2024 (7) TMI 395 - AT - Income Tax

Penalty u/s 271D - Reasonable time to initiate penalty proceedings - accepting the payments in cash from the buyers, who were unable to pay by way of account payee cheque or demand draft - HELD THAT - Assessee has filed return of income on 07/08/2017 and this return was processed by the Department on 8/9/2017, impugned penalty notice dated 6/7/2021 was issued by department. Ld DR also failed to point out anything contrary to the facts of the case. Therefore, we are of the view that the penalty was not initiated by the revenue in reasonable time. Scope of introduction of amendment - Income Tax Laws are very complex laws, every year amendments have come, and sometime even professional commit many mistakes. Therefore having regard to the fact that this is the first year immediately after the introduction of amendment, coupled with the fact that the persons from whom payments were to be made could not be able to arrange the Demand Drafts, due to closing of banking hours. The assessee has also filed confirmations from the buyers who confirmed that they could not be able to get the Demand Draft due to restricted banking hours. Therefore, we are of the view that there was reasonable cause and explanation of the assessee would be treated as bonafide, hence in this case, no penalty is leviable as section 273B. Section 273B categorically excludes the operations of section 271D. We observe that other persons have also received the cash in this very same transaction. However, they have been spared by the department without any plausible reasons. It is settled position of law that revenue cannot adopt the tactics of pick and choose while assessing the citizens of India, as it would be violative of Article 14 of the constitution. Reference can be made to the decision of Kaumudini Narayan Dayal 2000 (12) TMI 101 - SC ORDER . Delete penalty levied - Decided in favour of assessee.

Summary

Issues involved:
- Penalty proceedings initiated after a significant lapse of time.
- Justification for accepting payments in cash.
- Application of section 273B in relation to penalty under section 271D.
- Allegation of selective treatment by the revenue department.

Detailed Analysis:
1. Penalty Initiated After Lapse of Time:
The case involved an appeal by the assessee against a penalty levied under section 271D of the Income Tax Act. The assessee argued that the penalty proceedings were initiated by the JCIT after a considerable delay of around 4 years, which was deemed unreasonable. The Bangalore Bench's judgment in the case of Sree Rajendra Suri Gurumandir Trust was cited, emphasizing the necessity for penalty proceedings to be initiated and completed within a reasonable time frame. Reference was also made to the decision of the Hon'ble Calcutta High Court in the case of Indian Handloom Textiles vs. ITO, highlighting the invalidity of penalty proceedings initiated after an extended period. The tribunal agreed with the assessee, noting that the penalty was not initiated in a reasonable time, ultimately leading to the deletion of the penalty.

2. Justification for Accepting Cash Payments:
The assessee contended that there were valid reasons for accepting payments in cash, particularly due to the buyers' inability to pay via account payee cheque or demand draft. The argument was supported by the fact that the amendment restricting the sale of immovable property via cash mode was introduced recently, and the assessee believed it was permissible to accept cash payments. The tribunal acknowledged the complexity of Income Tax Laws and the potential for mistakes, especially in the first year after an amendment. Confirmations from buyers regarding their inability to obtain demand drafts due to restricted banking hours further supported the assessee's position. Citing section 273B, the tribunal concluded that there was a reasonable cause for accepting cash payments, and no penalty was leviable under section 271D.

3. Application of Section 273B and Selective Treatment Allegation:
The tribunal referenced the decision of the Hon'ble Delhi High Court in the case of Holland Tractors, emphasizing that penalties should not be imposed if the assessee's contention was plausible and bona fide, even if there were differing interpretations of tax provisions. Additionally, the tribunal noted that other individuals involved in the transaction had also received cash payments but were not penalized by the revenue department. This selective treatment was deemed violative of Article 14 of the constitution. Citing the decision of the Hon'ble Apex Court in the case of UOI Vs Kaumudini Narayan Dayal, the tribunal held that revenue cannot adopt a pick-and-choose approach while assessing taxpayers. Consequently, the penalty was deleted, and the appeal of the assessee was allowed.

In conclusion, the tribunal's detailed analysis considered the timing of penalty initiation, the justification for accepting cash payments, the application of relevant sections, and the principle of non-selective treatment by the revenue department, ultimately leading to the deletion of the penalty imposed on the assessee.