Senior Citizen's Bonafide Belief and Ignorance of law is Reasonable Cause u/s 273B: ITAT Deletes Penalty [Read Order]
Citing the objective of Section 269SS to deter the use of unaccounted money and the relief provision of Section 273B reasonable cause , the Tribunal held that the assessee's honest and bonafide belief, coupled with his background, constituted a reasonable cause for contravention.
Senior Citizen - Bonafide - Ignorance of law - Reasonable Cause - ITAT - Penalty - taxscan
Senior Citizen - Bonafide - Ignorance of law - Reasonable Cause - ITAT - Penalty - taxscan
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) deleted a penalty of ₹20,00,000/- levied under Section 271D of the Income Tax Act, 1961 and held that the senior citizen assessee had a 'reasonable cause' for accepting cash towards the sale of immovable property due to his honest and bonafide belief and ignorance of law.
Maheshwarappa Muniramu (assessee) , a senior citizen aged 82 with elementary education , jointly sold an immovable property with his son in Assessment Year (AY) 2017-18 for a total consideration of ₹85,43,100/-, of which ₹20 lakhs was received in cash.
The assessee's 50% share of the cash consideration was ₹10,00,000/-. The Assessing Officer (AO) completed the assessment under Section 143(3) by accepting the returned income without any additions.
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Subsequently, the Joint Commissioner of Income Tax (JCIT) initiated penalty proceedings under Section 271D for receiving cash in contravention of Section 269SS. The JCIT levied a penalty of ₹20 lakhs, holding that the assessee failed to demonstrate a reasonable cause for the cash receipt, rejecting explanations like age and health issues.
Aggrieved by the penalty order, the assessee filed an appeal before the commissioner of the Income Tax (appeals) [CIT(A)]. The CIT(A) upheld the penalty and observed that the assessee did not bring on record whether the cash was out of explained sources or why banking channels were not used.
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Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee contended that he accepted the cash in a bonafide belief and due to his ignorance of the law. The assessee highlighted that the genuineness of the transaction was not disputed by the AO.
The assessee had deposited his share of the cash ₹10,00,000 into his bank account and then transferred it to the capital gains account scheme, demonstrating his bona fides. The assessee also argued that the amendment to Section 269SS, which included property transactions, would not have been known to a senior citizen with elementary education.
The two-member bench, comprising PrashantMaharishi (Vice President) and Keshav Dubey (Judicial Member), noted that the genuineness of the transaction was clearly established and accepted by the AO.
Citing the objective of Section 269SS to deter the use of unaccounted money and the relief provision of Section 273B reasonable cause , the Tribunal held that the assessee's honest and bonafide belief, coupled with his background, constituted a reasonable cause for contravention.
The Bench concluded that the claim of the assessee was Bonafide and ignorance of law within the meaning of provisions of section 273B of the Act. The Tribunal directed the AO to delete the penalty levied under Section 271D of the Income Tax Act. In the result, the appeal filed by the assessee was allowed.
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