In a recent case, the Income Tax Appellate Tribunal (ITAT) has quashed the penalty levied on an assessee for accepting sale proceeds in cash on different dates while selling her flat. The assessee had put forth various reasons to establish that the transaction was bona fide and genuine, and not intended to evade taxes.
Background of the Case:
The assessee had sold her flat and received sale proceeds in cash on five different dates. The revenue authorities imposed a penalty under section 271D for violating the provisions of section 269SS. The assessee contended that the sale proceeds were received in cash due to various reasons such as arranging funds for her daughter’s marriage, the buyer’s inability to pay in a lump sum on a single date, and the medical infirmity of her husband.
The assessee put forth several arguments to establish the genuineness of the transaction. Firstly, she sold her flat to arrange funds for her daughter’s marriage, which was repeatedly postponed due to a lack of funds. Secondly, the buyer of the property informed the assessee that he could not pay the entire amount on a single date, and thus, the sale consideration was received in cash on five different dates. Thirdly, due to the medical condition of her husband, the assessee had to travel to Delhi to collect the sale proceeds on different dates and simultaneously make purchases for her daughter’s wedding.
The assessee further contended that relying on the purchaser to make payments through cheques was not a practical option, as there was no guarantee that the cheques would be honoured. The assessee also considered depositing the amount through RTGS/cheque in her bank account, but withdrawing cash in Jagraon and travelling with it to Delhi was deemed unsafe and impractical. Furthermore, there were restrictions on cash withdrawals from ATMs.
On considering the facts of the case, the ITAT held that the assessee had successfully established that there was a reasonable cause for her to accept payments on specific dates. The explanation provided by the assessee was bona fide and was accepted by the court. Therefore, the penalty imposed on the assessee was quashed. [Sonia Verma v. ITO (2023) 149 taxmann.com 21 (ITAT Chandigarh)]
Implications of the Case:
This decision by the ITAT has significant implications as it highlights that if an assessee can provide sufficient evidence to demonstrate that the transaction was bona fide and genuine, then penalties under section 271D may be waived. This case also serves as a reminder to taxpayers that it is essential to maintain proper records and evidence to support their transactions and financial dealings.
Importance of Seeking Professional Tax Advice:
In light of this case, it is crucial for taxpayers to seek professional tax advice from a qualified Chartered Accountant (CA). A CA can provide expert guidance and help in maintaining accurate records, ensuring compliance with tax laws, and preparing for tax assessments and audits.
In conclusion, the ITAT has quashed the penalty levied on the assessee for accepting sale proceeds in cash on different dates while selling her flat. The court accepted the bona fide explanation provided by the assessee and held that there was a reasonable cause for her to accept payments on specific dates. This decision reinforces the importance of maintaining proper records and seeking professional tax advice from a qualified CA. If you are looking for a reliable and experienced CA firm in Gurgaon, contact us today.