AY 2017-18) there was neither cash transaction nor cash deposits in his bank-account as admitted by AO in respect of sale of immovable property has not been addressed by the JCIT; and assessee s assertion that cash was transacted in earlier years upon sale agreement for the same property on 06.01.2014 (AY 2014-15) has not been found false by the JCIT. And the Ld.AR pointed out that in AY 2014-15 Sec. 269SS of the Act (violation for which JCIT levied penalty u/s. 271D of the Act) did not had the term/expression any specified sum which was inserted only in Finance Act 2015 w.e.f. 01.06.2015 therefore no penalty could have been taken in the year in which assessee took advance of Rs 2.50 crores. And it was pointed out that assessee s stand throughout the assessment/penalty proceedings were that in the year under consideration the assessee had adjusted the amount received in AY 2014-15; therefore no penalty was warranted; and in the relevant year assessee has only adjusted the amount taken in AY 2014-15 and showed as taking advance of Rs. 4.20 lakhs on 6.10.2016; and that the balance consideration of Rs. 1.14 Crs. was shown as given on next day when the sale was executed/registered to four relatives of Shri R.Shaktivel who was party in the agreement of sale in AY 2014-15 as noted. Moreover it was pointed out by the Ld.AR that the entire sale consideration was reflected in the Sale Deed as noted by the JCIT. Thus according to him there is no dispute about the identity of four buyers and the amount of sale consideration albeit in cash was also not in dispute. Therefore according to the Ld.AR Rs. 1.14 Crs. given as sale consideration while executing the sale penalty ought not to have been levied; and for such a preposition relies on the decision of the Tribunal in the case of ITO v. R. Dhinagharan (HUF) 2024 (1) TMI 61 - ITAT CHENNAI Thus we find force in the contentions we agree that even if the penalty would have been levied it would have been only of Rs. 4.20 lakhs and not Rs. 1.14 Crs. However as noted we have found that the penalty notice which was initiated against the assessee was invalid in the eyes of law and therefore the penalty levied is vitiated; and consequently penalty levied deserves to be deleted. Appeal filed by the assessee is allowed.
Issues Involved
1. Validity of the penalty notice issued under Section 271DA instead of 271D. 2. Whether the sale consideration received in cash of Rs. 1,14,00,000/- attracted penalty under Section 271D. 3. Whether penalty should have been levied only on advances of Rs. 4.20 lakhs received in cash. Issue-Wise Detailed Analysis 1. Validity of the Penalty Notice Issued under Section 271DA Instead of 271D The assessee challenged the penalty notice on the grounds that it was issued under Section 271DA instead of Section 271D. The Appellate Tribunal noted that the JCIT initiated the penalty proceedings under Section 271DA due to a typographical error, which was later corrected. However, the Tribunal found that this error was not merely typographical but a significant mistake that affected the validity of the penalty notice. The Tribunal emphasized that Section 271DA pertains to violations of Section 269ST, while Section 271D pertains to violations of Section 269SS, and both sections are distinct. The Tribunal cited several judgments, including CIT vs. Jai Laxmi Rice Mills [379 ITR 521(SC)], to support the argument that the penalty notice was invalid due to the initial incorrect section. Consequently, the penalty levied was deemed unsustainable in law. 2. Whether the Sale Consideration Received in Cash of Rs. 1,14,00,000/- Attracted Penalty under Section 271D The assessee argued that the sale consideration received in cash did not attract penalty under Section 271D because the cash transactions occurred in an earlier assessment year (AY 2014-15) and were adjusted in the relevant year (AY 2017-18). The JCIT did not accept this explanation and imposed a penalty of Rs. 1,18,20,000/-. The Tribunal found that the JCIT did not address the assessee's assertion that there were no cash transactions in the relevant year. The Tribunal also noted that the term "any specified sum" was inserted in Section 269SS only by the Finance Act, 2015, effective from 01.06.2015, and therefore, no penalty could have been levied for the transactions in AY 2014-15. The Tribunal concluded that the penalty under Section 271D was not warranted for the cash received in AY 2017-18, as it was merely an adjustment of the amount received in AY 2014-15. 3. Whether Penalty Should Have Been Levied Only on Advances of Rs. 4.20 Lakhs Received in Cash The assessee contended that, without prejudice, the penalty should have been levied only on the advances of Rs. 4.20 lakhs received in cash. The Tribunal agreed with this contention, noting that even if the penalty were to be levied, it should have been only for the Rs. 4.20 lakhs received in cash on 06.10.2016, and not the entire Rs. 1.14 crores. The Tribunal referred to a similar case, ITO v. R. Dhinagharan (HUF) [in ITA No.3329/Chny/2019 for AY 2016-17], where the penalty was deleted on the grounds that the entire sale consideration was disclosed in the Profit and Loss Account, and there was no generation of black money. The Tribunal concluded that the penalty of Rs. 1.14 crores was excessive and not justified. Conclusion The Tribunal allowed the appeal filed by the assessee, finding that the penalty notice issued under Section 271DA was invalid, and even if the penalty were to be levied, it should have been only for Rs. 4.20 lakhs. The penalty of Rs. 1,18,20,000/- was deemed unsustainable and was deleted. The appeal was allowed, and the order was pronounced on the 29th day of May, 2024, in Chennai.
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