PILLAPPA SESHAKUMAR,BANGALORE vs. DC/ACIT CIRCLE-5(1)(1), BANGALORE

Brief facts of the case are assessee being an individual, filed his return of income for the Assessment Year 2017-18 declaring an income of Rs.69,45,413/-. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). The learned Assessing Officer [in short “AO”]

Aggrieved by the order of the learned AO, assessee carried the matter before the learned CIT(A). The learned CIT(A) observed that certain transactions were entered into during the Financial Year 2015-16 relevant to Assessment Year 2016-17 and therefore deleted an amount of Rs.5,25,000/-. The learned CIT(A) however sustained the penalty of Rs.2,20,000/- since the transaction is dated 09.04.2016 and relevant to Assessment Year 2017-18.

Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us by raising various grounds. The only issue emanating from the above ground is with respect to confirmation of penalty under section 271DA of the Act amounting to Rs.2,20,000/-. On this issue, the learned AR submitted that section 269ST of the Act was introduced with effect from 01.04.2017 by the Finance Act, 2017. He further explained that the transaction of receipt of cash happened on 09.04.2016 which is well before the enactment of the Finance Act, 2017. He further pleaded that the section 269ST of the Act and the relevant penalty under section 271DA of the Act cannot be applied retrospectively since

Per contra, the learned Departmental Representative [in short ‘DR’] relied on the orders of Revenue authorities and could not controvert the fact argued by the learned AR.

We heard both the sides and perused the material available on record including the written submissions of the assessee. The main contention of the learned Authorized Representative [in short ‘AR’] is that the transaction of sale of tractor took place on 09.04.2016 which is evidenced by receipt No.14169 dated 09.04.2016 for Rs.2,20,000/-. The submission of learned AR was section 269ST of the Act was introduced by the Finance Act, 2017, w.e.f. 01.04.2017 and therefore the consequent penalty u/s 271DA shall be applied for transactions entered prospectively. In the instant case, we noticed that the Ld AO invoked section 269ST of the Act and levied the penalty under section 271DA of the Act for a transaction which took place on 09.04.2016 before the enactment of the Finance Bill 2017 which in our opinion is not justifiable. There is merit in the argument of the learned AR that the relevant provisions cannot be applied retrospectively as it was not in force when the transaction was executed. There is also no indication in the Finance Act, 2017, that section 269ST of the Act was intended to be applied retrospectively to transactions occurred prior to introduction. Under similar circumstances the co-ordinate Bench of Delhi in the case of Krishna Wanti (supra) held as follows:

In view of the facts and circumstances as discussed above, and by following the decision of the co-ordinate Bench of Delhi, we are of the opinion that invocation of penalty under section 271DA r.w.s. 269ST of the Act cannot be justified and therefore we direct the AO to delete the same. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.