Penalty u/s 271DA deleted for receiving cash above Rs. 2 lakhs from farmers against sale of tractors.
In a recent judgment, the ITAT Delhi has deleted penalty u/s 271DA holding that the assessee had bona fide reasons to receive cash over and above Rs. 2 lakhs from the farmers against sale of tractors.
ABCAUS Case Law Citation:
4424 (2025) (02) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(Appeals)-NFAC in confirming the penalty u/s 271DA of the Income Tax Act, 1961 (the Act).
The appellant assessee was engaged in the business of trading in tractors and its spare parts. Return of the assessee for two assessment years were processed u/s 143(1) of the Act. The Assessing Officer noticed that as per Form 61A (statement of specified financial transactions / SFT) u/s 285BA(1) filed by the assessee, the assessee reported that the assessee firm had accepted and aggregate amounts of Rs. 2 lakhs or more in cash.
The Assessing Officer issued show-cause notice u/s 274 r.w.s. 271DA to explain as to why an order imposing penalty u/s 271DA of the Act should not be passed since the assessee had violated the provisions of Section 269ST of the Act. The assessee submitted that the business activity of the assessee firm was sales of tractor used for agricultural activity, the agriculturists mostly purchase tractor in cash or from bank loan. It was submitted that the assessee furnished SFT statement every year on Income tax portal and the assessee did not violate the provisions of section 269ST and hence no penalty u/s 271D can be imposed on the assessee.
Not convinced with the reply the Assessing Officer imposed penalty u/s 271DA of the Act. On further appeal, the CIT(Appeals) sustained the penalty levied by the Assessing Office.
The Tribunal observed that it was not the case of the Assessing Officer that the unaccounted money of the assessee was routed back in the form of cash sales. Neither the bona fide’s of the transactions were in doubt nor questioned by the Assessing Officer. Therefore, in such circumstances it cannot be said that there was any intention to evade tax.
The Tribunal further noted that the provision of section 269ST was introduced from 01.04.2017 and the assessee was making cash sales right from the inception of its business. Therefore, there was good and sufficient reasons for accepting cash over and above Rs. 2 lakhs from the farmers on account of sales of tractors. Loss of business could not be afforded by the assessee when the transactions are genuine and the purchaser is identified.
Further, the Tribunal observed that as stated the assessee was under bona fide belief that cash could be accepted at any point of time not exceeding Rs. 2 lakhs and that is how cash was accepted at any given point of time within this limit of Rs. 2 lakhs. It was quite plausible to entertain this belief in view of language of section 269ST which refers to ‘single transaction’ and whereas section 40A(3), 269SS, 269T used the expression ‘aggregate’. Even at one place, section 269ST too uses the expression ‘aggregate’. Section 269ST was the new provision and this was the first year and therefore to entertain this belief was not something which was impossible.
The Tribunal also observed that as held by the Hon’ble Supreme Court penalty is quasi criminal in character and therefore it should not be imposed for technical or venial breach. In on case the Hon’ble Punjab & Haryana High Court held that when the transactions are bona fide and the default was technical imposing penalty u/s 271D is not justified. Similar view has been taken by the various High Courts.
In view of the above the Tribunal held that the assessee had bona fide reasons to receive cash over and above Rs. 2 lakhs and the assessee had reasonable cause in accepting cash over and above Rs. 2 lakhs from the farmers against sale of tractors. Penalty cannot be levied for the technical and venial breach.
Accordingly, the Tribunal directed Assessing Officer to delete the penalty levied u/s 271DA of the Act.
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