The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the penalty under Section 271D of the Income Tax Act as the Assessee bonafidely explains reasonable Cause.
The assessee, Sarita Singh filed return of income declaring income of Rs. 2,30,000 plus agricultural income of Rs. 1,10,000. The assessee is a Civil Contractor. The AO made an addition of Rs. 42,587 on account of low household withdrawal. The AO also made an addition of Rs. 1,10,000 on account of undisclosed agricultural income.
The assessment was completed under section 143(3). The AO imposed penalty under section 271D. The AO in this order has mentioned that assessee has received cash amount of Rs.1,74,320 and Rs. 35,90,165 from Ms. Sujata and Shri Dushyant other than account payee cheque/draft in contravention of provisions of section 269SS of the Act. The assessee in response to show-cause notice filed a reply which was not accepted by AO, hence, penalty under section 271D of the Act was imposed. The CIT(A) dismissed the appeal of assessee.
The assessee submitted that he has maintained an account with IDBI Bank, Bahadurgarh. Ms. Sujata and Mr. Dushyant are the neighbours of the assessee and known to assessee for many years. They have no bank account and have purchased property and they have to make payment to HUDA for development charges which could be made only through demand draft and requested to help them. They have given cash to the assessee through which drafts were prepared in their names for payment to be made to HUDA for development charges. The assessee did this act on humanitarian ground to help them out.
The assessee therefore submitted that due to the above reasonable cause assessee received cash from these two persons. Therefore, no penalty is leviable.
The coram of B.R.R. Kumar and Bhavnesh Saini clarified that Section 273B provides that no penalty shall be imposable on the persons or the assessee as the case may be for any failure referred to in section 271D, if he proves that there was a reasonable cause for the said failure.
The ITAT held that the facts would clearly disclose that assessee has reasonable cause for failure to comply with provisions of law contained under section 271D. Further, while passing the assessment order the AO did not disbelieve the explanation of the assessee as regards receipt of cash from these two neighbours and issue of drafts for these two neighbours and ultimate payment to HUDA. The AO did not record any satisfaction in the assessment order for contravention of provisions of section 271D.
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