2023 (2) TMI 165 - AT - Income Tax

Penalty u/s. 271D - failure to comply with the statuary provisions of section 269SS - As argued penalty proceedings has been initiated on wrong person/assessee - HELD THAT - Property has been purchased in his individual capacity and also sold in his individual capacity. As regards, the claim of the assessee that property was owned by HUF, if you go by date of generating PAN number for HUF, the assessee HUF has generated PAN number on 03.03.2017 much after the date of sale of asset. Further, the appellant has filed return for HUF capacity on 30.03.2018. The documents relied upon by the assessee can only be considered as an afterthought to circumvent penalty proceedings initiated in his individual capacity. Therefore, we reject arguments of assessee that penalty proceedings has been initiated on wrong person/assessee. There is no dispute with regard to the fact that the appellant had received a sum of Rs. 14 lakhs in cash for sale of immovable property. In fact, the relevant data collected from the Registrar Officer clearly reported transactions with specified date and amount and also amount received in cash. In fact, the assessee never disputed fact that sum of Rs. 14 lakhs has been received on sale of immovable property. However, the only argument of the assessee was that out of Rs. 14 lakhs, a sum of Rs. 11,50,000/- has been received on 10.02.2016 and further a sum of Rs. 2,50,000/- has been received on 07.11.2016. We find no merit in arguments of the assessee that a sum of Rs. 11,50,000/- has been received by way of cash on 10.02.2016, because the information collected by the AO clearly indicates that as on the date of sale i.e., 07.11.2016, the assessee has received a sum of Rs. 14 lakhs. Therefore, we are of the considered view that the assessee has received a sum of Rs. 14 lakhs in cash for sale of immovable property in contravention of provisions of section 269SS of the Act, and liable for penalty u/s. 271D of the Act. Thus, levy penalty u/s. 271D for violating provisions of section 269SS of the Act Confirmed - Decided against assessee.

Summary

Issues Involved:
1. Legitimacy of penalty under Section 271D of the Income Tax Act, 1961.
2. Ownership status of the property sold.
3. Validity of penalty proceedings based on the timing of PAN generation and tax returns.
4. Compliance with Section 269SS of the Income Tax Act, 1961.
5. Consideration of reasonable cause for accepting cash payments.
6. Alleged violation of the principles of natural justice.
7. Timeliness of penalty proceedings.
8. Impact of the transaction on revenue loss.

Issue-wise Detailed Analysis:

1. Legitimacy of Penalty under Section 271D:
The primary issue was whether the penalty under Section 271D of the Income Tax Act, 1961, was validly imposed. The appellant argued that the penalty was wrongly levied because the property was owned by his HUF and his wife, and not in his individual capacity. However, the authorities found that the appellant's individual PAN was used during the sale, indicating individual ownership. The Tribunal upheld the penalty, stating that the appellant received Rs. 14 lakhs in cash, violating Section 269SS, which mandates transactions above Rs. 20,000 to be conducted through account payee cheque, draft, or electronic clearing system.

2. Ownership Status of the Property Sold:
The appellant contended that the property was owned by his HUF and his wife, and thus, the penalty should not be levied on him individually. However, the Tribunal found that the appellant's individual PAN was used during both the purchase and sale of the property, indicating individual ownership. The HUF PAN was generated after the sale, and returns were filed later, suggesting an afterthought to avoid penalty. Therefore, the Tribunal concluded that the property was owned and sold by the appellant in his individual capacity.

3. Validity of Penalty Proceedings Based on Timing of PAN Generation and Tax Returns:
The appellant argued that the HUF PAN was generated after the sale, and returns were filed later, indicating that the property was owned by the HUF. However, the Tribunal found this argument unconvincing, noting that the individual PAN was used during the sale, and the HUF PAN was generated much later. The Tribunal viewed the timing of PAN generation and returns as an attempt to circumvent the penalty.

4. Compliance with Section 269SS:
The Tribunal examined whether the appellant complied with Section 269SS, which prohibits cash transactions exceeding Rs. 20,000. The appellant received Rs. 14 lakhs in cash, violating this provision. The authorities found that the appellant received Rs. 14 lakhs in cash on the date of sale, contrary to the appellant's claim of receiving Rs. 11.5 lakhs earlier. The Tribunal upheld the penalty for non-compliance with Section 269SS.

5. Consideration of Reasonable Cause for Accepting Cash Payments:
The appellant argued that the cash was needed for medical emergencies, constituting a reasonable cause under Section 273B, which could exempt him from penalty under Section 271D. However, the Tribunal found no merit in this argument, as the appellant failed to substantiate the claim with evidence. The Tribunal upheld the penalty, rejecting the argument of reasonable cause.

6. Alleged Violation of the Principles of Natural Justice:
The appellant claimed that the lower authorities violated principles of natural justice by not considering all facts and parties involved. However, the Tribunal found that the authorities had duly considered the facts and provided the appellant with opportunities to present his case. The Tribunal concluded that there was no violation of natural justice principles.

7. Timeliness of Penalty Proceedings:
The appellant contended that the penalty proceedings were initiated after six months from the intimation date, making them invalid. However, the Tribunal did not find any procedural lapse or delay that would invalidate the penalty proceedings. The Tribunal upheld the penalty, dismissing the argument of untimeliness.

8. Impact of the Transaction on Revenue Loss:
The appellant argued that there was no revenue loss due to the bona fide transaction, and hence, penalty should not be levied. However, the Tribunal emphasized that the penalty under Section 271D is for non-compliance with Section 269SS, irrespective of revenue loss. The Tribunal upheld the penalty, stating that the violation of statutory provisions warranted the penalty.

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty of Rs. 14 lakhs under Section 271D for violating Section 269SS. The Tribunal found that the appellant owned the property in his individual capacity, received cash payments in contravention of Section 269SS, and failed to provide a reasonable cause for accepting cash. The Tribunal concluded that the penalty proceedings were valid and timely, with no violation of natural justice principles. The appeal was dismissed, and the penalty was upheld.