No Penalty if Assessee Discloses Genuine LTCG Amount: ITAT Deletes Income Tax Penalty finding Reasonable Cause for S.269SS Non-Compliance [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore recently held that no penalty may be levied on an Assessee if they have made genuine disclosure of their Long Term Capital Gains (LTCG) while proceeding to delete penalty imposed on the Assessee, being apprised of reasonable cause for failing to comply with the provisions of Section 269SS of the Income Tax Act, 1961.

The Income Tax Appeal was filed before the ITAT by Sri Gangadhara Shetty against the order of the Commissioner of Income Taxes (Appeals) ( CIT(A) ) in relation to Assessment Year (A.Y.) in 2017-18.

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Appellant, being a salaried assessee failed to file their returns of income for the A.Y. 2017-18, which was retrospectively reopened under Section 147 of the Act. The jurisdictional Assessing Officer (AO) observed that the Assessee had earned LTCG of Rs.29,29,238/- and claimed exemption of the same under Section 54 of the Income Tax Act, averring that the gained amount had been redirected for the construction of a residential house.

However, the AO noticed that the Assessee had received in cash, an amount of Rs.6 Lakh in the transaction for the sale of property. The AO subsequently levied a penalty of Rs.6 Lakhs on the Assessee alleging violations of Section 269SS of the Income Tax Act, 1961.

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In Appeal before the CIT(A), the Assessee contested the penalty averring that the provisions of Section 269SS inserted with effect from 01.06.2015 may not be ascribed to the Assessee’s disputed 6 lakh cash as the currency had been accepted vide agreement dated 30.04.2015; however the CIT(A) affirmed the penalty order of the AO.

Sunaiana Bhatia, representing the Appellant reiterated that the cash transactions had been conducted prior to the amendment of Section 269SS of the Act.

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Departmental Representative Neha Sahay, vehemently contested the claims pointing out that the agreement referenced by the Assessee is neither registered nor signed by the purchaser, further alleging that the Assessee has concocted a story to buttress his record.

The two-member Bench of Padmavathy S., Accountant Member And Prakash Chand Yadav, Judicial Member observed that though the disputed Rs.6 Lakhs was not made out in the agreement dated 30.04.2015, the Assessee had not adopted any means to hide the same and had rightfully claimed exemption under Section 54 of the Act which was affirmed in reassessment proceedings.

Read More: Cash Transaction for Property Registration: ITAT deletes Section 269SS Income Tax Penalty against Women with Elementary Knowledge

Reinforced by the Decision of a coordinate Bench in the case of Smt. Pushpalatha Vs. ITO (2024) wherein the Tribunal observed no intention to generate unaccounted money or black money by an Assessee owing to their full disclosure in their income tax returns, the Bangalore Bench deleted Gangadhar Shetty’s penalty in consideration of the smallness of the disputed amount.

To Read the full text of the Order CLICK HERE

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