No Penalty u/s 271D if Reasonable Cause shown by Assessee: ITAT [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that a penalty under Section 271D of the Income Tax Act, 1961 cannot be levied if a reasonable cause is shown by the assessee.

The assessee Narendrakumar Chunilal Soni 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 declaring a total income of Rs.4,82,280/-

The assessee’s case was selected for scrutiny assessment since cash deposits were made during the demonetization period. The assessee was asked to furnish the source of the cash deposit along with documentary evidence and a 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 gold/silver ornaments.

 In support of the same, the assessee submitted a copy of the sale deed, cash book and bank statement. The Assessing Officer issued a summons under Section 133(6) of the Income Tax Act to the purchaser of the flat and received a reply from the purchaser and satisfied with the explanation offered by the purchaser that she being an agriculturist, purchased the flat from the assessee by cash transaction. Thus the Assessing Officer completed the assessment accepting the returned income as the assessed income. 

Thereafter, the assessee was issued a notice under Section 274 read with Section 271D  calling for an explanation on the cash transaction in connection with the violation of Section 269SS of the Income Tax  Act. The assessee replied that during the year, he sold his immovable property for a sum of Rs. 7,93,000/- to Smt. Sushilaben Bharatbhai Pujara. The purchaser being an agriculturist from a small village, paid the sale consideration of Rs. 7,93,000/- by cash, which is duly and truly reflected in the Registered Sale Deed and also in the Return of Income filed by the assessee.

Further, the assessee was not aware of the violation of Section 269SS which will attract a penalty under Section 271D of the Income Tax Act. The above explanation offered by the assessee was not accepted as satisfactory, therefore the Joint Commissioner levied a penalty under Section 271D of Rs. 7,93,000/-

The assessee filed an appeal before NFAC (Delhi). The NFAC confirmed the levy of a penalty under Section 271D of the Income Tax Act of Rs. 7,93,000/-.  Hence the appeal before the Tribunal, the counsel for the Assessee argued that this case was squarely applicable to the case OMEC Engineers vs. CIT and pleaded to delete the penalty levied under Section  271D of the Income Tax Act.

Counsel for the revenue requested to uphold the same and thereby dismiss the assessee’s appeal.

The two-member Bench consisting of Judicial Member T.R. Senthil Kumar, and Accountant Member Annapurna Gupta observed that ‘’a careful reading of Section 273B encompasses that certain penalties “shall” not be imposed in cases where “reasonable cause” is successfully pleaded. The bench further added that the Jurisdictional High Court in the case of Maa Khodiyar Construction (cited supra) held that no penalty is leviable under Section  271D for cash loans exceeding Rs. 20,000/- from agriculturists living in remote areas when transactions were not doubted."

As a result, the Bench cancelled the penalty and the appeal filed by the Assessee was allowed.

To Read the full text of the Order CLICK HERE

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