The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that no penalty shall be imposed in cases where reasonable cause was successfully pleaded.
The assessee Narendrakumar was an individual engaged in the business of repairing gold/silver ornaments. For the Assessment Year 2017-18, the assessee filed its Return of Income on 29.03.2018.
The assessee was asked to furnish source of cash deposit during demonetisation alongwith documentary evidence and copy of the bank statements. The assessee replied that the cash deposit is out of his sale proceeds of residential flats and his income from repairing of gold/silver ornaments.
Thereafter the AO was about to impose a penalty under Section 271D of the Income Tax Act, 1961 in connection with violation of Section 269SS of the Income Tax Act.
The assessee replied that during the year, he sold his immovable property. The purchaser being an agriculturist from a small village, paid sale consideration cash, which was being truly reflected in the Registered Sale Deed and also in the Return of Income filed by the assessee. Further the assessee was not aware that the violation of Section 269SS would attract penalty under Section 271D of the Act.
Hirak Shah, who appeared on behalf of the assessee relied upon judgement of the High Court in CIT vs. Maa Khodiyar Construction.
Rakesh Jha,on behalf of the revenue, supported the concurrent findings of the lower authorities and requested to uphold the same and thereby dismiss the assessee’s appeal.
The two-member Bench of Annapurna Gupta, (Accountant Member) and T.R. Senthil Kumar, (Judicial Member) relying upon the decision in OMEC Engineers’ deleted penalty and held that, “ ‘Reasonable cause’ obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides. Before imposition of penalty under section 271, the Assessing Officer must be satisfied, not arbitrarily but judiciously, that the assessee has without reasonable cause failed to comply with the provisions.”
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