2023 (12) TMI 403 - AT - Income Tax

Penalty under Section 271D quashed for cash acceptance as assessment order lacked satisfaction recording

The ITAT Visakhapatnam allowed the assessee's appeal against penalty u/s 271D imposed for accepting cash exceeding prescribed limits during immovable ... Condonation of delay for reasonable and sufficient cause - penalty under section 271D of the Income Tax Act - requirement of recording satisfaction before initiating penalty proceedings - acceptance of cash consideration in contravention of section 269SS of the Income Tax Act - reliance on CIT Vs Jai Laxmi Rice Mills - afterthought in issuing penalty noticeCondonation of delay for reasonable and sufficient cause - Delay of 34 days in filing the appeal was condoned. - HELD THAT: - The assessee produced an affidavit explaining prolonged illness and medical advice necessitating bed rest, which prevented timely filing. The Tribunal found this explanation constituted 'reasonable and sufficient cause' and therefore exercised its discretion to condone the 34 day delay and admit the appeal for adjudication on merits. [Paras 3]Delay of 34 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.Penalty under section 271D of the Income Tax Act - requirement of recording satisfaction before initiating penalty proceedings - acceptance of cash consideration in contravention of section 269SS of the Income Tax Act - afterthought in issuing penalty notice - reliance on CIT Vs Jai Laxmi Rice Mills - Penalty imposed under section 271D was quashed for lack of recorded satisfaction in the assessment order. - HELD THAT: - The admitted fact was that the assessee received part of the sale consideration in cash. However, the assessment order under section 143(3) records acceptance of the assessee's explanation and does not record any satisfaction required as a precondition to initiate penalty proceedings under section 271D. The Tribunal treated issuance of the penalty notice thereafter as an afterthought. Applying the principle in CIT Vs Jai Laxmi Rice Mills , that penalty cannot be levied in the absence of requisite satisfaction, the Tribunal held the penalty order to be without jurisdiction and quashed it. As the core additional ground challenging validity of the penalty succeeded, the Tribunal considered other grounds academic. [Paras 8, 9]Penalty order under section 271D is quashed for want of the mandatory recorded satisfaction in the assessment order; other grounds rendered academic.Final Conclusion: The Tribunal condoned the appeal filing delay and allowed the appeal by quashing the penalty imposed under section 271D for failure to record the requisite satisfaction in the assessment order; other grounds were held academic. Issues involved:The appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) regarding penalty under section 271D of the Income Tax Act, 1961 for the AY 2017-18.Delay in filing appeal:The assessee sought condonation of delay of 34 days due to the appellant's ill health, which was diagnosed as AFI with Thrombocytopenia with Jaundice, leading to complete bed rest as advised by the doctor. The Tribunal found the explanation to be a 'reasonable and sufficient cause' and condoned the delay to proceed with adjudicating the appeal on merits.Background and Assessment:The assessee, engaged in business activities, e-filed the return of income for AY 2017-18, which was processed under limited scrutiny. The assessee explained cash deposits during demonetization period were from the sale of inherited property, supported by evidence. The Ld. AO accepted the explanation and assessed the total income. Subsequently, a penalty under section 271D was imposed for accepting cash in violation of section 269SS, which the assessee contested before the Ld. CIT(A)-NFAC.Grounds of appeal:The assessee appealed against the sustained penalty, contending that the penalty was contrary to facts and law, not justified, and fell within the scope of reasonable cause under section 273B. Additional grounds raised included the limitation and validity of the penalty under section 271D.Legal Arguments and Decision:The Ld. AR argued that the penalty order was unsustainable as the Ld. AO did not record satisfaction for penalty proceedings during the assessment. Citing relevant case law, the Tribunal found that the penalty order lacked a prerequisite initiation and was an afterthought, thus quashing the penalty under section 271D. The decision was based on the Supreme Court's observation in a similar case. Consequently, the appeal was allowed in favor of the assessee, rendering other grounds of appeal academic and dismissed.Conclusion:The Tribunal allowed the appeal of the assessee, pronouncing the decision in open court on 29th November 2023.