RAMA RAO KARNAM,VISAKHAPATNAM vs. JOINT COMMISSIONER OF INCOME TAX,RANGE-4, VISAKHAPATNAM

This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, vide DIN & Order No.ITBA/NFAC/S/250/2022-23/1043662508(1) dated 29.06.2022 for the Assessment Year (A.Y.) 2017-18.

Brief facts of the case are that the assessee, an individual, filed his original return of income for the A.Y.2017-18 on 28.03.2019, declaring total income at Rs.3,20,230/-. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee along with co-owner had sold a property bearing Zeroyati Patta No.553, Survey No.248/9 of Madhurwada Village, within the limit of Greater Visakhapatnam Municipal Corporation, vide sale deed No.1386/2017 dated 30.03.2017 for a consideration of Rs.33,40,000/- and the assessee received his share of Rs.16,70,000/- by way of cash, spanning over a period of two years i.e. total of Rs.7,50,000/- during F.Y.2015-16 and Rs.9,20,000/- during F.Y.2016-17. The AO observed that the assessee had exceeded the limit of receipt of cash as prescribed u/s 269SS of the Income Tax Act, 1961 (in short “Act”), as per which, it is mandatory for the assessee to receive or accept an aggregate amount of twenty thousand rupees or more through 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. The AO held that as the assessee failed to abide by the statutory obligations and committed default in contravention of section 269SS of the Act, made addition u/s 271D of the Act amounting to Rs.9,20,000/-.

On being aggrieved, the assessee preferred an appeal before the CIT(A) and after careful consideration of the facts and circumstances of the case, the Ld.CIT(A) upheld the addition made by the AO and dismissed the appeal of the assessee.

On being aggrieved, the assessee preferred an appeal before the Tribunal by raising the following grounds of appeal :

That under the facts and circumstances of the case the orders passed under the provisions of section 250 fo the I.T.Act is contrary to the provisions of law.

All the grounds of appeal relate to the addition made by the AO u/s 271D and confirmed by the Ld.CIT(A). At the outset, the Ld.AR filed a paper book and filed written submissions along with IT Acknowledgement, reply to the notices issued by the AO, sale deed, relevant extract of explanatory notes to Finance Act 2015 and the case laws relied upon by the assessee. The Ld.AR submitted that the assessee is a senior citizen, aged 80 years, having pension income and interest from bank. The assessee is a regular income tax filer and for the A.Y. 2017-18, the assessee filed return of income, declaring total income of Rs.3,20,230/-. The Ld.AR further submitted that the assessee received his share on sale of immovable property by way of cash of Rs.7,50,000/- during A.Y.2016-17 and Rs.9,20,000/- during the impugned A.Y.2017-18. The Ld.AR further submitted that there was no restriction in acepting the cash as sale consideration in sale of an immovable property until 01.06.2015. However, Finance Act 2015 amended the provisons of section 269SS w.e.f. 01.06.2015 and imposed restriction on accepting cash of more than Rs.20,000/- on sale of an immovable property, which has come into effect from A.Y.2016-17. Thus, by the time the assessee entered into transaction during the A.Y.2017-18, the amendment was a recent one, therefore, neither the buyer nor the seller was aware of the amendment. The Ld.AR further submited that the assessee had duly declared the capital gains from sale of immovable property in the return of income and the penalty provisions u/s 271D of the Act does not attract since the assessee proved the genuineness of the transaction and the assessee also has reasonable cause u/s 273B and the penalty u/s 271D cannot be levied. He, therefore, pleaded to set aside the orders passed by the lower authorities and allow the appeal of the assessee.

We have heard both the parties and perused the material placed on record. It is undisputed fact that the assessee along with his son had sold an immovable property at Madhurwada Village for a consideration of Rs.33,40,000/- and the assessee received his share by way of cash, spanning over a period of two years i.e. total of Rs.7,50,000/- during A.Y.2016-17 and Rs.9,20,000/- during A.Y.2017-18. The AO imposed penalty of Rs.9,20,000/- u/s 271D due to contravention of provisions of section 269SS, which was upheld by the Ld.CIT(A). The Ld.AR submitted that the assessee was ignorant of the fact that there was amendment to Finance Act 2015, w.e.f. 01.06.2015 which imposed restriction on accepting cash of more than Rs.20,000/- on sale of immovable property w.e.f. A.Y.2016-17 and he was not even guided by his chartered accountant. The assessee further submitted that the assessee has reasonable cause u/s 273B for not imposing penalty u/s 271D of the Act. On careful consideration of the facts and circumstances of the case, we hold that ignorance of law cannot be a valid reason to quash the penalty and it is not a resonable cause u/s 273B to delete the penalty levied u/s 271D. The assessee violated the provisions u/s 269SS of the Act and thus is liable for imposition of penalty u/s 271D of the Act. Hence, we have no reason to interefere with the orders passed by the lower authorities and accordingly uphold the same. In the result, appeal filed by the assessee is dismissed.