The Hyderabad Income Tax Appellate Tribunal ( ITAT ) set aside the order of the Commissioner of Income Tax (Appeals)[(CIT)(A)]/NFAC and directed the Assessing Officer (AO) to cancel the penalty imposed under 271D for violation of section 269SS of Income Tax Act, 1961.
In accordance with Section 269SS, if a deposit, loan, or specified amount is worth Rs. 20,000 or more, it must be made by an account payee bank draft, account payee check, or through an electronic clearing system via a bank account.
It was observed that the imposition of penalty made by the Revenue in the year under consideration is without any basis and jurisdiction.
The assessee had sold an immovable property, and the sale profits totaled Rs. 13,63,000 in cash, according to the case’s basic facts. A show-cause notice under section 271D under section Income Tax Act was issued and served on the assessee on 04.03.2021, following the AO’s discovery that cash totaling more than Rs. 20,000 was accepted in violation of section 269SS.
The assessee further responded that he had accepted the cash payment of Rs. 13,63,000 because he required the money for his medical costs and treatment, and that following demonetization, he had deposited it in his bank account.
The AO rejected the assessee’s response, and as a result, he started penalty proceedings under Section 271D of the Income Tax Act for violating section 269SS’s rules.
The section 271D states about the penalty for failure of provision 269SS of Income Tax Act. According to the section, a person who violates the terms of section 269SS by accepting a loan or deposit is subject to paying a fine that is equivalent to the amount of the loan or deposit that was improperly accepted.
Because the exception specified in section 273 of Income Tax Act was also inapplicable, the AO determined that the case was appropriate for the imposition of a penalty and issued an order pursuant to section 271D of the Income Tax Act after observing that the Assessee had failed to provide a justification for accepting cash totaling more than Rs. 20,000 in violation of section 269SS of Income Tax Act.
The tribunal after considering both sides it was observed that the assessee had sold the immovable property in cash and thus committed violation of section 269SS of the Income Tax Act.
Furthermore, it was noted that the assessee had a responsibility and obligation not to accept cash in the form of a loan, deposit, or other specific amount. The Revenue has the right to take the appropriate action under section 269SS in just that year if the assessee violates the section 269SS duty.
Similar to this, only the year in which the breach of section 269SS occurred may result in a penalty being levied. The power to impose the fine in any assessment year cannot be entrusted to the Revenue unrestrictedly or uncontrolled.
The bench of Rama Kanda Panda (Accountant Member) and Laliet Kumar (Judicial Member) stated that it was clear that the assessee had breached the section 269SS provision in the current case during the assessment year 2016–17 and not the assessment year 2017–18. As a result, there is no justification for or authority over the Revenue’s imposition of a penalty during the relevant year.
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