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TMI Blog2024 (6) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... ng "section 271DA" instead of "section 271D". The same typo error was informed to the assessee vide this office letter/DIN No: ITBA/PNL/F/271DA/2022- 23/1043934742(1) dated 19.07.2022 that wherever "section 271DA" is mentioned in the above notices/letters, the same to be read as "section 271D". Further opportunities have been given by issuing notices/reminders dated 24/01/2022, 09/02/2022 & 19/07/2022. 4. Thus, the JCIT noted that assessee had filed his explanation along with certain documents to his show cause notice (SCN) and asserted that in the relevant year i.e. AY 2017-18, there was no cash payments/receipts in execution of sale agreement dated 07.10.2016 to four persons/buyers. And the transaction in question was explained by assessee that there was a earlier agreement for sale dated 06.01.2014 (AY 2014-15) between assessee and four persons (Shri R.Sakthivel and three others) regarding sale of a property situated in Dr.No.11/10-12, Rayappapuram East Street (hereinafter referred to as the immovable property), which agreement was registered as document No.115 of 2014 for a sum of Rs. 3 Crores, out of which, assessee acknowledged recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NFAC who was pleased to dismiss the appeal by holding as under: I have carefully considered the facts of the case as well as submissions filed by the appellant. I find no force in the arguments of the Appellant. The only plea taken by the Assessee is that a sum of Rs. 2.5 crore was received by him in cash and this payment of Rs. 1.18 crore is just an adjustment against the aforesaid sum. However, no evidence has been submitted in respect of this purported agreement, the forfeiture of this amount of 2.5 crore. Later, the Assessee himself denies this forfeiture. As stated by the AO, there are several contradictions in the explanations given. Accordingly, the penalty of Rs. 1,18,20,000/- levied by the AO u/s. 271D of the Act is hereby confirmed. The grounds of appeal No. 1 to 5 are thus, dismissed. 7. Aggrieved by the aforesaid action of the Ld.CIT(A)/NFACC, the assessee is before us. 8. We have heard both the parties and perused the material available on record. The Ld AR assailing the action of Range Head/JCIT levying penalty u/s. 271D of the Act submitted that AO while passing the assessment order dated 25.12.2019 only initiated penalty proceedings u/s. 270A of the Act, and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 19.07.2022] placed on record, the notices from which it is discerned that the AO had initiated the penalty on 17.01.2022 which generated DIN wherein also Sec. 271DA of the Act, is clearly mentioned therein [DIN ITBA/PNL/F/271DA/2021- 22/1038795499(1)] and a careful reading of Para No.4 of impugned penalty order (supra) would itself reveal that the JCIT had in fact initiated penalty u/s. 271DA & not u/s. 271D as stated by him at Para No.4, firstly because the DIN taken note by us (supra) gives away the fact that notice initiated for imposing penalty was u/s. 271DA [and not u/s. 271D of the Act]. And secondly, all other notices dated 24th January, 2023 & 09th February, 2022, (except the last notice issued on 19.07.2022) the JCIT had mentioned about imposition of penalty u/s. 271DA of the Act and also in the letter dated 24.01.2022, he referred to earlier notice issued on 17.01.2022 u/s. 271DA of the Act. And thirdly, if the JCIT had initiated notice u/s. 271D in the first place, there was no reason for him to state in notice on 19.07.2022 asking the assessee to read in other notices wherever it is stated as Sec. 271DA to be read as Sec. 271D of the Act. In the light of above, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 and for that we relies on ratio of the judgments (infra) though in the context of penalty levied u/s. 271(1)(c) of the Act including that of the Hon'ble jurisdictional High Court: i) Mohd. Farhan A. Shaikh v. ACIT reported in (2021) 434 ITR 1 (Bom) (FB) ii) CIT v. Sam-son Pondichery [2017] 392 ITR 4 (Bom) TXA No. 1154 of 2014 dated January 5, 2017; iii) CIT (Pr.) v. Goa Coastal Resorts and Recreation P. Ltd. [2020] 16 ITR-OL 111 (Bom) Tax Appeal No.24 of 2019 dated November 11, 2019; iv) Pr. CIT v. New Era Sova Mine [2021] 433 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (supra). 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) [in ITA No.3329/Chny/2019 for AY 2016-17 order dated 29.12.2023], wherein, the Tribunal in similar case deleted the penalty imposed u/s. 271D of the Act, held as under: 7. The brief facts of the case are that the assessee is engaged in real estate business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive intent behind the amendment to section 2698S which included cash dealings. in immovable' property transactions should be understood in the correct perspective. lt is a well-known fact that money changes hands 'in property transactions and this fact cannot be denied. This money is outside the books and is not subject to income tax therefore the term "BLACK MONEY' is applied to such kinds of transactions. In the appellant's context, the question that needs to be asked is whether, simply because the appellant has received the money in cash, does it make the transaction "BLACK" or unaccounted? I have gone through the Trading, Profit and Loss Account of the appellant for the year ended 31.03.2016. It is noted that the appellant has disclosed the entire amount of Rs. 3, 03, 46,301/- received on account of sale of plots in the Trading, Profit and Loss Account. 