Successful Appeal Against Penalty Imposed under Section 271D: A Case Analysis

Introduction:

• The present article discusses a recent appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [Ld.CIT(A)-NFAC]. The appeal centered around the penalty imposed under section 271D of the Income Tax Act, 1961 [the Act] for the Assessment Year (AY) 2017-18.

Condonation of Delay:

• The appeal commenced with the Ld. AR highlighting a delay of 34 days in filing the appeal. The assessee provided a detailed affidavit explaining the reasons for the delay, citing the assesse's health issues. The affidavit stated that the appellant suffered from a severe illness, diagnosed as AFI with Thrombocytopenia with Jaundice, leading to complete bed rest for a month. The Tribunal, considering the explanation as 'reasonable and sufficient cause,' condoned the delay and proceeded to adjudicate the appeal on its merits.

Background and Facts of the Case:

• The assessee, engaged in a Xerox business, e-filed the return of income for AY 2017-18 on July 31, 2017. The case underwent limited scrutiny under CASS, focusing on capital gains/loss on the sale of property and cash deposits during demonetization. The Ld. AO accepted the explanation provided by the assessee, who had made cash deposits during demonetization from the sale proceeds of an inherited property.

Penalty Proceedings and Appeal:

• Subsequently, a penalty show cause notice under section 271D was issued, alleging a violation of section 269SS for accepting Rs. 16,98,000 in cash. The Faceless Penalty Scheme was invoked, and the penalty was imposed by the Ld. AO. The assessee, dissatisfied with the order, appealed to the Ld. CIT (A)-NFAC, who sustained the penalty. This led to the assessee's appeal before the Tribunal.

Grounds of Appeal:

• The assessee raised multiple grounds of appeal, challenging the CIT (A)'s order. The main contentions included the CIT (A)'s alleged misinterpretation of facts and the law, the unjustified sustenance of the penalty, and the failure to consider the reasonable cause under section 273B.

Additional Grounds of Appeal:

• Additionally, the assessee raised two additional grounds, asserting that the penalty was barred by limitation and void-ab-initio due to the absence of any satisfaction recorded in the assessment order.

Tribunal's Decision:

• The Tribunal carefully examined the assessment order under section 143(3) and noted that the Ld. AO had not recorded satisfaction regarding the initiation of penalty proceedings. Citing the precedent set by the Supreme Court in CIT Vs Jai Laxmi Rice Mills, the Tribunal concluded that the penalty order under section 271D was without proper satisfaction and deemed it unsustainable in law. As a result, the Tribunal allowed the appeal, quashing the penalty imposed under section 271D.

Conclusion:

• The successful appeal serves as a reminder of the importance of proper documentation and satisfaction recording by the tax authorities. In this case, the Tribunal's reliance on legal precedents and a meticulous review of the assessment order played a crucial role in upholding the assessee's appeal. The decision reinforces the principle that penalty proceedings must be initiated with due diligence and adherence to legal requirements.

Topic- Rayala Rajeswara Rao Versus Income Tax Officer

Court-ITAT-Visakhapatnam

Date-29/11/2023

Team Taxonation

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