MADHU DEVI,VIJAYAWADA V. INCOME TAX OFFICER, WARD-2(1), VIJAYAWADA

ITA 361/VIZ/2024

AI Insights

The case involves two separate appeals by Madhu Devi and Rakesh Kumar Jain against penalties imposed for alleged violations of section 269SS of the Income Tax Act, which prohibits cash transactions above a certain limit in property dealings. Both assessees received substantial cash payments for property sales, which were later deposited into their bank accounts. The Assessing Officer initiated penalty proceedings under section 271D, which were upheld by the CIT(A). However, the Tribunal found that the penalties were not warranted as the assessees had disclosed the cash receipts and reported the capital gains. The Tribunal also noted procedural lapses in the initiation of penalty proceedings and the lack of any guilty intention on the part of the assessees.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46596 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: Nymisha Kundum v. ITO, ACIT v. Kanchumarthi Venkata Sita Ramachandra Rao, Rayala Rajeswara Rao v. ITO, CIT v. Jai Laxmi Rice Mills
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reasonable cause; Period of limitation; Capital Gains; Ignorance of law; Initiation of penalty proceedings; Time period of passing order
• Section: 143(3); 250; 143(1); 271(1)(c); 271D; 271E

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM (HYBRID HEARING) श्री धिजय पाल राि, उपाध्यक्ष, एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI VIJAY PAL RAO, HON’BLE VICE PRESIDENT & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.361/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2017-18) Madhu Devi #27-23-66, Chetla Bazar Governorpet, Vijayawada – 520002 Andhra Pradesh [PAN: AELPJ0707L] v. Income Tax Officer – Ward – 2(1) C.R. Building, 1st Floor Annex M.G. Road, Vijayawada – 520002 Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) आयकर अपीलसं./I.T.A.No.362/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2017-18) Rakesh Kumar Jain D.No. 27-12-35, Chetla Bazar Governorpet, Vijayawada – 520002 Andhra Pradesh [PAN: ASTPS2713B] v. Income Tax Officer – Ward – 2(1) C.R. Building, 1st Floor Annex M.G. Road, Vijayawada – 520002 Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri C. Subrahmanyam, AR राजस्व का प्रतततितित्व/ Department Represented by : Dr.Aparna Villuri, Sr.AR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 07.01.2025 घोर्णध की तधरीख/Date of Pronouncement : 31.01.2025 I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 2 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. These appeals are filed by the different assessees against different orders Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide respective DIN &Order No. as stated below: - ITA No. & A.Y. DIN &Order No. Dated ITA No. 361/VIZ/2024 ITBA/NFAC/S/250/2024-25/1067152186(1) 30.07.2024 ITA No. 362/VIZ/2024 ITBA/NFAC/S/250/2024-25/1067652749(1) 14.08.2024 2. Since the issue raised by the assessees for both the appeals are identical in nature, these appeals are clubbed and a consolidated order being passed. We now take up the appeal in ITA No. 361/VIZ/2024 for the A.Y.2017-18 as a lead appeal. ITA No. 361/VIZ/2024 (A.Y. 2017-18) 3. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1067152186(1) dated 30.07.2024 for the A.Y.2017-18 arising out of the penalty order passed under section 271D of Income Tax Act, 1961 (in short ‘Act’). I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 3 4. Brief facts of the case are that, assessee being an individual filed her return of income admitting a total income of Rs. 4,99,990/- on 24.08.2017 for the A.Y. 2017-18. The return was subsequently summarily processed under section 143(1) of the Act. Thereafter, the case was selected for limited scrutiny for the purpose of verifying the “cash deposits and transaction in property” and “Capital gains / loss on sale of property”. Ld. Assessing Officer [hereinafter in short “Ld. AO\"] during the course of assessment proceedings after examining the information called for, accepted the return of income filed by the assessee. However, Ld. AO failed to record any satisfaction regarding imposing of the penalty in the assessment order. Subsequently, penalty proceedings under section 271D of the Act was initiated, on obtaining permission from JCIT, for violating the provisions of section 269SS of the Act. It was observed that assessee has received Rs.46,54,622/- (being 19.23% of her share of total consideration of Rs.2,45,05,000/-) in cash towards sale consideration of immovable property vide sale deed No. 3155/2016 dated 20.10.2016. Ld. AO observed that assessee has contravened the provisions of section 269SS of the Act and issued show-cause notice dated 23.03.2021. In response, assessee filed her reply. After perusing the reply of the assessee, Ld. AO being not convinced with her submissions proceeded to levy the penalty of Rs.46,54,622/- for contravening the provisions of section 269SS of the Act, under 271D of the Act. I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 4 5. Aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Before Ld. CIT(A), assessee made similar submissions including the plea that assessee has disclosed the amount received and has discharged the capital gains arising out of the same. However, the Ld. CIT(A) did not agree with the contention of the assessee and dismissed the appeal of the assessee. 