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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI G. MANJUNATHA
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi, dated 31.05.2022 and pertains to assessment year 2017-18.
:-2-: ITA. No: 565/Chny/2022 2. The assessee has raised the following grounds of appeal: “1. The order of the CIT (A) is contrary to the law, facts and circumstances of the case in so far as he confirms the levy of penalty under Sec 271 D of the income tax Act, 1961.
2. The CIT(A) erred in holding that the penalty levied is exigible since appellant has not justified the reasonable cause for receiving the cash payment upon the sale of the property situated at Dadagapatti, Salem.
3. The lower authorities erred in holding and not appreciating the crucial fact that the sale consideration received cash and cheque upon the sale of the property equally owned by the appellant in his HUF status/ capacity and the appellant's wife and the sale was not effected in the individual capacity of the appellant but in the capacity as a kartha of HUF.
4. The appellant has furnished his individual PAN ADCPN3023D in the sale deed for identification purpose only and had replied to the penalty notices that he is not the owner of the property and his HUF and his wife Kalaiselvi are the owners and the penalty cannot be levied on him.
5. The lower authorities have wrongly levied penalty of Rs. 14,00,000/- in his individual status when the assessee has no locus standi to the impugned transaction in question and he is a non-entity for all practical purposes viz to the sale of the property and he cannot be called upon to give the explanation for the receipt of cash merely because his PAN Number has been mentioned in the sale deed wrongly.
6. The lower authorities erred in stating that the HUF PAN was generated later on only and hence the individual has to be taxed is a perverse finding especially when the department has accepted the income tax returns filed by the HUF and wife of the appellant that the HUF and the wife of the assessee are the co-owners of the property in question.
7. Even assuming and without admitting that the assessee herein has to explain the reasonable cause for :-3-: ITA. No: 565/Chny/2022 the accepting the cash by the wife of the assessee, the appellant has given cogent explanation that the medical exigencies necessitated that the cash is needed for emergent purposes and the same constitute a reasonable cause as per Sec 273 of the Income tax Act, 1961 and no penalty is leviable under Sec 271 D as though there was a violation of Sec 269 SS of the Income tax Act, 1961.
8. The lower authorities have violated the principles of natural justice assessment, penalty action have been taken without considering the J transaction and the parties involved in the to the transaction. The appellant objects to the entire levy of penalty including the sum determined in the order.
9. Penalty proceedings invoked after six months from intimation date are not valid (386 ITR 719 SC).
10. Commissioner (Appeals ought to have recognized that the Registrar documents registered the sale deed reflecting cash transaction.
11. While there was no loss to Revenue due to the bonafide transaction, a penalty is not leviable, just because it is lawful to do so.
The appellant craves leave to adduce additional grounds of appeal at the time of hearing.”
3. The brief facts of the case are that during the financial year 2016-17 relevant to assessment year 2017-18, the assessee has received a sum of Rs. 14 lakhs in cash on sale of immovable property from M. Gomathi. Since, the assessee has violated provisions of section 269SS of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), the AO issued a show cause notice and called upon the assessee to explain :-4-: ITA. No: 565/Chny/2022 as to why penalty u/s. 271D of the Act cannot be levied. In response to show cause notice, the assessee vide his letter dated 12.10.2021, submitted that the property has been held in the joint name of HUF and his wife with 50% of share. The HUF has declared rental income from said property and also declared capital gain on sale of property. Therefore, penalty u/s. 271D of the Act cannot be levied in the hands of the individual. The AO, however was not convinced with the explanation furnished by the assessee and according to the AO, the arguments of the assessee that property was owned by Shri. Natarajan in his HUF status is devoid of merits, because when the property has been purchased in the year 2013, the assessee had given his individual PAN number and further, the HUF has generated PAN number on 03.03.2017, after the date of sale. Therefore, rejected arguments of the assessee that consideration has been received by assessee, HUF and hence, penalty cannot be levied in the hands of the individual and levied penalty of Rs. 14 lakhs u/s. 271D of the Act for failure to comply with the statuary provisions of section 269SS of the Act. The relevant findings of the AO are as under: “3. The contention of the assessee has been carefully examined. It is claimed by the assessee that the property was :-5-: ITA. No: 565/Chny/2022 purchased jointly by Sri Natarajan in his HUF status (PAN: ABDHS2089O) and his wife Smt. N Kalaiselvi (PAN: ARJPK 2926R) each having 50% of share and the rental income from this property has been admitted in their hands and filed their income tax returns including this rental income. However, as per the PAN data base of the Department it is seen that the said HUF PAN: ABDHS2089D was generated only on 3.3.2017. A screen shot of the search results is appended below for ready reference.