5.3 In the light of this fact it is clearly evident that the sale of plots for which money has been received in cash has been fully disclosed in the IT return of the appellant. Therefore, I am of the view that levy of penalty under section 269 SS is not correct. The imposition of penalty has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the proceedings u/s. 271D of the Act, the assessee had only one defence i.e., he has not taken any loan/deposit in contravention of provisions of Sec. 269SS of the Act during the year. A request was made to drop the proceedings u/s. 271D of the Act. During the course of appellate proceedings, it is seen that the CIT(A) has adjudicated the issue, taking into consideration reasonable cause, which is not acceptable in the facts and law of the case under dispute. The CIT(A) has given rationale of his decision in favour of the assessee in para 5 of the order. The CIT(A) seems to have accepted the following arguments of the assessee: (i) Scope of Sec. 269SS was amended in order to curb the generation of black money by dealings made in cash in immovable property transactions. The learned CIT(A) accepted the submission of the assessee with a finding, 'since the appellant has fully disclosed the entire sale transactions in his profit and loss account, the issue of generation of unaccounted income does not arise. (ii) The imposition of penalty has been drawn in a mechanical manner without taking into consideration the legislative intent behind the amendment of the section. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the reason given by the tax payer should be genuine and bonafide. The appellant assessee has not demonstrated any such reason before the CIT(A), nor has the learned CIT(A) required it to furnish such vital evidence for establishing reasonable cause. (ii)The CIT(A) has also relied on the case of Hindustan Steel Limited Vs State of Orissa reported in 83 ITR 26 (1972). At the outset, it may be stated that the above citation is concerned with provisions of Orissa Sales Tax. Further, in the said ruling, the Hon'ble Supreme Court had noted the following: "Under the Act penalty may be imposed for failure to register as a dealer: s.9(1) read with s.25(J)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out statutory obligation is the result of a quasi criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given in Explanation to Section 269SS of the Act defines that it means any sum of money receivable, whether as advance or otherwise, in relation to transfer of immovable property, whether or not the transfer takes place, he explained that this means that this is applicable for advance given at the time of entering into agreement for purchase of property and purchase/sale of property and not for actually registration done and sale consideration received at time of registration of sale deed for purchase/sale of property. The Ld. counsel for the assessee stated that this specific amendment was brought in w.e.f. 01.06.2015 for curbing the generation of black money. He explained that the 'specified transaction' means, the advance paid or inter remittance payments made and any payments made at one go at the time of registration of sale deed. The Ld. counsel stated that further a provision was brought in by the legislature in the statute vide Finance Act, 2017 w.e.f 01.04.2017 by introducing the provision of section 269ST, wherein even the purchase of property if the amount is two lakhs or more will be covered and penalty will be levied of an equivalent to the amount u/s. 271DA of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property. It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions. The Memorandum forming part of Finance Bill, 201.5 highlighting the intention of the amendment is captured below: B. MEASURES TO CURB BLACK MONEY Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances. The existing provisions contained in section 269SS of the Income-tax Act provide that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide that any loan or deposit shall not be repaid, otherwise than by an account pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heque or account payee bank draft or online transfer through a bank account if the amount of such loan or deposit or specified sum is twenty thousand rupees or more. It is also proposed to define "specified sum" as any sum of money receivable, whether as advance or otherwise in relation to transfer of an immovable property whether or not the transfer materialises. These amendments will take effect from 1st June, 2015. 12.1 In the present case, the sale consideration was received in cash at the time of execution of multiple sale deeds from different persons for the sale of plots and accepted as genuine in the assessment order completed on 23.05.2018 and admittedly there was no advance received by the seller. The amended provisions of Section 269SS of the Act was applied by the A.O to the facts of the present case only to the sale consideration received as 'specified sum' and on such presumption the JCIT levied penalty u/s 271D of the Act. The intention of the amendment is very clear right from the Budget speech of the Finance Minister that the said amendment is brought into the statute in Section 269SS of the Act would get attracted to sum received in cash as an adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. 54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made. 54.6 Applicability: These amendments have taken effect from 1st day of June, 2015. From the above provisions, Memorandum explaining the intention of amendment by Finance Bill, 2015 including the definition of 'sum specified' brought in the Explanation to Section 269SS of the Act, it is clear that the intention for brining this provision was to curb the generation of black money in real estate prohibiting acceptance or repayment of advance in cash of Rs. 20,000/- or more for any transaction in immovable property. This was explained by Hon'ble Finance Minister while placing the Finance Bill, 2015 in her budget speech highlightin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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