2024 (8) TMI 1137 - AT - Income Tax

Penalty u/s 271D - contravention of section 269SS - consideration received in cash towards sale of property - HELD THAT - This issue is squarely covered in favour of the assessee by the decision of Katasani Tirupati Reddy 2024 (8) TMI 1097 - ITAT HYDERABAD where the Tribunal by following the decision of Shri R. Dhinagharan (HUF) 2024 (1) TMI 61 - ITAT CHENNAI held that specified sum as per Explanation to section 269SS of the Act is only applicable for the advance receivable or advanced received in relation to transfer of any immovable property, but not to consideration received towards transfer of property. Thus we direct the AO to delete the penalty levied u/s 271D of the I.T. Act, 1961. Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of JCIT under the Faceless Penalty Scheme.
2. Limitation period for levying penalty under Section 271D.
3. Applicability of judicial precedents.
4. Requirement of foundational satisfaction note.
5. Validity of penalty notice issued after an inordinate delay.
6. Independent nature of penalty proceedings under Section 271D.
7. Non-submission of reasonable cause under Section 273B.
8. Non-provision of draft assessment order under the Faceless Scheme.

Issue-wise Detailed Analysis:

1. Jurisdiction of JCIT under the Faceless Penalty Scheme:
The assessee contested that the JCIT, Range-1 Tirupathi, lacked jurisdiction to issue the show cause notice dated 07-09-2021 due to the implementation of the Faceless Penalty Scheme on 12-01-2021. The Tribunal did not find merit in this argument, as the jurisdiction was appropriately assumed under the scheme.

2. Limitation Period for Levying Penalty under Section 271D:
The assessee argued that the penalty levied was barred by the limitation of time. The Tribunal noted that the penalty notice dated 07-09-2021 was issued beyond the permissible time limit by 615 days. The Tribunal, however, upheld the penalty, indicating that the limitation period was calculated correctly under Section 275(1)(c).

3. Applicability of Judicial Precedents:
The CIT (A) relied on the Kerala High Court's decision in Grihalakshmi Vision vs. Addl. CIT, which the assessee argued was not applicable due to subsequent judicial decisions, including those from the Apex Court. The Tribunal considered this argument but did not find it sufficient to overturn the penalty.

4. Requirement of Foundational Satisfaction Note:
The assessee argued that the foundational satisfaction note regarding the contravention of Section 269SS was not mentioned in the assessment order dated 01-12-2019. The Tribunal found that the absence of such a note did not invalidate the penalty proceedings, as the contravention was evident from the facts.

5. Validity of Penalty Notice Issued After an Inordinate Delay:
The assessee contended that the penalty notice was issued after an inordinate delay of 1100 days from the date of knowledge of the AO. The Tribunal did not find this delay sufficient to invalidate the penalty, as it was within the permissible time frame under the relevant provisions.

6. Independent Nature of Penalty Proceedings under Section 271D:
The assessee argued that penalty proceedings under Section 271D are independent and should not be initiated with inordinate delay. The Tribunal upheld the penalty, indicating that the proceedings were validly initiated and conducted.

7. Non-submission of Reasonable Cause under Section 273B:
The assessee argued that the penalty was confirmed without considering the reasonable cause under Section 273B. The Tribunal found that the reasons provided by the assessee for accepting cash did not constitute a reasonable cause under the law.

8. Non-provision of Draft Assessment Order under the Faceless Scheme:
The assessee argued that no draft assessment order was provided as required under the Faceless Scheme. The Tribunal did not find this argument sufficient to invalidate the penalty, as the procedural requirements were deemed to have been met.

Conclusion:
The Tribunal, following the decision of the ITAT Hyderabad Benches in the case of Katasani Tirupati Reddy vs. Income Tax Officer, held that the 'specified sum' as per Explanation to Section 269SS of the Act is applicable only to advances receivable or received in relation to the transfer of immovable property, not to the consideration received towards the transfer of property. Consequently, the penalty under Section 271D was not exigible, and the appeal filed by the assessee was allowed. The Assessing Officer was directed to delete the penalty levied under Section 271D of the I.T. Act, 1961.

Order Pronounced:
The appeal filed by the assessee was allowed, and the order was pronounced in the Open Court on 21st August 2024.