Respected Sir ,

My submissions are as under relying the provision of section 273B of the Act, 1961 as there is every reasonable cause with the assessee which is argued in writing detailed as under before you .

Basically assessee is a farmer and in possession of sufficient agriculture lands . He is earning agriculture income and showing with his income tax returns for the last so many years . The assessee has sold his agriculture land at village XXXXXXX during the F.Yr. 2016-17 which is almost rural land .The assessee is quite innocent. He sold the agriculture land and accepted the payment in cash and by cheques . He had no choice of his own to receive the payment in cash as well as through banking channel.

The assessee sold the land for a sum of Rs. 96,50,000.00 and received the payment detailed as under :

Rs. 40,00,000.00 through cheques and Rs. 56,50,000.00 through cash .

Assessee agreed to accept cash as per the choice of the buyer of the land .He never made his own choice to receive the payment in cash or by cheques or RTGS. It was only the decision of the buyer to make the payment in cash .

Assessee was not aware of the new law which is amendment to section 269SS w.e.f. 1.06.2015 as the assessee is ;

A farmer ,
Having agriculture income,
Not educated,
Innocent ,
Never tried to conceal the income,

Regularly filing his income tax returns for the last so many years and always declared his true income .

Not any bad intention with the assessee at the time of accepting the payment in cash .

Not aware of the new law of section 269SS of the Act ,1961 which is amended wef 1.06.2015

He is having his bank accounts and he could have accepted the payment through cheques but being not aware of the new law , without bad intention he accepted the payment in cash . The buyer of the property has not told him of the new law as it was not his concern and he also might be not knowing the new law w.e.f.1.06.2015. It was his convenient to make  the payment in cash.

Authorities at the courts those who registered the sale deed never told the assessee of the new provision regarding specified sum not to accept in cash introduced by the Finance Act , 2015 and applicable from 1.06.2015

Those days when he sold the land he was not well and was suffering from lever and kidney problem . He wanted to finalise the sale proceedings without putting undue pressure on his mind. He was not in hope of his life which caused to mature the deal this way or that way but later on he recovered from the acute ailment .

The assessment of the assessee has been framed u/s 143(3) of the Act in which the complete transaction has been accepted by the Assessing Officer , Ward No. 11(6), XXXXXXXXX  and the transaction has been declared as bonafide . No tax liability has arisen out of sale of this land . The transaction has been proved bonafide before the tax authority .

The assessee can safely pray that the default, if any, can be said to be “technical” and venial” one. The “bona fldes” of the assessee can also be said to be there with  the facts of the case. The assessee had a ‘bona flde’ belief that no offence was committed. The levy of penalty is not automatic since the Hon’ble Supreme Court of India in the case of Motilal Padampal Sugar Mills Co. Ltd. v. State of UP. (1979) 118 ITR 326 (SC) has observed that there is no presumption that every person knows the law.

The innocence of the assessee was the reason for accepting the payment in cash. This was the sufficient and reasonable cause as per section 273B of the Act, 1961

Non awareness of the newly introduced law section 269SS with amendment wef 1.06.2015 was the reasonable cause for accepting the payment in cash . Moreover assessee has no melafide and bad intention towards the tax laws . He never desired to make concealment of his income . He never desired not to abide by the law . But he was not aware of the law .

The assessee is from village background. Not a literate person . Innocent and honest nature of the assessee was the reasonable cause for sale of land partly in cash .

No one told her not to accept payment in cash . Even buyer, Registrar, document writer but certainly there is no loss to the revenue when assessee has accepted the payment in cash .

The assessee files his income tax returns regularly . This fact was clear to the assessee . In that way revenue was safe in the hands of the seller . The land was ancestral land of the assessee . Assessee was aware that the transaction shall not be concealed from  the Income Tax department . This confirmation that revenue was safe in the hands of the seller was also the reasonable cause of accepting the payment in cash .He has prepared his books of accounts and the sales consideration of the agriculture land has been duly incorporated and accepted by the Assessing Office during the course of assessment proceedings u/s 143(3) for the A.Yr. 2017-18.

It was the utter ignorance of the assessee that he accepted the specified sum in cash otherwise this was not his willful attempt .

Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on considerations of all relevant circumstances Hindustan Steel Ltd. v. State of Ozissa (1972) 83 ITR 26 (SC).

The following judgment of ITAT , Chandigarh Bench supports the case of the assessee which is reproduced as under .  .

