Case Law Details
Jayaram Basani Vs ACIT (ITAT Hyderabad)
ITAT Hyderabad held that in case of violation of provisions of section 269SS of the Income Tax Act, penalty can be only in the year in which violation has taken place and not in any assessment year.
Facts- The assessee had sold an immovable property and the sale proceeds were received in cash amounting to Rs. 13,63,000/-. On observation that the cash amounting to more than Rs.20,000/- was accepted in contravention to the provisions of section 269SS by the Assessing Officer, a show cause notice u/s 271D was issued and served on the assessee on 04.03.2021.
The assessee had replied that he had accepted the cash amount of Rs. 13,63,000/- as he needed the cash for his medical treatment and expenses and after demonetization, he had deposited the same in his bank account. The reply made by the assessee was not accepted by AO and he initiated penalty proceedings u/s 271D of the Act for the contravention to the provisions of section 269SS.
During the penalty proceedings, AO observed that the assessee failed to explain the reasonable cause for accepting the cash amounting to more than Rs.20,000/- in contravention to the provisions of section 269SS, and therefore, as exception laid down u/s 273 was also not applicable, AO held it as a fit case for imposition of penalty and thus passed order u/s 271D of the Act.
Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A). However, the Ld. CIT(A) had also not granted the relief to the assessee.
Conclusion- Held that If the assessee violates the obligation as per section 269SS, then the remedy lies with the Revenue to take action as per section 269SS in that year alone. Similarly, for violation of section 269SS, the penalty can only be imposed in that year in which the violation of section 269SS has taken place. The Revenue cannot be given unfettered and unbridled power to impose the penalty in any assessment year. The law has prescribed the manner in which the power has to be exercised for imposing the penalty by the Revenue and the Revenue cannot impose penalty as per its whims and fancies. In the present case, undoubtedly, the assessee had violated the provision of section 269SS in the assessment year 2016-17 and not in the A.Y. 2017-18. Therefore, the imposition of penalty made by the Revenue in the year under consideration is without any basis and jurisdiction. Accordingly, penalty u/s 271D set aside.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by the assessee, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the AY 2017-18, on the following grounds :
“1. The order of the learned first appellate authority is not correct either in law or on facts and in both.
2. The learned first appellate authority is not justified in confirming the penalty levied u/s 271D of Rs. 13,63,000/-.
3. The learned first appellate authority failed to appreciate the facts that since the sale of plots was affected on 25.02.2016 ie., Y. 2016-17, levy of penalty u/s 271D for the A.Y. 2017-18 is not justified.
4. The learned first appellate authority failed to appreciate that in the facts and circumstances of the case provisions of section 271D r.w.s. 269SS are not applicable to the appellant’s case.
5. The learned first appellate authority failed to appreciate the fact that the appellant had reasonable cause for accepting the sale proceeds in cash and hence levy of penalty u/s 271D is not
2. The brief facts of the case are that the assessee had sold an immovable property and the sale proceeds were received in cash amounting to Rs. 13,63,000/-. On observation that the cash amounting to more than Rs.20,000/- was accepted in contravention to the provisions of section 269SS by the Assessing Officer, a show cause notice u/s 27 1D was issued and served on the assessee on 04.03.2021. The assessee had replied that he had accepted the cash amount of Rs. 13,63,000/- as he needed the cash for his medical treatment and expenses and after demonetization, he had deposited the same in his bank account. The reply made by the assessee was not accepted by the Assessing Officer and he initiated penalty proceedings u/s 27 1D of the Act for the contravention to the provisions of section 269SS. During the penalty proceedings, Assessing Officer observed that the assessee failed to explain the reasonable cause for accepting the cash amounting to more than Rs.20,000/- in contravention to the provisions of section 269SS, and therefore, as exception laid down u/s 273 was also not applicable, Assessing Officer held it as a fit case for imposition of penalty and thus passed order u/s 271D of the Act.
3. Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A). However, the Ld. CIT(A) had also not granted the relief to the assessee.
4. Before us, the ld.AR had drawn our attention to paras 7(ii), 7(iii) and 7(v) to 7(vii) at pages 6 to 8 of the order passed by the ld.CIT(A), NFAC, which provides as under :
“7(ii) During these appellate proceedings also, the assessee has reiterated the same causes for accepting the sale proceeds of Rs.13,63,000/- in cash, in contravention of provision of section 269SS, that he was in need of the cash for his medical treatment and expenses and after demonetization he, had-deposited the same in his bank accounts. The assessee has further submitted that the amount of cash received by him is not a loan or deposit but sale consideration and on receipt of such sale consideration in cash, section 269SS is not applicable. The assessee has further submitted that the capital gains on the sale of property was offered to tax in the ITR filed for A.Y. 201 6-17 where he offered the capital gains of Rs.9,85,930/- and tax and interest totalling to Rs.1,68,150/- was paid and proof enclosed.
7(iii) In the light of contentions, raised by the assessee that the amount of cash received by him is not a loan or deposit, but sale consideration received on sale of immovable property and that provisions of section 269SS are not applicable, on receipt of such sale consideration in cash, it needs to be examined whether the contention indeed has merit?. Besides, it also needs to be examined whether the assesee’s case constitutes reasonable cause for making contravention of provision of section 269SS.
