Penalty under Section 271D cancelled as cash payment made during property registration was transparent and genuine

The ITAT Dehradun allowed the assessee's appeal against penalty u/s 271D for alleged violation of section 269SS. The assessee received cash consideration after property registration, deposited it in bank account, and used it to purchase another property. The AO accepted the transaction as genuine in regular assessment without additions. The tribunal found no violation of section 269SS since cash payment was made before the sub-registrar during registration, the transaction was recorded in the sale deed, and the money flow was transparent and accepted by authorities.

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Issues Involved:

1. Limitation of the penalty order.
2. Knowledge and awareness of the assessee regarding the provisions of the Income Tax Act.
3. The role of the assessee's counsel in the proceedings.
4. Justification and validity of the penalty imposed under section 271D.
5. The bona fide nature of the transactions.
6. Compliance with section 269SS of the Income Tax Act.
7. Consideration of reasonable cause under section 273B.
8. Timing of the transaction concerning the amendment in the Act.
9. Applicability of section 269SS to the transaction in question.
10. Request for deletion of the penalty imposed.

Detailed Analysis:

1. Limitation of the Penalty Order:
The assessee contended that the penalty order dated 28.03.2019 was barred by limitation. The argument was based on the timeline of the proceedings, suggesting that the order was not issued within the statutory period, thus warranting the deletion of the penalty.

2. Knowledge and Awareness of the Assessee:
The assessee, employed as a lower division clerk, claimed ignorance of the complex provisions of the Income Tax Act. He relied on his advocate for compliance, indicating a lack of personal knowledge about the legal requirements, particularly concerning section 269SS and 271D.

3. Role of the Assessee's Counsel:
The assessee argued that the failure of his counsel to appear before the JCIT was due to the advocate's misconduct. He asserted that he should not be penalized for the counsel's actions, as he was dependent on professional advice for tax matters.

4. Justification and Validity of the Penalty:
The assessee challenged the imposition of the penalty as unwarranted. He argued that the transactions were bona fide and not disputed at any stage, suggesting that the penalty was invalid. The penalty was seen as uncalled for, given that the income from the transaction was declared and accepted by the authorities.

5. Bona Fide Nature of the Transactions:
The assessee maintained that the transactions were genuine, with no intent to evade taxes. The sale consideration was declared in the income tax return, and the capital gains were offered for taxation. The authorities had accepted the transaction as genuine during the assessment proceedings.

6. Compliance with Section 269SS:
The assessee contended that the transaction did not breach section 269SS, as it was not a loan or deposit but a sale consideration. He argued that the amendment introducing "specified sum" was not applicable retroactively to his transaction, which occurred shortly after the amendment.

7. Consideration of Reasonable Cause:
The assessee invoked section 273B, arguing that there was a reasonable cause for the non-compliance with section 269SS. He cited his ignorance of the new provisions and the genuine nature of the transaction as reasons why the penalty should not be imposed.

8. Timing of the Transaction:
The transaction occurred within a month of the amendment to section 269SS. The assessee claimed unawareness of the new provision due to the short time frame, arguing that neither he nor his advocate was informed of the change in law.

9. Applicability of Section 269SS:
The assessee argued that section 269SS was not applicable to his transaction, as it was not intended to curb black money in bona fide property sales. He cited judicial precedents to support the view that penalties should not be imposed in the absence of black money involvement.

10. Request for Deletion of the Penalty:
The assessee requested the deletion of the penalty, arguing that the transaction was genuine, and there was no attempt to evade taxes. He cited various case laws to support his position that penalties should not be levied for technical breaches without malicious intent.

Conclusion:

The tribunal, after considering the submissions and material on record, concluded that the transaction was genuine and duly recorded in the sale deed. The assessee had demonstrated reasonable cause under section 273B, and the penalty under section 271D was not justified. The tribunal directed the deletion of the penalty, aligning with similar decisions in comparable cases. The appeal filed by the assessee was allowed, and the penalty imposed was ordered to be deleted.

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