Penalty under Section 271D for cash receipt in property transfer unsustainable when transaction genuine and transparent

ITAT Visakhapatnam held that penalty under section 271D for cash receipt in immovable property transfer was unsustainable. Assessee received advance partly by cheque and remaining in cash, but immediately deposited cash in bank account and offered capital gains for taxation. Court found no suppression of cash receipts and reasonable cause existed under section 273B due to unavoidable circumstances. The objective of section 269SS to curb black money generation was not violated as transaction was genuine and transparent.

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Issues involved:
The case involves an appeal against the penalty imposed under section 271D of the Income Tax Act, 1961, concerning the receipt of cash in violation of section 269SS of the Act during the transfer of an immovable property for the assessment year 2017-18.

Summary:
The appellant, an individual, filed a revised return of income for the AY 2017-18, declaring total income that included capital gains from the sale of a vacant site. The Assessing Officer initiated penalty proceedings under section 271D of the Act due to the receipt of cash during the property transfer, which was deemed a violation of section 269SS. The appellant's explanations were not accepted, leading to the imposition of a penalty. The appeal before the Ld. CIT(A)-NFAC was dismissed, prompting the appellant to challenge the decision.

The core issue revolved around the validity of the penalty under section 271D for receiving cash in connection with the property transfer, contravening section 269SS. The appellant argued that the cash received was deposited in the bank, showing the genuineness of the transaction. The appellant also contended that the receipt of cash was due to unavoidable circumstances, constituting a reasonable cause under section 273B. Relying on case laws, the appellant sought the deletion of the penalty.

After considering the arguments and relevant provisions, the Tribunal found that the cash received was deposited in the bank, indicating no suppression of cash receipts. The Tribunal noted that the appellant had offered the capital gains for taxation and that the explanation provided constituted a reasonable cause. Consequently, the penalty imposed by the Assessing Officer and upheld by the CIT(A)-NFAC was deemed unsustainable in law. Therefore, the Tribunal set aside the orders and deleted the penalty, allowing the appellant's appeal.

The decision was pronounced in open court on 29th November 2023.

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