In the absence of satisfaction in the Assessment Order, the penalty under 271D is eliminated
Fact and issue of the case
The above two appeals filed by the respective assessees are directed against the separate orders dated 11.08.2022 of the learned CIT (A)-11, Hyderabad, relating to A.Y.2019-20. Since identical grounds have been raised in these two appeals, therefore, for the sake of convenience, these appeals were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assessee is an individual and derives income from business or profession and income from other sources. A search & seizure operation u/s 132 of the I.T. Act, 1961 was conducted along with the group cases of M/s. Moksha Infracon Pvt Ltd and M/s. Kaveri Infra Projects (P) Ltd on 9.8.2018. The assessee filed his return of income on for the A.Y under consideration on 14.02.2020 admitting total income of Rs.1,46,37,210/- and agriculture income of Rs.12,05,000/-. Statutory notices u/s 143(2) & 142(1) of the I.T. Act were issued and served on the assessee to which the AR of the assessee appeared before the Assessing Officer from time to time and furnished the requisite details.
The Assessing Officer observed that during the course of search operation in the residence of the appellant, certain loose sheets were found and seized. As per the page no., 4 of Annexure A/NRR/01, cash of Rs. 2,00,00,000/- was noted to have been received by Sri J. Sampath Rao on 25-07-2018 on behalf of 5 sellers of an immovable property located at Bondugula Village. The assessee is one of the 5 sellers mentioned therein. A Sworn statement of Sri J. Sampath Rao was recorded during the course of search and he had stated to have received cash of Rs. on 2,00,00,000/- on behalf of 5 sellers including the assessee. Subsequently, the assessee agreed to have received cash of Rs. 40,00,000/- as his share with respect to sale of immovable property. As the cash received in connection with sale of immovable property was more than the specified limit of Rs. 20,000/- as per the Section 269SS of the IT Act, penalty proceedings u/s. 271D were initiated for violating the provisions of Section 269SS and penalty order u/s. 271D of the Act was passed on 07.06.2022 levying a penalty of Rs. 40,00,000/-.
In appeal, the learned CIT (A) confirmed the penalty levied by the Assessing Officer u/s 271D of the I.T. Act by observing as under
In the instant case, penalty order u/s. 271D of the IT Act was passed on 07.0o.2022 levying a penalty of Rs, 40,00,000/- in connection with acceptance of consideration in cash on sale of immovable property.
Going into facts of the case, the appellant individual was covered under search and seizure operation u/s. 132 of the Act conducted in the group cases of M/s. Moksha Infracon Pvt. Ltd. and M/ s. Kaveri Infra Projects Pyt. Ltd on 09.08.2018. During the course of search operation, certain loose sheets were found and seized. As per the page no. 4 of Annexure A/NRR/01, cash of Rs. 2,00,00,000/- was noted to have received by Sri J. Sampath Rao on 25-07-2018 on behalf of the appellant and 4 other sellers of an immovable property located at Bondugula Village. A sworn statement of Sri J. Sampath Rao was recorded during the course of search and he had stated to have received cash of Rs. 2,00,00,000/- on behalf of 5 sellers including the appellant. Subsequently, the appellant agreed to have received cash of Rs. 40,00,000/- as his share with respect to sale of immovable property and admitted in his return of income filed for AY 2019-20. As the cash received connection with sale of immovable property was more than the specified limit of Rs.20,000/- as per the Section 269SS of the IT Act, penally proceedings u/s 271 D of the Act were initiated for violating the provisions of Section 2699SS and penalty order u/s, 271D of the Ac was passed on 07.06.2022 by the Addl. CIT levying a penalty of Rs. 40,00,000/-.
The appellant had agreed that he had received Rs. 40,00,000/-in cash as his share of advance towards sale of a land properly that was sold jointly by the appellant along with four others. The appellant had not disputed the receipt of cash of Rs. 40,00,000/- or the purpose for which such cash was received for.
Further, It is also to noted that the said cash of Rs. 40,00,000/- was added to the returned income of the appellant as undisclosed money in the assessment order passed u/s. 143(3) dated 21.04.2021 and taxed as per the provisions of Section 115BBE of the IT Act. The appellant had preferred an appeal against the assessment order before the undersigned and the appellate order was passed on 04.05.2022 allowing the appeal of the appellant. In the appellate order, it was held that the said amount of Rs. 40,00,000/- was not undisclosed money and it was in fact the consideration received in connection with the sale of immovable property by the appellant. Therefore nexus has been clearly established between the cash received and the sale of immovable property. Thus the appellant had received Rs. 40.00.000/- in cash as part o! consideration towards sale of immovable property.
Hence, in view of the above discussion, the provisions of Section 2693S are attracted straight forward in the case of the appellant and therefore liable to penalty u/s. 271D of the Act. The relevant extract of section 269SS and 271D are reproduced below
269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed?,
the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
on the date of taking or accepting such loan or deposit or specified sum, any loan (iv) or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid: or
the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more
Observation of the court
ITA No.522/Hyd.2022 –
Sri Venkateshwar Reddy Pacchica (A.Y 2019-20)
The ground raised by the assessee are as under
The Commissioner of Income tax – Appeals -11, Hyderabad [ herein after denoted as Hon CIT -A] erred in confirming the penalty order of Additional Commissioner of Income Tax, Central Circle -1, Aayakar Bhavan Hyderabad [herein after termed as Ld. Add. CIT] of levy of penalty under section under section 271D of Income tax Act, 1961/ for short – the Act].
The Hon.CIT-A had erred in summarily rejecting the judicial views submitted by the appellant.
The Hon. CIT -A had erred in opining that that the appellant had not disclosed the cash portion of the consideration. The learned CIT-A failed to appreciate the fact that the appellant had already disclosed Rs.40.00 lakhs with the Department – which disclosure date was much before the date of registration of property.
The Ld.CIT-A had erred in forming an opinion that the taxpayer ought to have full and complete knowledge of all provisions tax laws, which is contrary to the popular judicial views. The leaned CIT-A failed to appreciate basic practical premise that income tax law is a highly dynamic and ever-changing law and that there is high probability for knowing a provision fully well by an average taxpayer till a transaction or two covered by a section are undertaken.
For the grounds pleaded above or for such other additional grounds that may be pleaded at the time hearing the appellant prays for the deletion of the said penalty amount levied under section 271D or to grant such other relied as the Hon’ble Bench may deem fit and proper under the facts and circumstances of the case. “
The assessee has also raised an additional ground which reads as under
The levy of penalty u/s 271D of the I.T. Act, 1961 at Rs.40,00,000 is wholly unsustainable based on the facts and in law as the Assessing Officer has not recorded his satisfaction about initiation of penalty proceedings u/s 271D of the said Act
After hearing both the sides, we find the grounds raised by the assessee are identical to the grounds raised in ITA No.520/Hyd/2022 including the additional ground. We have already decided the issue and the appeal filed by the assessee has been allowed. Following similar reasoning, the appeal filed by the assessee is allowed.
In the result, both the appeals filed by the assessee are allowed
Order pronounced in the Open Court on 31st May, 2023
In the result, appeal of the assessee is allowed and ruled in favour of the assessee