ITAT Deletes Penalty as Assessee accepted Cash on Flat Sale for Daughter’s Marriage

Case Details: Sonia Verma v. ITO - [2023] 149 taxmann.com 21 (Chandigarh-Trib.)

Judiciary and Counsel Details

• • Smt Diva Singh, Judicial Member
  • Sudhir Sehgal, Adv. for the Appellant.
  • Akashdeep, JCIT, Sr. DR for the Respondent.

Facts of the Case

Assessee, a resident individual, sold a flat in the year under consideration for cash. Subsequently, the revenue authorities levied penalty under section 271D upon the assessee for receiving the sales consideration in cash and issued a notice under section 274.

On appeal, CIT(A) upheld the penalty levied. Aggrieved by the order, an appeal was preferred to the Chandigarh Tribunal.

The assessee submitted that she was in dire need of funds for materializing her daughter’s wedding, which was being repeatedly postponed after the engagement due to a shortage of funds. She also contended that she was unaware of the law that cash payments against the sale of the property could not be accepted.

ITAT Held

The Tribunal held that Section 273B explicitly states that if the assessee offers an explanation showing reasonable cause for the failure, the penalties considered therein, including those under Section 271D, are not attracted.

In the instant case, sale proceeds of flat were received in cash by the assessee on five different occasions; the assessee’s daughter’s marriage, finalized in January 2013, was frequently postponed because of lack of funds and ultimately took place in December 2016.

Further, the purchaser had expressed his inability to make full payment by way of a one-time payment. The assessee, on account of the medical infirmity of her husband, travelled to Delhi to collect the sale proceeds on different dates and simultaneously made purchases in Delhi for the wedding of the daughter. Documentary evidence in support of these submissions is available.

Assessee had led sufficient explanations consistently on record with evidence which remains unrebutted to plead a reasonable cause. The simple dictionary meaning of ‘reasonable’ is fair, practical and sensible. A reasonable cause is a standard of proof that is applied to a set of facts or actions to prove whether a reasonable person would have come to the same conclusion or acted in the same way given the totality of the circumstances.

Considering the consistent explanation available on record, the assessee had successfully made out a case demonstrating a reasonable cause for her to accept payments in cash.

Further, the assessee also pleaded ignorance of the law. The Tribunal agreed with the arguments of the revenue that ignorance of the law is no excuse. However, it is necessary to keep in mind the provisions of the law invoked. The issue is not to be decided on the plea of ignorance of the law and is to be considered under the umbrella provision of section 273B. Thus, the pleading that the assessee was in ignorance of the law at best can be considered a submission to argue that it is not a case of wilful and deliberate defiance of the law on the part of the assessee.

Therefore, the assessee’s plea was accepted, and the penalty order was accordingly quashed.

List of Cases Referred to

• • Pr. CIT v. Tehal Singh Khara & Sons, Distt. Ferozepur [2017] 64 IT REPS 420 (Punj. & Har.) (para 5.1)
  • CIT v. Saini Medical Store [2005] 276 ITR 79 (Punj & Har.) (para 5.1)
  • CIT v. Sunil Kumar Goel [2009] 183 Taxman 53/315 ITR 163 (Punj & Har.) (para 5.1)
  • CIT v. Harpal Singh Jaswant Singh [ITR No. 14 of 1995, dated 13-9-2006] (para 5.3)
  • CIT v. Speedways Rubber (P.) Ltd. [2010] 326 ITR 31 (Punj & Har.) (para 5.3)
  • CIT v. Smt. Dimpal Yadav [2015] 61 taxmann.com 219/234 Taxman 160/379 ITR 177 (All.) (para 5.3)
  • Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) (para 5.3)
  • Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 118 ITR 326 (SC) (para 5.3)
  • Faridkot Bathinda Kshetriya Gramin Bank v. Jt. CIT [2003] 125 Taxman 268 (Mag.) (Amritsar) (para 5.3)
  • CIT v. Smt. M Yesodha [2013] 31 taxmann.com 153/351 ITR 265 (Mad.) (para 5.3)
  • CIT v. Maheshwari Nirman Udyog [2008] 170 Taxman 502/302 ITR 201 (Raj.) (para 5.3)
  • CIT v. Bhagwati Prasad Bajoria HUF [2003] 133 Taxman 426/263 ITR 487 (Gauhati) (para 5.3)
  • Mohanjeet Singh v. Jt. CIT [2016] 70 taxmann.com 335/159 ITD 582 (Chd. – Trib.) (para 5.3)
  • CIT v. Manohar Lal Thakral [2018] 93 taxmann.com 156 (Punj & Har.) (para 5.3).