Hence, the claim of the assessee that assessee's PAN was wrongly given to the SRO during the time of registration of the sold property is not justified and not true. Before proceeding further, the provisions of Sec. 269SS and Sec. 271D are reproduced below: Mode of taking or accepting certain loans, deposits and specified sum. 269SS. No person shall take or accept from any other person (herein referred to a the depositor), any loan or deposit or any specified sum, otherwise than by a 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], if, :-6-: ITA. No: 565/Chny/2022 (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, , loan or deposit or specified sum taken or accepted earlier by such person f the depositor is remaining unpaid (whether repayment has fallen due or not the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, (a) the Government; (b) any banking company, post office savings bank or co-operative bank; (c) any corporation established by a Central, State or Provincial Act; (d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013}; (e) such other institution, association or body or class of institutions. associations or bodies which the Central Government may. for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act. Explanation.--For the purposes of this section,- (i) "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; :-7-: ITA. No: 565/Chny/2022 (ii) "co-operative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949}; (iii) "loan or deposit" means loan or deposit of money; (iv) "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. Penalty for failure to comply with the provisions of section 269SS. 271D. (1) If a person takes or accepts any loan or deposit or specified sum] in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.
In this case, the assessee had received Rs. 14,00,000/- other 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 and therefore contravened the provisions of Sec. 269SS which attracts penalty u/s 271 D of the Act.
5. From the facts brought out above, I am satisfied that the assessee has contravened provisions of section 269SS of the Income Tax Act, 1961 and therefore it is a fit case for levying penalty u/s 271D of the I.T. Act, 1961. Under the provisions of section 271D of the Act, the amount of penalty shall be a sum equal to the amount of the loan or deposit or any sum so taken or accepted. Accordingly, penalty of Rs.14,00,000/- (Rupees Fourteen lakhs Only) is hereby levied on the assessee u/s 271D(1) of the Act for failure to comply with the statuary provisions of section 269SS of the Act.”
4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that the property has been sold by Shri.
:-8-: ITA. No: 565/Chny/2022 Natarajan in his HUF status and also declared relevant capital gains in the return of income filed by the HUF. The assessee had filed necessary evidence including income tax returns filed by HUF for relevant assessment year to prove that rental income from property has been offered in the hands of HUF. Therefore, penalty cannot be levied in the hands of the individual. The CIT(A), after considering relevant submissions and also by taking note of various facts observed that the assessee could not substantiate its claim of property owned by HUF and further, the reliance made by the assessee on ITR’s filed for assessment year 2017-18 by the HUF is after initiating penalty proceedings by the AO. Therefore, the CIT(A), opined that the assessee has cooked up the theory to circumvent levy of penalty u/s. 271D of the Act. Therefore, he has rejected arguments of the assessee and sustained penalty levied by the AO. The relevant findings of the CIT(A) are reproduced as under: 4.2 In this connection, the relevant part of the penalty order is reproduced as under: "As per the records, during the Financial Year 2016-17 relevant to AY 2017-18, the assessee has received a sum of Rs. 14,00,000- in cash on sale of immovable property from M Gomathi (PAN:ASTPG6321R) in contravention of provisions of Sec. 269SS of the Income Tax Act, 1961. The mode of receipt of the amounts was otherwise than by an account payee cheque or account payee bank draft {or use of electronic :-9-: ITA. No: 565/Chny/2022 clearing system through a bank account. The relevant data collected from the Sub Registrar's Office is reproduced below: ------------ From the above it is clear that the assessee has received a portion of sale proceeds in cash contravening the provisions of section 269SS of the Income Tax Act, 1961. Hence, penalty proceedings u/s 271D of the Income Tax Act, 1961 was initiated in this case for AY 2017-18 by issue of notice u/s 274 r:w.s. 271D dated 23.3.2020.
The contention of the assessee has been carefully examined. It is claimed by the assessee that the property was purchased jointly by Sri Natarajan in his HUF status (PAN: ABDHS2089D) and his wife Smt. N Kalaiselvi (PAN: ARJPK 2926R) each having 50% of share and the rental income from this property has been admitted in their hands and filed their income tax returns including this rental income. However. as per the PAN data base of the Department it is seen that the said HUF PAN:ABDHS2089D was generated only on 3.3.2017. A screen shot of the search results is appended below for ready reference. Hence the claim of the assessee that assessee's PAN was wrongly given to the SRO during the time of registration of the sold property is not justified and not true 1. In this case. the assessee had received Rs. 14,00.000/- other than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account 82[0r through such other electronic mode as may be prescribed and therefore contravened the provisions of Sec. 269SS which attracts penalty u/s 271D of the Act.
From the facts brought out above, I am satisfied that the assessee has contravened provisions of section 269SS of the Income Tax Act, 1961 and therefore it is a fit case for levying penalty u/s 271D of the I. T. Act, 1961. Under the provisions of section 271D of the Act, the amount of penalty shall be a sum equal to the amount of the loan or deposit or any sum so taken or accepted. Accordingly, penalty of Rs.14,00.000- (Rupees Fourteen lakhs Only) is hereby levied on the assessee u/s 271D(1) of the Act for failure to comply with the statuary provisions of section 269SS of the Act."