6. Being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: - “1. That under the facts and circumstances of the case the order passed u/s 271D of the IT Act dt. 12/11/2021 that was upheld by the Ld.CIT(A) NFAC vide order passed u/s 250 of the IT Act dt. 30.07.2024 is not in accordance with facts of the case and provisions of law. 2. The Ld. CIT(A) NFAC in a summary and casual manner confirmed the penalty under section 271D of the IT Act of Rs.46,54,622/- without proper consideration of the assessee's submissions. 3. The Ld. CIT(A) NFAC ought to have appreciated that sale proceeds of the property were not received by the assessee but cash was directly deposited by the purchaser of the property into the assessee's bank account, under these circumstances the penalty ought not have been levied u/s 271D of the IT Act. 4. The Ld. CIT(A) NFAC and the Assessing Officer (AO) failed to recognize that there was a reasonable cause and the lower authorities neglected to consider the levy of penalty from the perspective of section 273B of the IT Act. 5. For these and other reasons that are to be urged at the time of hearing the appellant prays that the penalty imposed is liable to be deleted.” I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 5 7. Assessee also raised the following two additional grounds on the legal issues relating to the limitation period for levying of penalty. “1. The penalty-imposed u/s 271D of the IT Act lacks legal validity, in the absence of initiation of subject penalty proceedings while completing the assessment u/s 143(3) of the IT Act dt. 11.12.2019, therefore, the subject penalty order is void- ab-initio and liable to be dismissed. 2. The subject order levying penalty u/s 271D of the IT Act is barred by limitation, as per the provisions of section 275(1)(c) of the IT Act. Therefore, the impugned order lacks legal validity and should be quashed.” 8. At the outset, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the penalty order under section 271D of the Act is barred by limitation as per provisions of section 275(1)(c) of the Act. On this issue, he provided a copy of the CBDT notification dated 25th June, 2021 and submitted that the end date to which the completion of action was extended to 30th September, 2021, he therefore pleaded that penalty order of the Ld. AO is void ab-initio and is liable to be dismissed. 9. On the contrary, Ld. Departmental Representative [hereinafter in short “Ld. DR”] submitted that the CBDT vide Notification No. 17th September, 2021, the period of limitation has been extended to 31stMarch, 2022 and hence the additional legal ground raised by the assessee is not sustainable. 10. We have heard both the sides and perused the notifications. As submitted by the Ld. DR, the period of limitation is extended up to I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 6 31st March, 2022 vide CBDT Notification dated 17thSeptember, 2021, hence, we have no hesitation in dismissing the legal additional ground raised by the assessee on the issue of limitation. 11. Now we proceed to discuss the issue on merits. 12. On merits, Ld.AR submitted that the cash was directly deposited by the buyer into the assessee’s account. Further, he submitted that the assessee has disclosed while filing return of income and computed capital gains accordingly. He also submitted that the assessee being a Senior Citizen was not aware of the amendment made to provisions of section 269SS of the Act. The Ld.AR on this issue relied on the following case laws: - a. Nymisha Kundumv. ITO in ITA No. 210/VIZ/2022 dated 28.02.2024. b. ACIT v. Kanchumarthi Venkata Sita Ramachandra Rao in ITA No. 245 & 246/VIZ/2020 dated 30.08.2022. c. Rayala Rajeswara Rao v. ITO in ITA No. 239/Viz/2022 dated 29.11.2023. 13. Ld.AR also further relied on the decision of the Hon’ble Supreme Court of India on the ratio laid down in the case of CIT v. Jai Laxmi Rice Mills [379 ITR 0521 (SC)]. Ld.AR submitted that the Ld. AO has not recorded any satisfaction in the assessment order and hence decision of the Hon’ble Supreme I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 7 Court is directly applicable. He therefore pleaded that the penalty order may be quashed. 14. Per contra, Ld. DR heavily relied on the orders of the Revenue Authorities. 