Section 273B of the IT act gives that there will be no penalty imposed on the individual or the taxpayers if it is towards section 271D of the IT Act if he proves that there is a genuine reason for the failure. To the council, the taxpayer said that the two of the neighbors of the taxpayers buy the properties and they need to furnish the payment to HUDA. Since there it possesses no bank account hence upon the taxpayer’s request the taxpayer takes the amount and deposits it in his same account.
The drafts were being made in the favour of HUDA and then it was deposited by them. The receipts are in the name of Mrs. Sujata and Shri Dushyant of the equivalent amount. Indeed, the HUDA receipts are in the favor of Shri Dushyant also placed in the records. This concern clarified that the taxpayer has a genuine cause for failure to obey the provisions of law contained u/s 271D of the Income Tax Act. Furthermore, passing the assessment order on 21st March 2014 the assessing officer undoubted the taxpayer’s elaboration towards the cash receipt from these 2 neighbors and provided the drafts for these 2 neighbors in order for a breach of the provision of section 271D of the I.T. Act.
In this case, the taxpayer has a reason for the failure to obey the provisions of the law and no satisfaction is recorded through the assessing officer in the assessment order will provide that there is no late fee imposed in the said concern.
Full Text of Income Tax Appellate Tribunal Ruling
- The taxpayer who made the appeal has been imposed with respect to the order of Ld. CIT(Appeals), Rohtak dated 14.12.2016 for AY 2011-12, challenging the levy of penalty u/s 271D of the I.T. Act.
- We have been through the Ld. Representatives of both parties and perused the material on record.
- The taxpayer has furnished the return of income which shows that the income of Rs 2,30,000 along with the agricultural income of Rs. 1,10,000/- was filed on 31.03.2012. The taxpayer is the civil contractor. The assessing officer has built the addition of Rs 42,587 upon the account of less withdrawal of household funds. The AO has filed the addition of Rs 1,10,000 upon the undisclosed agricultural income. The examination was ended on u/s 143(3) dated 21.03.2014. The assessing officer has imposed the penalty u/s 271D of the I.T. Act vide order dated 28.04.2015/01.05.2015. The assessing officer has shown that the taxpayer has obtained the cash amount of Rs 1,74,320/- and Rs. 35,90,165/-from Ms. Sujata and Shri Dushyant excluding the account payee cheque/draft towards the breach of provisions of section 269SS of the Act. Towards answering the show cause notice the taxpayers filed a reply which the AO has not been accepted thus penalty u/s 271D of the Act was imposed. The Ld. CIT(A) rejected the appeal of the taxpayers.
- The taxpayer’s counsel has explained that he has maintained the account with IDBI Bank, Bahadurgarh. Ms. Sujata and Shri Dushyant who are neighbors of the taxpayers and known to be the taxpayer for several years. They possess no bank account and have purchased the property along with the furnishing required for the payment to HUDA for the development charges which can be done only via demand draft and urged to assist them. They had provided cash to the taxpayer via which the drafts were made in their names for the payable amount to HUDA towards development charges. The taxpayers perform the act on the basis of humanitarian relief. Copy of the bank statement towards the above individual and with the bank account of the taxpayers have furnished the receipt in the name of Sh. Dushyant is also issued by HUDA in the same amount.
- Thus the taxpayer’s counsel submitted that because of the above reason the taxpayer obtained the cash from these 2 people. Thus no penalty is to be levied. He depends on the order of the Income Tax Appellate Tribunal (ITAT) Jaipur Bench in the case of Sunil Kumar Vs Addl. CIT in ITA No. 203 & 204 (JP)/2018 dated 09.01.2019 where the amount was obtained for building the demand draft in favor of the Excise Department for participating in the tender of the shop. In these situations, it was held that the taxpayers have a genuine reason thus the penalty was revoked.
- On the other hand Ld. DR depends upon the orders of the council below:
- We have acknowledged the rival submissions. Section 273B of the I.T. Act states that no penalty will be subjected upon the individual or the taxpayer as per the case for any failure justified in section 271D of the I.T. Act if he proves that there was a reason for the said failure. The elaboration was given by the taxpayer to the council that two of the neighbors of the taxpayer had bought the properties and they had to furnish the payment to HUDA. Since there was no bank account thus upon their request the taxpayers had obtained the amount and deposited it in his bank account. The drafts were made in favor of HUDA and they then deposited by them. In the name of Mrs. Sujata and Shri Dushyant, the receipts are there of an equal amount. The receipts of HUDA towards Shri Dushyant are also ordered on record. These points will clearly show that the taxpayer has a genuine reason for failure to obey the provisions of section u/s 271D of the I.T. Act. Moreover, during passing the assessment order on 21st March 2014 the assessing officer will not have any doubt in taxpayers elaboration with respect to the receipts of cash from these two neighbors and provides drafts for the two neighbors and ultimate payment to HUDA. the AO doesn’t write any satisfaction in the Assessment order for HUDA. the AO unable to record any satisfaction inside the assessment order towards the breach of provisions of section 271D of the I.T. Act. The Hon’ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills 379 ITR 521 accommodated as under:
“For the AY 1992-93, the assessment order was passed on the assessee on February 26, 1996, ex parte. While framing the assessment, the Assessing Officer observed that the assessee had contravened the provisions of section 269SS of the Income-tax Act, 1961, and because of this the Assessing Officer was satisfied that penalty proceedings u/s 271D of the Act were to be initiated.”
“On appeal, the Commissioner (Appeals) by order dated December 5, 1996, set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. Meanwhile, penalty under section 271D was levied by order dated September 23, 1996, i.e., before the appeal of the assessee against the original assessment order, was heard and allowed thereby setting aside the assessment order itself.”
“After remand, the AO passed a fresh assessment order but in this assessment order, no satisfaction regarding initiation of penalty proceedings u/s 271D of the Act was recorded. The Tribunal as well as the High Court held that the penalty order passed on the basis of the original assessment order could not still survive when that assessment order had been set aside because the satisfaction recorded therein for the purpose of initiation of the penalty proceedings would also not survive. On further appeals:”
“Held, dismissing the appeals, that in the fresh assessment order there was no satisfaction recorded regarding penalty proceedings under section 271D of the Act though in that order the Assessing Officer wanted penalty proceedings to be initiated u/s 271(1)(c) of the Act. Thus, the penalty u/s 271D was without any satisfaction and, therefore, no such penalty could be levied.”
- From the above concerning the judgment of the Supreme Court above it is clear that the taxpayer has the genuine reason for the failure to obey through the provision of law and that no satisfaction is recorded through AO in the assessment order, will clearly show that no penalty is levied in the case.
- Taking reference from the above sections, we hereby cancel the orders of the authorities and remove the penalty under section 271D of the I.T. Act.
- In context to the appeal of the taxpayer is permitted. Order pronounced in the open court on 10th March 2021.
