The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the penalty under Section 271D of the Income Tax Act as the Assessee Bonafide explains reasonable Cause.
The assessee, Sarita Singh filed a return of income declaring an income of Rs. 2,30,000 plus agricultural income of Rs. 1,10,000. The assessee is a Civil Contractor.
The AO made an addition of Rs. 42,587 on account of low household withdrawal. The AO also made an addition of Rs. 1,10,000 on account of undisclosed agricultural income.
The assessment was completed under section 143(3). The AO imposed a penalty under section 271D. The AO in this order has mentioned that the assessee has received cash amounts of Rs.1,74,320 and Rs. 35,90,165 from Ms. Sujata and Shri Dushyant other than account payee cheque/draft in contravention of provisions of section 269SS of the Act.
The assessee in response to the show-cause notice filed a reply which was not accepted by AO, hence, a penalty under section 271D of the Act was imposed. The CIT(A) dismissed the appeal of the assessee.
The assessee submitted that the assessee has maintained an account with IDBI Bank, Bahadurgarh. Ms. Sujata and Shri Dushyant are the neighbors of the assessee and known the assessee for many years.
They have no bank account and have purchased the property and they have to make payment to HUDA for development charges which could be made only through demand draft and requested to help them. They have given cash to the assessee through which drafts were prepared in their names for payment to be made to HUDA for development charges.
The assessee did this act on humanitarian grounds to help them out. Copy of the bank statement in the name of the above persons along with the bank account of the assessee has filed the receipt in the name of Sh. Dushyant is also filed issued by HUDA of the same amount.
for the assessee, therefore, submitted that due to the above reasons cause assessee received cash from these two persons. Therefore, no penalty is leviable.
He has relied upon the order of the ITAT Jaipur Bench in the case of Sunil Kumar Vs. Addl. CIT in ITA No. 203 & 204 (JP)/2018 dated 09.01.2019 in which amount was received for making demand draft in favor of Excise Department for participating in the tender of the liquor shop.
In such circumstances, it was held that the assessee has a reasonable explanation, therefore, the penalty was canceled.
Section 273B of the I.T. 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 I.T. 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 neighbors of the assessee purchased the properties and they were to make payment to HUDA.
The ITAT held that the facts would clearly disclose that assessee has reasonable cause for failure to comply with provisions of law contained under section 271D.
Further, while passing the assessment order the AO did not disbelieve the explanation of the assessee as regards receipt of cash from these two neighbors and issue of drafts for these two neighbors, and ultimate payment to HUDA.
The AO did not record any satisfaction in the assessment order for a contravention of provisions of section 271D.