15. We have heard both the sides and perused the material available on record. Admittedly facts are that, the assessee has received cash for the sale of property against her share and has deposited into the bank account of the assessee. Section 269SS of the Act was amended by Finance Act, 2015 w.e.f 01.06.2015 which stipulates that no person shall take or accept from any other person, any 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. The term “specified sum” has been defined in section 269SS of the Act as follows: “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.” 16. From the plain reading of the above section, which bars any person from receiving any amount otherwise by cheque or through banking channels in relation to transfer of the immovable property. However, the Memorandum explaining the provisions of Finance Bill, 2015 with respect to amendment proposed w.e.f 01.06.2015 in section 269SS is reproduced below: I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 8 “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.” 17. It can be observed that the primary objective of the amendment proposed in 269SS of the Act is to curb generation of black money. However, in the instant case the fact is that cash is received by the assessee which has been recorded in the sale deed and partly deposited by the assessee into the bank account, goes to the root of the matter that there is no suppression of cash receipts by the assessee. Further Ld.AR also submitted that assessee has offered the same as capital gains to tax. We therefore are of the considered view that in the instant case it does not attract the provisions of section 269SS of the Act. 18. From the submissions of the Ld.AR, we noticed that assessee is a Senior Citizen and was not aware of the amendment made to provisions of section 269SS of the Act. Further, it was submitted by the Ld.AR that the assessee has disclosed the capital gains including the cash receipts while filing the return of income. Even though the ignorance of law may or may not constitute reasonable excuse, if it is merely technical or venial breach, no penalty can be levied because levy of penalty would necessarily imply I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 9 existence of some guilty intention on the part of the assessee. We have to consider all the surrounding facts and circumstances and in the absence of guilty intention of the assessee and whether the assessee has derived benefit, gain or advantage, by such default or non-compliance the assessee has defrauded the Revenue or caused any loss to the revenue should have to be seriously considered, before considering the fact whether ignorance of the law on the part of the assessee can constitute valid and reasonable cause to levy penalty. In view of the facts and circumstances of the instant case, we find that there is reasonable and sufficient cause as contemplated under section 273B of the Act and therefore in our opinion no penalty shall be imposable on the assessee in these peculiar circumstances. 19. Further, it is also noticed that the Ld. AO has not recorded satisfaction regarding initiation of penalty proceedings in the assessment order. The ratio laid down in the case CIT v Jai Laxmi Rice Mills (supra), relied on by the Ld.AR, the Hon’ble Supreme Court has observed as follows: “As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under section 271(1)(c) of the Act. Thus, insofar as penalty under section 271E is concerned, it was without any satisfaction and therefore no such penalty could be levied.” 20. Therefore, on this count also in the instant case, by respectfully following the ratio laid down by Hon’ble Supreme Court, we are of the I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 10 considered view that the order of Revenue Authorities deserves to be quashed. Accordingly, the grounds on merits raised by the assessee are allowed. 21. In the result, appeal of the assessee is partly allowed. ITA No. 362/VIZ/2024 (A.Y. 2017-8) 22. Coming to appeal relating to ITA No. 362/VIZ/2024, since the issue is exactly similar and grounds as well as the facts are also identical. Therefore, the decision taken in ITA No. 361/VIZ/2024 in the aforesaid paragraph shall apply mutatis mutandis to the appeal number in ITA No. 362/VIZ/2024. Accordingly, appeal filed by the assessee is partly allowed. 23. To sum-up, appeals filed by both the assessees are partly allowed. Order pronounced in the open court on 31st January, 2025. Sd/- (धिजय पाल राि) (VIJAY PAL RAO) उपाध्यक्ष/VICE PRESIDENT Sd/- (एसबालाक ृष्णन) (S. BALAKRISHNAN) लेखासदस्य/ACCOUNTANT MEMBER Dated:31.01.2025 Giridhar, Sr.PS I.T.A.No.361/VIZ/2024 Madhu Devi I.T.A.No. 362/VIZ/2024 Rakesh Kumar Jain Page No. 11 आदेशकीप्रनतनलनपअग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : (i) Madhu Devi #27-23-66, Chetla Bazar Governorpet, Vijayawada – 520002 Andhra Pradesh (ii) Rakesh Kumar Jain D.No. 27-12-35, Chetla Bazar Governorpet, Vijayawada – 520002 Andhra Pradesh 2. रधजस्व/ The Revenue : Income Tax Officer – Ward – 2(1) C.R. Building, 1st Floor Annex M.G. Road, Vijayawada – 520002 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "