RAJU SIDDAIAH,ANJANAPURA vs. INCOME TAX OFFICER, WARD-1(2)(6), BANGALORE

4.1 While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:

(2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.

'Every day's delay must be explained' does not mean that a (3) pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. It must be grasped that the judiciary is respected not on (6) account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

4.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of nondeliberate delay. Moreover, no counter-affidavit was filed by the Revenue denying the allegation made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue.

4.3 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay”.

4.4 Accordingly, we condone the delay of 419 days in filing the appeal before us and admit the appeal for adjudication.

4.5 Before leaping straightaway to the penalty proceedings, it is very much pertinent here to discuss with regard to assessment proceedings for each of the understanding and appreciating the real facts which leads to the initiation of penalty proceedings.

5.1 Thereafter in accordance with the provisions of section 274 of the Act, a show cause notice u/s 271D of the Act was issued and served on 20.3.2020 and assessee was asked to explain why an order imposing a penalty u/s 271D of the Act should not be imposed for the contravention of the provision of section 269SS of the Act. However, the assessee had not responded to the show cause notice. The AO in absence of any submission issued another show cause notices on 14.6.2021 and 21.1.2022. However, again the assessee had not responded to any of the notices. Accordingly, the AO held that it is a fit case for imposition of penalty u/s 271D of the Act amounting to Rs.10,32,000/- as the assessee for the reasons best known to him chosen to remain silent to the various statutory/show cause notices without offering any explanation. Aggrieved by the penalty order dated 17.2.2022 passed u/s 271D of the Act, the assessee preferred an appeal before the ld. CIT(A)/NFAC.

5.2 The ld. CIT(A)/NFAC dismissed the appeal of the assessee by observing that the assessee sold two immovable properties on 22.3.2017 and received an amount of Rs.6,66,000/- for each property, out of which Rs.5,16,000/- is received in cash for each property. The ld. CIT(A)/NFAC uphold that since the assessee has accepted the cash towards the consideration of sale of immovable Raju Siddaiah, Bangalore Page 8 of 17 property which is more than Rs.20,000/-and the penalty proceedings u/s 271D of the Act is for the contravention of provision of section 269SS of the Act and hence the assessee is liable for penalty u/s 271D of the Act amounting to Rs.10,32,000/- and accordingly dismissed the appeal of the assessee.

5.3 Aggrieved by the order of ld. CIT(A)/NFAC, the assessee filed the present appeal before this Tribunal.

5.4 The solitary issue that is raised whether the ld. CIT(A)/NFAC justified in confirming the penalty levied u/s 271D of the Act as the assessee has received Rs.10,32,000/- in cash on sale of immovable property?

5.5 Before us ld. A.R. of the assessee vehemently submitted that the authorities below ought to have appreciated that there is reasonable and sufficient cause as the acceptance of cash payment was required at the time of registration for completion of the sales transaction as the buyer did not pay the A/c payee cheque or draft well before the date of the registration and therefore, the penalty should not be levied as per the provisions contained in section 273B of the Act. Further, ld. A.R. of the assessee submitted that the amount received was only towards the sale consideration at the time of registration of property, which had also been accepted by the AO during the course of assessment proceedings and therefore, this is not a case of any black money in loans/deposits/advances as well as property transactions.

7.1 The purpose of introduction of section 269SS of the Act was discussed in the judgement of Hon’ble Allahabad High Court in the case of Dimple Yadav reported in 379 ITR 177 (All.), wherein the Court considered the recourse of section 271D of the Act and also the provisions of section 273B of the Act to hold as under:

“6. The short question that arises for consideration is, whether any penalty could be imposed under Section 271D of the Act? 7. The learned counsel for the department contended that the unsecured loan, which was more than Rs.20,000/- taken by the assessee from a political party should have been taken by a cheque or a demand draft through banking channels, which had not been done. The taking of the loan in cash, which was more than Rs.20,000/- was in gross violation of Section 269SS of the Act and, consequently, by operation of law, the penalty was rightly imposed, which had wrongly been deleted by the appellate authorities. The learned counsel contended that there was no urgency for the assessee to receive the entire amount in cash nor any dire need was shown for taking such huge amount in cash. In support of his submission, the learned counsel has placed reliance upon a decision of the Punjab and Haryana Raju Siddaiah, Bangalore Page 10 of 17 High Court, Charan Dass Ashok Kumar v. CIT [2014] 365 ITR 367/[2015] 231 Taxman 513/[2014] 52 taxmann.com 424 and Auto Piston MFG. Co. (P.) Ltd. v. CIT [2013] 355 ITR 414/218 Taxman 150 (Mag.)/38 taxmann.com 61 (Punj. & Har.) as well as the decision of the Madras High Court P. Baskarv. CIT [2012] 340 ITR 560/21 taxmann.com 78.

