Bangalore ITAT’s Ruling on Penalty for Excessive Cash Receipts
In a noteworthy decision, the Bangalore Income Tax Appellate Tribunal (ITAT) ruled against the Revenue Department’s selective approach in assessing Indian citizens, deeming it a violation of Article 14 of the Constitution. The tribunal consequently nullified the penalty imposed by the Assessing Officer under section 271D of the Income Tax Act on an assessee for receiving surplus cash during a property sale, in contravention of taxation regulations.
Section 271D of the Income Tax Act stipulates penalties for taxpayers accepting loans, deposits, or specified amounts in violation of Section 269SS, which mandates all transactions exceeding Rs. 20,000 to be conducted through official banking channels.
Furthermore, Section 273B of the Income Tax Act exempts taxpayers from penalties under section 271F if they can demonstrate a reasonable cause for their non-compliance. The term “reasonable cause” denotes circumstances that would prevent an ordinarily prudent individual, acting without negligence, from performing the required action.
Notably, the ITAT bench, comprising Chandra Poojari (Accountant Member) and Prakash Chandra Yadav (Judicial Member), determined that the assessee had a valid explanation, qualifying as bona fide, thus rendering no penalty applicable under section 273B. The operation of section 271D is explicitly excluded by section 273B, as per the bench’s observations.
Case Background:
The individual assessee had sold two properties for a sum of Rs. 8,39,000 in cash. Following the filing of the tax return, the assessee received a penalty notice under section 271D, contesting that there was a reasonable cause for accepting the sale amount in cash.
Tribunal’s Findings:
The tribunal noted the considerable delay in the penalty notice, issued almost four years after the processing of the tax return, without any contradictory evidence presented by the Departmental Representative. Additionally, the complexity of Income Tax Laws and the potential for errors even by professionals was acknowledged by the bench.
Given the circumstances surrounding the introduction of the amendments and the practical challenges in arranging Demand Drafts due to limited banking hours, the bench found merit in the assessee’s explanations. Confirmations from the buyers further supported the inability to obtain Demand Drafts within the restricted banking hours.
Moreover, the tribunal observed instances of similar cash transactions where penalties were not imposed without evident justification by the department.
Consequently, the ITAT revoked the penalty and ruled in favor of the assessee.
Legal Representation:
- Counsel for Appellant/ Assessee: Suman Lunkar
- Counsel for Respondent/ Revenue: Neha Shaya
Case Details:
- Case Title: Laxmilal Badolla vs. The NFAC
- Read Full Case Summary