Tribunal cancels penalty under IT Act citing reasonable cause and lack of recorded satisfaction

The Tribunal allowed the appeal, canceling the penalty imposed under section 271D of the IT Act, 1961, citing the appellant's reasonable cause for accepting the cash loan and the absence of recorded satisfaction by the Assessing Officer. The decision aligned with the Supreme Court ruling in CIT vs. Jai Laxmi Rice Mills, emphasizing the necessity of valid satisfaction before initiating penalty proceedings. The delay in filing the appeal was condoned due to unforeseen circumstances involving a road accident requiring surgery for the appellant's father.

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Issues:
1. Penalty under section 271D of the IT Act, 1961 for accepting cash loan in contravention of section 269SS.
2. Delay in filing appeal due to unforeseen circumstances.

Issue 1: Penalty under section 271D of the IT Act, 1961 for accepting cash loan in contravention of section 269SS:

The appellant, an individual, received a notice u/s 148 of the IT Act for depositing cash exceeding Rs. 10,00,000 in bank accounts. During re-assessment proceedings, it was noted that the appellant maintained bank accounts with multiple banks. The appellant explained that cash deposits were from withdrawals and funds from friends and relatives for showing bank balance for a student visa. The Assessing Officer (A.O.) initiated penalty proceedings u/s 271(l)(c) for the addition made. Subsequently, after 30 months, a notice was received for penalty u/s 271D for accepting a cash loan of Rs. 4,00,000 in contravention of section 269SS. The appellant argued that the A.O. was satisfied with explanations provided. However, the penalty was imposed, and the CIT(A) confirmed it. The appellant contended that no penalty should be levied as there was a "reasonable cause" under section 273B for accepting the loan. The Tribunal, in line with a similar ITAT Delhi Bench order, allowed the appeal, citing the Supreme Court judgment in CIT vs. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC), canceling the penalty.

Issue 2: Delay in filing appeal due to unforeseen circumstances:

The appellant filed an appeal with a three-day delay, citing a road accident involving their father requiring surgery. An affidavit was submitted explaining the delay, which was accepted by the Tribunal, and the delay was condoned.

In conclusion, the Tribunal allowed the appeal of the Assessee, canceling the penalty imposed under section 271D of the IT Act, 1961. The decision was based on the appellant's reasonable cause for accepting the cash loan and the absence of recorded satisfaction under section 271D by the A.O. The judgment aligned with the Supreme Court ruling in CIT vs. Jai Laxmi Rice Mills, emphasizing the importance of a valid satisfaction before initiating penalty proceedings.

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