Proceedings u/s 269SS for levy of penalty u/s 271D are independent proceedings – ITAT

Proceedings u/s 269SS for levy of penalty u/s 271D are independent proceedings- ITAT

In a recent judgment, the ITAT Cuttack has held that proceedings u/s 269SS for levy of penalty u/s 271D are independent proceedings and are not related to assessment proceedings

ABCAUS Case Law Citation:
ABCAUS 4038 (2024) (05) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre (NFAC) in confirming penalty levied u/s 271D of the Income Tax Act, 1961 (the Act).

Penalty u/s 271D

The case of the assessee was that the penalty the proceedings were initiated without jurisdiction and also there was a reasonable cause for accepting the cash in violation to provisions of Section 269SS of the Act.

The Assessing Officer (AO) had received information from Investigation Wing that the assessee had received a sum in cash as sale consideration against the immovable property sold by her during the year in violation of the provisions of Section 269SS of the Act.

Accordingly, the AO referred the matter to the JCIT for levy of penalty u/s 271D of the Act and the JCIT levied penalty u/s.271D of the Act for an equal amount to the amount of cash received on sale consideration.

The CIT(A) confirmed the penalty holding that the assessee had not placed any material to show that there was a reasonable cause in accepting the sale consideration in cash.

Before the Tribunal, the assessee submitted that he has performed her daughter’s marriage wherein she had incurred huge debts. In order to repay the debt she was forced to dispose off the property and received the consideration in cash which was paid to clear the dues and since under this urgent circumstances, the consideration is received in cash, her case is duly covered under the reasonable cause as provided u/s 273B of the Act.

It was further contended that clause (iv) in Explanation to Section 269SS of the Act had been inserted defining the term “specified sum”, according to which if any sum/advances is received in relation to the transfer of property then the provisions of Section 269SS of the Act could be invoked.

It was further stated that Section 269ST of the Act was brought into the statute w.e.f.01.04.2017, which is applicable where any transaction of the amount of Rs.2 lakhs or more made in cash, penalty would be leviable of an equal amount u/s.271DA. Accordingly, the assessee contended that the term “specified sum” as introduced w.e.f.01.06.2015 does not hits assessee’s transaction more particularly when the assessee has not received any advance payment rather has received the entire sale consideration in one row at the time of getting the document registered before the sub-registrar.

It was also submitted that in the present case, there was no assessment proceedings either pending or carried out against the assessee in which the satisfaction could be recorded for violation of the provisions of Section 269SS of the Act, and, therefore, when no proceedings were pending before the AO, the jurisdiction assumed by the AO for referring the matter to the JCIT u/s 271D of the Act, is illegal and barred by limitation, therefore, requested for cancellation of penalty so levied.

With respect to the contention of the assessee that the penalty had been levied without the jurisdiction, the Tribunal observed that in Section 271D of the Act, there is no compulsion that before levy of penalty any satisfaction is to be recorded in any proceedings so also in Section 269SS of the Act, also there is no reference of pendency of any proceedings before initiation of proceedings.

The Tribunal also observed that Hon’ble High Court had held that penalty proceedings for default in not having transactions through the bank as required under sections 269SS and 269T of the Act are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under Sections 271D and 271E of the Act may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings”.

Following the Hon’ble High Court the Tribunal opined that since the proceedings u/s 269SS of the Act are independent proceedings and for violating the provisions of Section 269SS of the Act, the penalty is leviable u/s.271D of the Act, therefore, the contention that the penalty proceedings had been initiated without jurisdiction does not hold water and, thus, this contention was dismissed.

With regard to reasonable cause, from the records, the Tribunal observed that the assessee since inception of the proceedings before the AO has submitted that the payment was received in cash due to urgency of making payment of the debts taken at the time of marriage of her daughter, which is a bonafide reason and duly covered under reasonable cause u/s 273B of the Act. Further the transaction had been disclosed, therefore, there was no loss to the revenue.

With regard to the contention that the term “specified sum” as provided in the explanation to Section 269SS of the Act does not applicable to the sale consideration received in cash at the time of registration of sale deed, the Tribunal noted that provisions of Section 269SS of the Act was amended w.e.f.01.06.2015 wherein in explanation to the said Section the term “specified sum” was inserted.

The Tribunal further noted that the memorandum and Notes on Clauses forming part of the Finance Bill, 2015 clearly defined the “specified sum” as any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

The Tribunal noted that provisions of Section 269ST and Section 271DA had been introduced which are meant for the violation of making cash transaction above Rs.2.00 lacs, which was not invoked by the AO though the transaction referred is fallen under the provision of Section 269ST of the Act. From the perusal of the intention of the legislature as explained in the memorandum and notes on clauses, while amendment made vide Finance Bill 2015, it is clear that intention for bringing this provision was to curb the generation of black money in real estate transaction for prohibiting the acceptance of the payment of advance in cash of Rs.20000/- or more.

The Tribunal stated that the “specified sum” as defined is applicable only for “advance” receivable whereas the “advance otherwise” means advance can be of any manner. Therefore, this provisions is not applicable to the transactions were no advance payment in cash has been received and the cash transactions have happened at the time of registration of the sale deed.

The Tribunal opined that in the present case assessee also falls in the above category where admittedly entire cash was received by assessee in one go at the time of execution of sale deed. Therefore, there was no violation of the provisions of Section 269SS of the Act which had been wrongly invoked in this transaction.

Accordingly, the Tribunal deleted the penalty levied. 

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