Penalty under IT Act Section 271D canceled for AY 2011-12 due to reasonable cause.

The ITAT canceled the penalty imposed under section 271D of the I.T. Act for AY 2011-12, as the assessee demonstrated a reasonable cause for receiving cash amounts to help neighbors make payments to HUDA through demand drafts. The ITAT emphasized that no satisfaction regarding penalty proceedings was recorded in the assessment order, leading to the revocation of the penalty. The appeal was allowed, and the orders of the lower authorities were set aside.

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Issues:
Challenging the levy of penalty u/s 271D of the I.T. Act for AY 2011-12.

Analysis:
The appeal was against the order of Ld. CIT(Appeals) for the imposition of a penalty under section 271D of the I.T. Act. The AO imposed the penalty based on the assessee receiving cash amounts from individuals for whom drafts were prepared in contravention of section 269SS of the Act. The assessee contended that the cash received was for humanitarian reasons to help neighbors who needed to make payments to HUDA through demand drafts, as they did not have bank accounts. The assessee provided bank statements and receipts to support this explanation. The ITAT Jaipur Bench's decision in a similar case was cited to argue that a reasonable cause existed for the cash transactions. The DR, however, supported the lower authorities' decisions.

The ITAT considered Section 273B of the I.T. Act, which provides for no penalty if a reasonable cause is proven for the failure under section 271D. The assessee's explanation that the cash received was to help neighbors make payments to HUDA, supported by evidence, was deemed a reasonable cause. Notably, the AO did not question this explanation during the assessment process. Referring to a Supreme Court judgment, the ITAT emphasized that if no satisfaction regarding penalty proceedings is recorded in the assessment order, the penalty cannot be levied. Therefore, the ITAT concluded that the assessee had a reasonable cause for non-compliance with the law, and since no satisfaction was recorded by the AO, the penalty under section 271D was canceled. Consequently, the orders of the lower authorities were set aside, and the penalty was revoked, allowing the appeal of the assessee.

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