:-10-: ITA. No: 565/Chny/2022
5. The Ld. Counsel for the assessee, submitted that the penalty u/s. 271D of the Act has been levied on wrong person, even though, the assessee has filed necessary evidences including ITR returns filed by the HUF to prove that property has been purchased by HUF in the year 2013 and also relevant capital gains on sale of property has been offered by the HUF only. He further referring to explanation to provisions of section 269SS submitted that, ‘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, which means penalty can be levied when the assessee has received amount in violation of provisions of section 269SS of the Act. In this case, the assessee has received a sum of Rs. 11,50,000/- on 10.02.2016 which falls under the assessment year 2016-17 and further a sum of Rs. 2,50,000/- on 07.11.2016. But the AO has levied penalty on total sum of Rs. 14,00,000/- in the assessment year 2017-18, which cannot be sustained.
The ld. DR, referring to paper book filed by the assessee submitted that as per sale deed executed by the assessee, the :-11-: ITA. No: 565/Chny/2022 assessee has executed said sale in his individual capacity along with his wife. Further, when the property has been purchased in the year 2013, the assessee had given his individual PAN number. Further, the assessee has filed income tax returns in the status of HUF on 30.03.2018 to circumvent penalty leviable u/s. 271D of the Act. From the above facts, it is very clear that the property has been purchased in his individual capacity and thus, the AO has rightly levied penalty u/s. 271D of the Act and therefore, their order should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from record indicates that the assessee has coated his individual PAN number (AADCPN3023D), when he had executed a sale deed in favour of Smt. M. Gomathi on 07.11.2016. In other words, if you go by PAN number referred to in purchase and sale deed, on both occasions, the assessee has coated his individual PAN number. Therefore, from the above it is abundantly clear that the property has been purchased in his individual capacity and also when it was sold, the same has been sold in his individual :-12-: ITA. No: 565/Chny/2022 capacity. To this extent, there is no dispute. But fact remains that the assessee has raised objections for levying penalty u/s. 271D of the Act, for contravention of provisions of section 269SS of the Act, in his individual capacity, in light of income tax returns filed by Shri. Natarajan, HUF with PAN number ABDHS2089D, on the ground that the property was acquired by HUF and also sold in the capacity of HUF. Therefore, penalty cannot be levied in the individual status.
We have given our thoughtful consideration to the reasons given by the ld. Counsel for the assessee in light of facts brought out by the Assessing Officer and we ourselves do no subscribe to the reasons given by the Counsel for the assessee, for the simple reason that if you go by PAN number coated in purchase and sale deed, it was his individual PAN number and thus, we can safely conclude that the property has been purchased in his individual capacity and also sold in his individual capacity. As regards, the claim of the assessee that property was owned by HUF, if you go by date of generating PAN number for HUF, the assessee HUF has generated PAN number on 03.03.2017 much after the date of sale of asset. Further, the appellant has filed return for HUF :-13-: ITA. No: 565/Chny/2022 capacity on 30.03.2018. In our considered view, the documents relied upon by the assessee can only be considered as an afterthought to circumvent penalty proceedings initiated in his individual capacity. Therefore, we reject arguments of the ld. Counsel for the assessee that penalty proceedings has been initiated on wrong person/assessee.
Having said so, let us come back to the issue on hand. There is no dispute with regard to the fact that the appellant had received a sum of Rs. 14 lakhs in cash for sale of immovable property. In fact, the relevant data collected from the Registrar Officer clearly reported transactions with specified date and amount and also amount received in cash. In fact, the assessee never disputed fact that sum of Rs. 14 lakhs has been received on sale of immovable property. However, the only argument of the assessee was that out of Rs. 14 lakhs, a sum of Rs. 11,50,000/- has been received on 10.02.2016 and further a sum of Rs. 2,50,000/- has been received on 07.11.2016. We find no merit in arguments of the assessee that a sum of Rs. 11,50,000/- has been received by way of cash on 10.02.2016, because the information collected by the AO clearly indicates that as on the date of sale i.e., :-14-: ITA. No: 565/Chny/2022 07.11.2016, the assessee has received a sum of Rs. 14 lakhs. Therefore, we are of the considered view that the assessee has received a sum of Rs. 14 lakhs in cash for sale of immovable property in contravention of provisions of section 269SS of the Act, and liable for penalty u/s. 271D of the Act. Thus, we are of the considered view that there is no error in the reasons given by the AO as well as the CIT(A) to levy penalty u/s. 271D of the Act for Rs. 14 lakhs for violating provisions of section 269SS of the Act and hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject grounds taken by the assessee.