8. On the other hand, Sri Vijay Bahadur Singh, the learned Senior Counsel contended that the transaction of loan found place in the books of accounts of the assessee as well as by the lender, namely, the Samajwadi Party and that the assessing authority while completing the assessment order had found that the transaction of loan was genuine. The learned counsel submitted that in the absence of any finding that the transaction of loan was not genuine or it was a sham transaction to cover unaccounted money, no penalty could be imposed. In support of his submission, the learned Senior Counsel relied upon a decision of Gauhati High Court in CIT v. Bhagwati Prasad Bajoria (HUF)[2003] 263 ITR 487/133 Taxman 426, Chamundi Granites (P.) Ltd. v. Dy. CIT/Asstt. Director of Inspection v. Kum. A.B. Shanthi [2002] 255 ITR 258/122 Taxman 574 (SC)and M. Janardhana Rao v. Jt. CIT [2005] 273 ITR 50/142 Taxman 722 (SC).

Raju Siddaiah, Bangalore Page 13 of 17 15. In the instant case, we find that the Tribunal has given a categorical finding that the assessee had established a reasonable cause for failure to comply with the provision of Section 269SS of the Act. The Tribunal further found that the loan given by the Samajwadi Party was a genuine loan, which was reflected in the books of accounts on account of the Samajwadi Party as well as in the books of account of the assessee and that the cash given by the party was deposited in the bank of the assessee and, thereafter, used for the purpose of converting the nazul land into free hold. The Tribunal found that the genuineness of the transaction was also not disputed by the Assessing Officer.

7.3 The test to be provided for reasonable cause u/s 273B of the Act by Hon’ble Supreme Court (255 ITR 258) for section 271D r.w.s. 269SS of the Act which are as under: a) Reasonable cause to take a loan otherwise than by account payee cheque or draft and b) Transaction is Bonafide.

7.4 If assessee does not fulfil both of these tests of reasonable cause, assessee fails to substantiate with evidences, Bonafide not of taking/accepting the sales consideration in cash and he was unable to procure the sales consideration by account payee cheque or account payee demand draft.

7.5 Section 273B starts with a non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. A clause beginning with 'notwithstanding anything' is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict, an over-riding effect over the provision or Act mentioned in the non obstante clause - Orient Paper & Industries Ltd. v. State of Orissa AIR 1991 SC 672. A non obstante clause may Raju Siddaiah, Bangalore Page 15 of 17 be used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances - T.R. Thandur v. Union of India AlR 1996 SC 1643. The true effect of the non obstante clause is that in spite of the provision or the Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstanteclause will not be an impediment for the operation of the enactment - Smt. Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi ÅIR 1996 SC 1963. Therefore, in order to bring in application of section 27ID of the Act in the backdrop of section 273B, absence of reasonable cause, existence of which has to be established by the assessee, is the sine qua non.

7.6. Levy of penalty under section 271D is not automatic. Before levying penalty, that concerned officer is required to find out that even if there was any failure referred to in the concerned provision, the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. 'Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, 7.7 In the instant case, sale of property and consequent receipt of sale consideration in cash are not disputed by the either side. The assessee had only sold his two immovable properties on 22.3.2017 for Rs.6,66,000/- each out of which Rs.5,16,000/- was received in cash for each property. The genuineness of the transaction is also accepted by the AO in the Assessment proceedings. The assessee after receiving the cash amounting to Rs.10,32,000/- on the date of the registration of sale deed i.e. on 22/03/2017 immediately deposited the cash of Rs.10,00,000/- on 24/03/2017 into his bank Account. The contention of the assessee is that the buyer had not given the account payee cheque or demand draft well before the date of registration of the sale deed & he was compelled to accept the cash on the date of the registration of sale deed. Further he had no choice but to accept the cash on the date of the registration in order to complete the registration of sale deed. The assessee had also to acknowledge before the Registering Authority about the receipt of full & final amount against the sale consideration of immovable property.

7.8 Keeping all facts and relevant case laws (supra) into consideration, in our considered opinion, there is a reasonable cause for contravention to section 269SS of the Act in accepting cash otherwise than account payee cheque/account payee draft in the case of the assessee and further the genuineness of the transactions is also accepted by the AO. We find the claim of the assessee is Bonafide and within the meaning of provisions of section 273B of the Act and accordingly we direct the AO to delete the penalty levied u/s 271D of the Act amounting to Rs.10,32,000/-.

Order pronounced in the open court on 21st Jan, 2025