The penalty under section 271D for violation of section 269SS is not warranted when the transaction is fully declared and done under ignorance of law.

ORDER

Per George George K, Vice President:

This appeal at the instance of the assessee is directed against the order of CIT(A) dated 19.04.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.

2. Brief facts of the case are as follows:

Assessee is an individual. Assessee had sold a property on 15.06.2016. Out of the sale consideration of Rs.90 lakhs, she had received in cash a sum of Rs.49,10,000/-. For Assessment Year 2017-18, assessee filed the return of income on 11.02.2018 declaring total income of Rs.3,92,783/- and had also disclosed the capital gains arising on the sale of property. The assessee in the return of income claimed exemption under section 54 of the Act with regard to investment made from sale proceeds of the property. The assessment was selected for scrutiny by issuance of notice under section 143(2) of the Act. The Assessment Order was passed under section 143(3) of the Act (Order dated 09.12.2019) accepting the returned income.

3. However, during the course of assessment proceedings, it was noticed by the AO that assessee was in receipt of cash of Rs.49,10,000/- on account of sale of property on 15.06.2016. The AO was of the view that accepting cash on account of sale of immovable property was in contravention of provision of section 269SS of the Act which was amended by Finance Act, 2015 w.e.f. 01.06.2015, whereby the amount of cash received of more than Rs.20,000/- on account of sale of property was also included as violation of section 269SS of the Act. Accordingly, assessee was issued show cause notice under section 274 of the Act r.w.s. 271D of the Act on 11.01.2022. In response, assessee submitted as follows:

“I pushpalatha, I have sold my house property during the FY 2016-17 for Rs. 90,00,000/- and the same has been declared in my IT return and also assessment has been done by the ITO 3(2)(4), Bangalore on 09.12.2019. I am a housewife, I have received part of the sale consideration by way of cash due to lack of knowledge about cash transaction. I have Invested the total LTCG on purchase of new residential property and the same has been assessed by the ITO. Kindly consider the above facts and drop penalty proceedings."

4. The AO rejected the above explanation of the assessee and held that there is no “reasonable cause” for accepting the cash on account of sale of immovable property and imposed penalty under section 271D of the Act for a sum of Rs.49,10,000/- (being the cash accepted in contravention to the provisions of section 269SS of the Act).

5. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, assessee reiterated the submissions made before the AO. The CIT(A), after extracting the relevant provisions of the Act, held that assessee herself had accepted the fact that she has violated the provisions of section 269SS of the Act, out of ignorance of law and the same does not constitute “reasonable cause” as mandated under section 273B of the Act. Accordingly, the penalty imposed by the AO was confirmed by the CIT(A).

6. Aggrieved by the order of the CIT(A), assessee has filed the present appeal before the Tribunal. During the course of argument, assessee had raised several legal grounds such as (i) Order of penalty under section 271D of the Act is time barred (ii) there is no recording of satisfaction in the Assessment Order for initiation of penalty under section 271D of the Act (iii) the Order passed by the jurisdictional JCIT is bad in law since the correct authority ought to be NFAC. To the above contentions, the le