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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER DUVVURU RL REDDY, Judicial Member :
This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Ld.CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1045215395(1), dated 6/9/2022 arising out of the order passed U/s. 271D of the Income Tax Act, 1961 [the Act], dated 16/3/2022 for the AY 2017-18.
2. At the outset, the Ld. AR submitted that there is a delay of 34 days filing the appeal. The Ld. AR drew our attention to the petition, along with an affidavit, filed by the assessee seeking condonation of delay wherein the assessee explained the reasons for belated filing of the appeal before the Tribunal. The relevant portion of the affidavit is extracted herein below for reference:
“1 ……
The appellant suffered from high fever from 24/10/2022 onwards which was diagnosed as AFI with Thrombocytopenia with Jaundice and he was under treatment for one week. As a part of the treatment, the Doctor advised the appellant to take complete bed rest for 30 days more for better recover. As per the advice of the Doctor, the appellant was under complete bed rest during the period from 1/11/2022 to 30/11/2022 and therefore could not attend to any other affairs during this period. As soon as the appellant recovered, he took necessary steps and filed the appeal on 9/12/2022. ……” 3
On perusal of the reasons advanced by the assessee for filing the appeal before the Tribunal beyond the prescribed time limit with a delay of 34 days, we find that due to ill health of the assessee the assessee was prevented to file the appeal within the stipulated time. In our considered opinion, the explanation given by the assessee constitutes ‘reasonable and sufficient cause’ and therefore we hereby condone the delay of 34 days in filing the appeal and proceed to adjudicate the appeal on merits.
Briefly stated the facts of the case are that the assessee, an individual, is engaged the business activity by operating a Xerox Shop and e-filed his return of income for the AY 2017-18 on 31/07/2017 declaring a total income of Rs. 3,55,510/-. The return was processed U/s. 143(1) of the Act by the CPC, Bangalore on 7/11/2017 and subsequently the case was selected for limited scrutiny under CASS with the reasons “to examine the issues of (i) Capital gain/loss on sale of property and (ii) Cash deposits during the demonetization period”. Accordingly, notice U/s. 143(2), dated 9/8/2018 was issued to the assessee and the same was served on the assessee through email on 11/08/2018 and also manually served on the assessee on 17/8/2018.
Further, Notices U/s. 142(1) of the Act, dated 26/10/2018 and 31/1/2019 were issued and served on the assessee wherein the assessee was called for certain information. In response, the assessee filed his reply and furnished the information called for viz., computation of total income, copies of bank statements, explanation notes, information / evidences with regard to the sources for cash deposits made into the bank accounts, evidence in respect of LTCG on sale of inherited immovable property etc.
On verification of the e-submission / information furnished by 4 the assessee, the Ld. AO observed that the assessee had made cash deposits to the tune of Rs. 13,48,000/- in his bank account on different dates during demonetization period for the FY 2016- 17 relevant to the AY 2017-18. On being asked about the source of the cash deposits, the assessee explained before the Ld. AO that the said deposits were made out of the sale proceedings of immovable property (building) during the year which was sold at a total consideration of Rs.41,98,000/- out of which Rs. 16,98,000/- was received in cash and the assessee’s share of the sale consideration was Rs. 10,49,500/-, and the balance amount pertains other family members, which was deposited in the bank account of the assessee since the other family members (daughters) are also staying with the assessee. The assessee also explained before the Ld. AO that the immovable property sold was an inherited property through intestate from his father. It was also submitted that his share of Rs. 10,49,500/- being 1/4th of the total sale consideration was admitted in his return of income and paid tax on capital gains at Rs. 1,43,459/-. The Ld. AO is in concord with the assessee’s explanation and completed the assessment U/s. 143(3) of the Act and assessed the total income at Rs.3,55,510/- vide the assessment order dated 20/09/2019.
