Income Tax Appellate Tribunal

Smt. Sarita Singh, Jhajjar vs. Addl. Cit, Rohtak

MANU/ID/0186/2021

10.03.2021

Direct Taxation

No penalty shall be imposable on the persons or the assessee, if he proves that there was a reasonable cause for failure referred in Section 271 D of IT Act, 1961

In facts of present case, the assessee filed return of income declaring income of Rs. 2,30,000 plus agricultural income of Rs. 1,10,000 was filed on 31st March, 2012. The assessee is a Civil Contractor. The AO made addition of Rs. 42,587 on account of low household withdrawn. The AO also made addition of Rs. 1,10,000 on account of undisclosed agricultural income. The assessment was completed under Section 143(3) of Income Tax Act, 1961 (IT Act). The AO imposed penalty under Section 271D of the IT Act. The AO in this order has mentioned that, assessee has received cash amount of Rs. 1,74,320 and Rs. 35,90,165 from Sujata and Dushyant other than account payee cheque/draft in contravention of provisions of Section 269SS of the IT Act. The assessee in response to show-cause notice filed a reply which was not accepted by AO, hence, penalty under Section 271D of the IT Act was imposed. The Learned CIT(A) dismissed the appeal of assessee.

Section 273B of the IT Act provides that, no penalty shall be imposable on the persons or the assessee as the case may be for any failure referred to in Section 271D of the IT Act, if he proves that there was a reasonable cause for the said failure. The assessee explained before the authorities below that, two of the neighbours of the assessee purchased the properties and they were to make payment to HUDA. Since they were not having bank account, therefore, on their request assessee received the amount and deposited in his bank account. The drafts were prepared favouring the HUDA and ultimately, the same have been deposited by them. The receipts are in the names of Sujata and Dushyant of the equivalent amount. The receipts of HUDA in favour of Dushyant are also placed on record. These facts would clearly disclose that, assessee has reasonable cause for failure to comply with provisions of law contained under Section 271D of the IT Act.

Further, while passing the assessment order, the AO did not disbelieve the explanation of the assessee as regards receipt of cash from two neighbours and issue of drafts for these two neighbours and ultimate payment to HUDA. The AO did not record any satisfaction in the assessment order for contravention of provisions of Section 271D of the IT Act.

Assessee has reasonable cause for failure to comply with provisions of law and that no satisfaction has been recorded by the AO in the assessment order, would clearly show that no penalty is leviable in the matter. The orders of the authorities below are set aside and penalty under Section 271D of the IT Act is cancelled. The appeal of assessee is allowed.

Tags : Penalty Levy Legality

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