ITAT deletes Rs. 6 lakh penalty u/s 271D due to bonafide claim of LTCG on part of assessee [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal ( ITAT ) deletes Rs. 6 lakh penalty on the assessee over an alleged violation of Section 269SS of the Income Tax Act, 1961.

In this case, the main issue involved that the solitary issue involved in this case is regarding the levy of penalty of Rs. 6 lakhs u/s 271D of the Income Tax Act, 1961.

In this case, Gangadhara Shetty is an individual and earning salary income. The assessee had not filed its return of income for the assessment year ( AY ) 2017-18. During the reassessment proceedings, the assessee submitted his income tax returns ( ITR ) declaring total income as nil. 

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During the assessment proceedings, the Assessing Officer (AO) observed that the assessee had earned a long-term capital gain (LTCG) of Rs. 29,29,238, claiming exemption under Section 54 of the Income Tax Ac,1961, by utilizing the gain to construct a residential house. However, on 25.10.2023, the AO imposed a Rs. 6 lakh penalty, alleging a violation of Section 269SS, as the assessee received Rs. 6 lakhs in cash during the property sale transaction.

The assessee appealed before the Commissioner of Income Tax ( Appeals ) [ CIT (A) ] and contended that the penalty levied by the AO under Section 271D of the Income Tax Act, 1961, is not maintainable. But the CIT(A) upheld the order passed by the AO. 

The counsel on behalf of the assessee contended that the transaction entered into by the assessee is a bona fide transaction and has also been accepted by the AO in reassessment proceedings as genuine, and thus no penalty is leviable.

The bench held that in this case, the assessee had offered the alleged amount and claimed exemption under Section 54 of the Income Tax Act, 1961.

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The ITAT bench further observed that this is a case where a claim has been made in an open and bona fide manner, and hence, in terms of provisions of Section 273B of the Income Tax Act, which specifically exclude the rigors of provisions of Section 271D of the Income Tax Act, and thus the penalty is not maintainable.

The ITAT bench, comprising of Padmavathy S ( Accountant Member ) and Prakash Chand Yadav ( Judicial Member ) allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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