Thereafter, the Ld. JCIT, Range-1, Guntur issued a penalty show
5 cause notice U/s. 274 r.w.s 271D of the Act, dated 18/2/2020 was issued to the assessee as the assessee has accepted an amount of Rs. 16,98,000/- in cash violating the provisions of section 269SS of the Act. Subsequently, the case was handled under the Faceless Penalty Scheme and a show cause notice dated 10/06/2021 was issued to the assessee wherein the assessee was asked to explain as to why an order imposing penalty U/s. 271D of the Act should not be passed since the assessee had not complied with the provisions of section 269SS of the Act. In response the assessee gave a detailed reply explaining the reasons for accepting the payment of Rs. 16,98,000/- towards sale of immovable property. The Ld. AO did not consider the explanation given by the assessee and levied penalty of Rs. 16,98,000/- invoking the provisions of section 271D of the Act. Aggrieved by the order of the Ld. AO, the assessee carried the matter in appeal before the Ld. CIT (A)- NFAC. On appeal, the Ld. CIT(A)-NFAC sustained the addition made by the Ld. AO and dismissed the appeal of the assessee by holding that the assessee has accepted Rs. 16,98,000/- in cash as part of sale consideration on sale of immovable property which is in contravention of the provisions of section 269SS of the Act.
6 5. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before us by raising the following grounds of appeal:
“1. The order of the Ld. CIT (A) is contrary to the facts and also the law applicable to the facts of the case.
2. The Ld. CIT(A) is not justified in sustaining the penalty of Rs. 16,98,000/- levied U/s. 271D of the Act.
3. The Ld. CIT(A) ought to have considered that the case of appellant falls within the scope of reasonable cause provided U/s. 273B of the Act.
4. Any other grounds may be urged at the time of hearing.”
Further, the assessee vide his letter dated 1/3/2023 raised the following Additional Grounds of Appeal:
“1. The penalty levied U/s. 271D of the Act vide order dated 16/03/2022 is barred by limitation.
2. The penalty levied U/s. 271D of the Act is void-ab- initio and invalid in the absence of any satisfaction recorded in the assessment order.”
At the outset, it is the main contention of the Ld. AR that while passing the assessment order U/s. 143(3) of the Act, the Ld. AO has accepted the explanation given by the assessee with regard to the sale of property and the related transactions and accorded to the return of income filed by the assessee. Further, the Ld. AR submitted that Ld.AO has not recorded his satisfaction regarding the initiation of penalty proceedings while
7 passing the assessment order and therefore, the penalty order passed by the Ld. AO U/s. 271D of the Act is unsustainable in law. The Ld. AR relied on various case laws, but placed heavy reliance on the ratio laid down in CIT Vs Jai Laxmi Rice Mills [379 ITR 0521] (SC). The Ld.AR further submitted that the cash receipts have been accounted and is evidenced by sale deeds with respective buyers. Therefore, the Ld. AR pleaded that the penalty levied by the Ld. AO and confirmed by the Ld. CIT (A)-NFAC may be deleted.
Per contra, the Ld. DR heavily relied on the orders of the Ld.
Revenue Authorities and argued in support of the decision taken by the Ld. AO and the Ld. CIT(A)-NFAC.
We have heard both the sides and perused the material available on record and the orders of the authorities below. The admitted facts are that the assessee has received a part of the sale consideration in cash towards the sale of immovable property from the buyers totaling to Rs. 16,98,000/-. On careful perusal of the Assessment Order passed U/s. 143(3) of the Act dated, 20/09/2019, we find that the Ld. AO has enquired about the cash deposits made by the assessee amounting to Rs. 16,98,000/- and he convinced and accepted the explanation
8 given by the assessee. Further, it is pertinent to mention that the Ld.AO has not recorded the satisfaction regarding the initiation of penalty proceedings while passing the assessment order U/s. 143(3) of the Act which is a prerequisite for initiation of penalty U/s. 271D of the Act. Under these circumstances, we are of the considered opinion that issuing a notice U/s.274 r.w.s 271D of the Act is nothing but an afterthought of the Ld. AO. The ratio laid down in the case CIT Vs Jai Laxmi Rice Mills [379 ITR 0521] (SC), 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.”
Therefore, respectfully following the ratio laid down by Hon’ble Supreme Court in the case of CIT Vs Jai Laxmi Rice Mills (supra) we are of the considered view that the penalty order passed U/s. 271D deserves to be quashed. Accordingly, the Additional Ground No. 2 raised by the assessee is allowed. Since the core issue raised by the assessee vide Ground No.2 of the Additional Grounds of appeal is allowed in favour of the assessee,
9 the adjudication of the other regular grounds of appeal as well as the additional Ground of Appeal No.1 becomes academic and hence they are dismissed.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on 29th November, 2023.