The Hon’ble Income Tax Appellate Tribunal, Chandigarh Bench made the following observation in the Case of Sukhdev Singh Vs. The J.C.I.T.(TDS), Chandigarh4, with regards to reasonable cause for failure to deposit TDS

“It is well settled law that the penalty need not to be imposed in each and every case and discretionary in nature and the facts and circumstances of the case shall have to be taken into consideration. Section 273B of the Income Tax Act provides that no penalty under section 271D shall be imposable on the person or the assessee as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The circumstances explained by the learned counsel for the assessee clearly reveal that the assessee paid interest to nonbanking financial institution and did not deduct tax because the assessee was under the bonafide belief that no TDS was to be deducted on the payments made to non-banking financial institution. The Assessing Officer made disallowance under section 40(a)(ia) of the Income Tax Act and other additions were also made in the assessment order, which are accepted by the assessee and the demand raised as per assessment order has been paid. Therefore, these circumstances would clearly reveal that the assessee has reasonable cause for failure to comply with the provisions of section. Therefore, in view it being a beginning of the assessee for failure to deduct tax and then the assessee in future has starting deducting TDS would suggest that the penalty may not be imposed in the aforesaid case. Considering the above discussion, we are of the view that the levy of penalty in the facts and circumstances of the case is not warranted. We accordingly set aside the orders of the authorities below and cancel the penalty.”

The innocence nature of the assessee , not aware of the law was the reasonable casuse with the assessee in hand . Hence following the provision of section 273B of the Act , the penalty u/s 271D of the act is prayed not to be imposed on the assessee .

The Hon’ble Supreme Court of India made the following observation in the Case of Commissioner of Income Tax, New Delhi Vs. M/s Eli Lilly & Company (India) Pvt. Ltd. & Ors.1 with regards to reasonable cause for failure to deposit TDS:

 On the Scope of Section 271C read with Section 273B:

 Section 271C inter alia states that if any person fails to deduct the whole or any part of the tax as required by the provisions of Chapter XVII-B then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. In these cases we are concerned with Section 271C(1)(a). Thus Section 271C(1)(a) makes it clear that the penalty leviable shall be equal to the amount of tax which such person failed to deduct. We cannot hold this provision to be mandatory or compensatory or automatic because under Section 273B Parliament has enacted that penalty shall not be imposed in cases falling there under. Section 271C falls in the category of such cases. Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on  the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. In each of the  cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head “Salaries” being eligible to deduction of tax at source under Section 192 was a nascent issue. It has not be considered by this Court before. Further, in most of these cases, the tax- deductor-assessee has not claimed deduction under Section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under Section 271C because by not claiming deduction under Section 40(a)(iii), in some cases, higher corporate tax has been paid to the extent of Rs. 906.52 lacs (see Civil Appeal No. 1778/06 entitled CIT v. The Bank of Tokyo-Mitsubishi Ltd.). In some of the cases, it is undisputed that each of the expatriate employees have paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax-deductor-assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the  cases penalty was leviable under Section 271C as the respondent in each case has discharged its  burden of showing reasonable cause for failure to deduct tax at source.

On the basis of above reasonable causes , and the ITAT judgement and Hon’ble SC judgement, you are requested not to impose penalty of Rs. 5650000.00 on the assessee and further requested to waive the show cause notice issued to the assessee for penalty u/s 271D of the Income tax Act as the law was nascent and assessee was not aware of the newly inserted law ,no controversy was pending in the case of the assessee in any court of law  and general public was not aware of this law .

As per section 273B of the Act as the assessee was not aware of the law, the Hon’ble Ad.CIT, Range I is requested not to impose penalty u/s 271D of the act as the transaction are not bogus at all , proved bonafide during the course of assessment proceedings u/s 143(3) of the Act for the A.Yr. 2017-18 recently decide in the m/o Dec. 2019 .

For further details the assessee seeks some more time as the time limit for imposing penalty expires on 31.03.2021 as per section 275(1)(c) of the Income Tax Act, 1961. Kindly give suitable opportunity to the assessee to put his arguments before the Hon’ble Additional Commissioner of Income Tax, Range 1, XXXXXXXXX and requests not to impose penalty and further request for reasonble opportunity of being heard to be given to the assessee to explain his case.

Author Bio

Qualification: LL.B / Advocate
Company: S.K.Jain & Co.
Location: Faridabad, Haryana, India
Member Since: 16 May 2019 | Total Posts: 59
I am S.K.Jain , Tax Consultant cum Advocate practising in Income Tax , GST , Company Matters . The name of the concern is S.K.Jain & Co. and I am prop. of this concern . I am in practice for the last 30 years . Those who have joined the profession recently and want to discuss on the particular i View Full Profile

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