ITAT sets aside section 271D penalty for cash property transactions after finding dual penalties unacceptable

The ITAT Mumbai set aside the penalty imposed under section 271D regarding cash transactions. The assessee had received sale consideration in cash for transferring a property agreement, but the revenue did not dispute the genuineness of the underlying purchase and sale transactions. The tribunal found that imposing penalties under both sections 271(1)(c) and 271D for the same cash deposits was unacceptable. The tribunal directed the AO to delete the penalty, ruling in favor of the assessee and allowing the appeal.

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Issues involved:
The judgment involves issues related to penalty levied under section 271D and section 250 of the Income Tax Act.

Issue 1: Penalty u/s 271D
The appeal was filed against the penalty levied u/s 271D amounting to Rupees 24,50,000. The Appellant argued that no penalty should be levied as the loans received were genuine and each loan was less than Rs. 20,000. The Joint CIT and CIT(A) were criticized for their stand contrary to the findings in the Assessment order passed u/s 143(3) read with section 147.

Issue 2: Dismissal of appeal by CIT(A)
The CIT(A) was accused of dismissing the appeal without considering the request for adjournment, not providing proper opportunities, and overlooking the findings in the assessment order. The Appellant requested the penalty of Rs. 24,50,000 u/s 271D to be deleted.

Summary of Judgment:
The assessee, an individual deriving income from various sources, filed a return of income for A.Y 2007-08. The Assessing Officer (AO) found discrepancies in cash deposits and issued a notice u/s 148. The AO made additions to unexplained cash deposits u/s 68 of the Act and passed an order u/s 143(3) r.w.s 147. Subsequently, penalty proceedings were initiated u/s 271D as the assessee obtained cash deposits and loans. The AO levied a penalty of Rs. 24,50,000, which was confirmed by the CIT(A).

During the appeal, the Appellant argued that the penalty was unjust as the loans received were genuine and the sale consideration for a flat was received in cash and through banking channels. The Appellant provided evidence to support their claims, including agreements and payment details. The Tribunal found the explanations provided by the assessee to be reasonable and set aside the order of the CIT(A), directing the Assessing Officer to delete the penalty.

In conclusion, the appeal filed by the assessee was allowed, and the penalty u/s 271D was directed to be deleted. The judgment was pronounced in the open court on 17.01.2024.

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