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7(v) A plain reading of the provisions of s. 269SS suggests that any person receiving the cash amounting to Rs.20,000/- or more from any other person, whether loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, will found to violating the provisions of s.269SS of the Act. Under these circumstances, the contentions raised by the assessee that that the amount of cash received by him is not a loan or deposit, but sale consideration received on sale of immovable property and that provisions of section 269SS are not applicable on receipt of such sale consideration in cash, does not have any merit into it, since any sale consideration (on sale of immovable property) received in cash will be covered by the phrase “any specified sum”. Besides, it is also observed that the provisions do not make any distinction, whether or not, “ any specified sum”, so received in cash was offered to tax in ITR filed.
7(vii) In view of above, I am inclined to agree with the AO that the assessee has failed to explain any reasonable causes for accepting the cash amounting to more than Rs.20,000/-, in contravention to the provision of section 269SS, and therefore exception laid down in section 273B were not applicable to the case of assessee and thus AO has correctly held that it is a fit case for imposition of penalty u/s 271D of Income Tax Act 1961 for contravention of provision of section 269SS. Consequently, penalty of Rs.13,63,000/- imposed b AO, in accordance with the provisions of section 271D, which mandates that the assessee shall pay by way of penalty a sum equal to the amount of specified sum so taken or accepted, is confirmed.”
5. The ld.AR had submitted that the undisputed fact is that the assessee had sold an immovable property on 25.02.2016 for a total consideration of Rs. 13,63,000/- and the said amount was accepted by the assessee by way of cash which was duly mentioned in the sale deed. The ld.AR further submitted that the assessee had disclosed the capital gain arose on account of sale in the assessment year 2016-17, for that purpose, he has drawn our attention to the ITR – V. Further, the ld. AR had also submitted that the assessee had deposited the sale proceeds into his bank account in A.Y. 20 17-18. Based on bank deposits made by assessee, the Revenue had issued notice to the assessee on 18.12.2017. The assessee had given the reply to the said notice and submitted the source of the amount deposited in his bank account vide his letter dt.05.07.2018. In the said letter, he had disclosed the details of sale of plot in cash and subsequent deposit of amount in bank. Revenue after receiving the reply, had not initiated any action against the assessee.
6. The ld.AR further submitted that the Assessing Officer had failed to appreciate that the violation, if any, was committed by the assessee during the year 2016-17 and not in the assessment year 2017-18. The assessee had filed this reply before the Joint Commissioner, which was duly mentioned in the impugned order. It is the further contention of the ld.AR that the addition can only be made in the year in which the violation, if any, has taken place and not in the year when it came to the notice of the Assessing Officer.
7. Per contra, the ld.DR relied upon the orders of lower authorities. He had also submitted that in which penalty is to be imposed had not been provided u/s 271D of the Act. Therefore, in the absence of any clear instruction of imposing the penalty, the year in which the violation came to the notice, will be the relevant year for imposing the penalty. Hence, the action on the part of the lower authorities is in accordance with the law.
8. We have heard the rival contentions of the parties and perused the material available on record. Admittedly, the assessee had sold the immovable property in cash on 25.02.2016 relevant to the assessment year 2016-17 and thus committed violation of section 269SS of the Act. However, the only legal question argued before us is that the penalty, if any, was required to be levied in the A.Y. 20 16-17 and not in A.Y. 2017-18.
9. For the purpose of determining the issue whether the penalty u/s 27 1D is to be imposed in the year of violation or in the year when the Assessing Officer learnt about the violation. We had examined the various provisions of the penalty provided under Chapter XXI of the Act. If we read the various penalty provisions mentioned in Chapter XXI, it is abundantly clear that the relevant year would be the year in which violation had taken place as per the assessment order or as per the provisions of the statute. To illustrate the same, if we look into section 27 1A of the Act, it is clear that if an assessee fails to keep any such book of accounts or documents as required by section 44AA, in respect of previous year then such person shall be liable to pay by way of penalty for a sum of Rs.25,000/-. The violation under section 44AA of the Act, in our view is the failure on the part of the assessee to maintain the books of accounts which is relatable to the previous year. Section 27 1A does not provide any clue in which year, the penalty should be imposed, is whether it will be imposed in the assessment year relevant to the previous year or in the subsequent year to the assessment year when said violation was detected. In our view, the penalty under section 27 1A is required to be imposed in the assessment year relevant to the previous year i.e., in which year the assessee was under obligation to maintain the books of accounts.
10. Similarly, in the present case, there is an obligation and duty on the assessee not to accept cash by way of loan / deposit or specified sum. If the assessee violates the obligation as per section 269SS, then the remedy lies with the Revenue to take action as per section 269SS in that year alone. Similarly, for violation of section 269SS, the penalty can only be imposed in that year in which the violation of section 269SS has taken place. The Revenue cannot be given unfettered and unbridled power toimpose the penalty in any assessment year. The law has prescribed the manner in which the power has to be exercised for imposing the penalty by the Revenue and the Revenue cannot impose penalty as per its whims and fancies. In the present case, undoubtedly, the assessee had violated the provision of section 269SS in the assessment year 20 16-17 and not in the A.Y. 2017-18. Therefore, the imposition of penalty made by the Revenue in the year under consideration is without any basis andjurisdiction. In the light of the above discussion, we are of the considered opinion that the ld.CIT(A) / NFAC is not justified in sustaining the penalty levied by the Assessing Officer u/s 27 1D of the Income Tax Act, 1961. Accordingly, the order of the ld.CIT(A) / NFAC is set aside and the Assessing Officer is directed to cancel the penalty. The grounds raised by the assessee are accordingly allowed.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 31st January, 2023
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