The Income Tax Appellate Tribunal (ITAT) in Bangalore has allowed an appeal filed by an NRI-assessee and deleted the penalty imposed under Section 271D of the Income Tax Act, 1961. The ITAT held that the NRI-assessee had a reasonable cause for accepting part of the sale consideration in cash, despite the violation of Section 269SS. The ITAT took note of the difficulty faced by the assessee in selling the properties due to title-related issues and the lack of time in finalizing the transaction.
The case pertains to the Assessment Year 2017-18, where the NRI sold two immovable properties and received part of the sale consideration in cash. The revenue initiated penal proceedings against the assessee under Section 271D for violating the provisions of Section 269SS and imposed a penalty of Rs. 12.37 Lacs, which was equal to the sum accepted by the assessee. The Commissioner of Income Tax (Appeals) or CIT(A) confirmed the imposition of the penalty on NRI under Section 271D.
The ITAT noted that the assessee was an NRI who had come for a short visit to India and had to complete the sale transaction within ten days. The assessee found it challenging to sell the properties as 50% of the interest in the subject properties was initially held by her ex-husband, which was later allotted to the assessee. The disposal of the property was also challenging due to the slump in the real estate market following the introduction of RERA and other factors. Thus, when a buyer was interested, the NRI accepted the cash and closed the deal once and for all.
The ITAT observed that the intention of the NRI to defraud the revenue by violating the provisions of the Act or by evading taxes. The cash receipts had been duly disclosed in the sale deed as well as in the income tax returns. The ITAT distinguished the Madras High Court ruling relied upon by the revenue in Vasan Healthcare (P) Ltd. v. ACIT (2019) 411 ITR 499 (Mad.), by stating that the assessee therein could not discharge the onus as mandated under Section 273B. In contrast, the NRI in the present case satisfactorily explained that there was reasonable cause as mandated under Section 273B.
The ITAT relied on the Jharkhand High Court ruling in OMEC Engineers v. CIT (2007) 294 ITR 599 (Jhar.), Punjab and Haryana High Court ruling in CIT v. Sunil Kumar Goel (2009) 315 ITR 163 (P&H), and Madras High Court ruling in CIT v. Smt. M. Yesodha (2013) 351 ITR 265 (Mad.). In these cases, the penalty was deleted considering the urgency of the assessee to make payment, who had borrowed money in violation of provisions of section 269SS.
In light of the above facts and the relevant case law, the ITAT held that the NRI had a reasonable cause for accepting the consideration in cash, despite the violation of Section 269SS. Therefore, the ITAT deleted the penalty imposed under Section 271D.
In conclusion, this ITAT ruling provides clarity on the interpretation of Sections 269SS and 273B of the Income Tax Act, especially in cases where the taxpayer has a reasonable cause for violating the provisions of Section 269SS. It also emphasizes the importance of providing satisfactory explanations and adhering to the disclosure requirements to avoid the imposition of penalties.
[Anuradha Chivukula Challa v. Addl. CIT (International Taxation) – Date of Judgement : 14.09.2022 (ITAT Bangalore)]
