Case Law Details
Gangadhara Shetty Vs ITO (ITAT Bangalore)
ITAT Bangalore held that penalty under section 271D of the Income Tax Act not leviable in terms of section 273B of the Income Tax Act since claim of exemption u/s. 54 is made in an open and bonafide manner.
Facts- Assessee is an individual and earning salary income. The assessee has not filed its return of income for the year under consideration.
During the course of assessment proceedings, the AO observed that the assessee has earned long term capital gain amounting to Rs.29,29,238/-. The assessee claimed exemption of the entire long term capital gain (LTCG) u/s 54 of the Act as he has utilized the amount of gain in construction of one residential house. Thereafter, the reassessment proceedings were completed at the returned income. However, it has been noticed by the AO that the assessee has received an amount of Rs.6 lakhs in cash while entering into the transaction of sale of property. Thus, AO levied a penalty of Rs.6 lakhs on assessee, alleging that the assessee has violated the provisions of section 269SS of the Act.
CIT(A) affirmed the order of AO levying penalty. Being aggrieved, the present appeal is filed.
Conclusion- Held that it is a case where the assessee has offered this amount and claimed exemption u/s 54 of the Act and this factual aspect has been accepted by the AO in reassessment proceedings. Therefore, it is a case where a claim has been made in an open and bonafide manner and hence in terms of provisions of section 273B of the Act, which specifically exclude the rigors of provisions of section 271D of the Act, we are of the view that penalty is not leviable in the present case.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal of the assessee is arising from the order of ld. CIT(A) dated 28.6.2024 and DIN & order No.ITBA/NFAC/S/250/2024-25/1066172774(1) relating to assessment year 2017-18.
2. The assessee has raised 8 grounds of appeal. However, the solitary issue involved in this case is regarding the levy of penalty of Rs.6 lakhs u/s 271D of the Income Tax Act, 1961 (in short “The Act”) by the AO. Facts leading to file the present appeal are that assessee is an individual and earning salary income. The assessee has not filed its return of income for the year under consideration. Thereafter, on the basis of some information, the case of the assessee was reopened u/s 147 of the Act. The assessee has been asked to file the true and correct affairs of his income. In response, the assessee submitted his return of income declaring total income as Nil. During the course of assessment proceedings, the AO observed that the assessee has earned long term capital gain amounting to Rs.29,29,238/-. The assessee claimed exemption of the entire long term capital gain (LTCG) u/s 54 of the Act as he has utilized the amount of gain in construction of one residential house. Thereafter, the reassessment proceedings were completed at the returned income. However, it has been noticed by the AO that the assessee has received an amount of Rs.6 lakhs in cash while entering into the transaction of sale of property. It is relevant to mention here that it is the same property on which the assessee has claimed (LTCG) and in fact there is no quarrel on this. In the back ground of these facts, the AO vide its order dated 25.10.2023 levied a penalty of Rs.6 lakhs on assessee, alleging that the assessee has violated the provisions of section 269SS of the Act.
2.1 Aggrieved with the order of AO, the assessee filed an appeal before the ld. CIT(A) and contended that the penalty levied by the AO u/s 271D of the Act is not tenable. The assessee also pleaded that the assessee has accepted the cash vide agreement dated 30.4.2015 and on that date the newly inserted provisions of section 269SS of the Act, applicable w.e.f. 1.6.2015 are not there in statute. However, the ld. CIT(A) affirmed the order of AO levying penalty.
2.2. Aggrieved with the order of ld. CIT(A), the assessee has come up in appeal before us.
3. The ld. Counsel for the assessee appearing on behalf of the assessee has drawn the attention of the bench towards the agreement to sale dated 30.4.2015 placed in paper book at page 5-7 and reiterated the submissions that the cash has been accepted prior to the amended provisions of section 269SS of the Act. Alternatively, the ld. A.R. argued that the transaction entered into by the assessee is a bonafide transaction and has also been accepted by the AO in reassessment proceedings as genuine, therefore, no penalty in such circumstances is leviable. The ld. A.R. also placed reliance on the judgement of coordinate bench in the case of Smt. Pushpalatha in ITA No.1192/Bang/2024 dated 26.7.2024.
4. The ld. D.R. appearing on behalf of revenue has relied upon the order of authorities below. Ld. D.R. pointed out that the agreement on which the assessee is placing reliance is neither registered nor signed by the purchaser and therefore, the story concocted by the assessee is an afterthought.
5. We have heard the rival submissions and perused the materials available on record. We observe that in this case, the assessee has sold one property for an amount of Rs.30 lakhs. Out of this amount Rs.24 lakhs have been received by cheque on 26.10.2016 as evident from the relevant clauses of the sale deed. So far as the amount of Rs.6 lakhs is concerned, we observe that this amount also found mentioned in the sale deed dated 26.10.2016. However, the pertinent date i.e. 30.4.2015 is not coming out in the registered sale deed. Therefore, we are not impressed by the arguments of the ld. Counsel for the assessee. However, it is a case where the assessee has offered this amount and claimed exemption u/s 54 of the Act and this factual aspect has been accepted by the AO in reassessment proceedings. Therefore, it is a case where a claim has been made in an open and bonafide manner and hence in terms of provisions of section 273B of the Act, which specifically exclude the rigors of provisions of section 271D of the Act, we are of the view that penalty is not leviable in the present case.
5.1 Our view is fortified by the verdict of coordinate bench in the case of Smt. Pushpalatha (supra), wherein the coordinate bench under same set of facts observed as under:
“14. Further, on the facts of the present case, we find there is “reasonable cause” as mandated under section 273B of the Act, for the failure to comply with section 269SS of the Act. Section 269SS of the Act was amended by the Finance Act, 2015, wherein the term “specified sum” was introduced to include amount received for transfer of immovable property as a measure to curb generation of black money. The relevant extract of the memorandum of Finance Bill, 2015, reads as follows:
B. MEASURES TO CURB BLACK MONEY
Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances
The existing provisions contained in section 269SS of the Income-tax Act provide that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more.
In order to curb generation of black money by way of dealings in cash in immovable property transactions it is proposed to amend section 269SS, of the Income-tax Act so as to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.
It is also proposed to amend section 269T of the Income-tax Act so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.
It is further proposed to make consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively.
These amendments will take effect from 1st day of June, 2015.
[Clauses 66, 67, 69 & 70]
15. In the present case, there was no intention, whatsoever, to generate unaccounted money/black money as the assessee had recorded the receipt of entire cash in the registered sale deed and duly disclosed the same in the return of income filed. Assessee had also claimed exemption under section 54 of the Act towards construction of residential house. In this context, it is pertinent to note that the claim made by the assessee under section 54 of the Act has been allowed by the AO in the assessment completed.”
5.2 Therefore, considering the smallness of amount and the peculiar facts of the case, we hereby delete the penalty and allow the appeal of the assessee.
6. In the result, appeal of the assessee stands allowed.
Order pronounced in the open court on 22nd Oct, 2024
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