BADMANABAN NARAYANAN,KANCHEEPURAM vs. ITO WARD 1, KANCHEEPURAM

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ITA 456/CHNY/2026Status: DisposedITAT Chennai21 July 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the cash receipt was part of the disclosed and completed sale consideration of immovable property and not a loan or deposit attracting penalty. It also noted that the assessee's explanation of medical urgency constituted a reasonable cause under Section 273B.

What were the facts?

The assessee received part of the sale consideration for a property in cash, amounting to Rs. 3,50,000/-. The Assessing Officer initiated penalty proceedings under Section 271D for violating Section 269SS of the Income Tax Act, which was confirmed by the CIT(A).

What were the issues?

Whether penalty under Section 271D is leviable for receiving cash as part of disclosed sale consideration for immovable property, and if a reasonable cause exists under Section 273B.

Which sections of the Income-tax Act were involved?

Section 269SS,Section 271D,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI GEORGE GEORGE KAND MS. PADMAVATHY.S

आदेश / O R D E R

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 05.01.2026 for Assessment Year (AY) 2017-18.

2.

The assessee is an individual. The A.O received information that the assessee has sold his property for a consideration of Rs.13,50,000/-. On verification of the sale deed, the A.O noticed that the assessee has received

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part of the consideration to the extent of Rs. 3,50,000/- in cash. The A.O therefore initiated penalty proceedings u/s. 271D of the Act for the reason that the assessee has violated the provisions of Section 269SS of the Act. The A.O did not accept the submissions of the assessee with regard to the reasons for receipt of consideration in cash and accordingly proceeded to levy penalty of Rs.3,50,000/- u/s. 271D of the Act. Aggrieved, the assessee filed further appeal before the CIT(A) who confirmed the penalty. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3.

The Ld. Authorized Representative (AR) of the assessee submitted that the assessee is an agriculturist and has received the payments from the purchaser of the land on various dates. The Ld. AR in this regard drew our attention to the confirmation with regard to the payments made in cash. The Ld. AR submitted that the assessee being an agriculturist received that consideration in cash which has been utilized for the purpose of purchase in agriculture produce and that the assessee has disclosed the entire consideration in the purchase deed. The assessee being uneducated is not well aware of the income tax procedures and that the cash receipts are part of the genuine declared transaction as mentioned in the registered deed. Accordingly, the Ld. AR submitted that the levy of penalty in the present case is not in accordance with the intention of the statute to bring to tax the unaccounted cash transactions. The Ld. AR in this regard relied on the decision of the Coordinate Bench in the case of Srinivasan Ramya vs. ACIT [ITA No.3162 /Chny/2025 dated 16.04.2026].

4.

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

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5.

We have heard the parties, and perused the material available on record. The assessee in the present case has sold a property for a consideration of Rs. 13,50,000/-. From the perusal of the deed of sale (page 6 to 21 of paper book) we notice that the entire consideration has been stated in the sale deed. We further notice from the perusal of the confirmation from the purchaser (page 5 of paper book) that the consideration in cash is paid in piecemeal on various dates to the tune of Rs.3,50,000/-. It is also an admitted fact that the assessee is an agriculturist carrying on agricultural activity in a village near Kanchipuram. From these facts, it is clear that the consideration is duly evidenced by the registered agreement and the amount received in cash is not from an undisclosed transaction. We notice that the Coordinate Bench while considering an identical issue in the case of Srinivasan Ramya (supra) has held that: “8. We have heard the rival submissions and perused the material available on record, including the penalty order passed u/s.271D of the Act, the impugned appellate order of the ld. CIT(A), and the case law relied upon by the assessee. The undisputed facts are that the assessee, an individual, sold an immovable property for a total consideration of Rs.50,50,000/-, out of which a sum of Rs.12,62,500/- was received in cash. It is also not in dispute that the transaction of sale of property was disclosed before the Department, that the assessee, in response to notice issued u/s.148 of the Act, filed return of income declaring total income of Rs.60,830/-, and that the assessment came to be completed u/s.147 r.w.s 144B of the Act by accepting the returned income. Thus, the underlying transaction of transfer of immovable property and the consideration received therefrom have not been doubted by the Revenue. The penalty has been levied solely on the footing that receipt of cash of Rs.12,62,500/- attracted the mischief of section 269SS, thereby warranting penalty u/s.271D of the Act. 9. The primary question which arises for consideration is whether the cash component received by the assessee as part of the final sale consideration for transfer of immovable property, duly reflected in the registered transaction, can be brought within the ambit of section 269SS of the Act. The said provision, as is well settled, was enacted to curb the proliferation of unaccounted transactions in the nature of loans, deposits, and, after the amendment, specified sums received in relation to transfer of immovable

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property. The contention of the ld.AR is that the expression “specified sum” covers only advance money received in relation to transfer of immovable property and not the amount received as part of the final sale consideration at the time of execution/registration of the sale transaction.

10.

On a careful consideration of the statutory scheme, we find substance in the plea of the assessee. Explanation (iv) to section 269SS defines “specified sum” to mean any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. However, the legislative background and the context in which the provision was introduced indicate that the object was to regulate unaccounted cash receipts in property transactions, particularly amounts taken in advance prior to completion of transfer. Where the entire transaction culminates in a registered conveyance and the receipt forms part of the disclosed sale consideration itself, the character of such receipt stands on a different footing from a loan, deposit, or even a standalone advance disconnected from the completed transfer.

11.

In the present case, the Revenue has not brought any material on record to show that the impugned cash receipt represented an undisclosed transaction, accommodation entry, or any device adopted to evade tax. On the contrary, the sale transaction itself stands accepted in the reassessment proceedings. No addition has been made on account of suppression of sale consideration or unexplained money. Therefore, the foundational object behind section 269SS, namely prevention of false explanation of unaccounted cash in the guise of loans, deposits, or similar receipts, does not appear to be attracted on the peculiar facts of the present case.

12.

We further note that the assessee has consistently pleaded that the receipt of cash was on account of medical exigency and, therefore, there existed a reasonable cause within the meaning of section 273B of the Act. The authorities below have not properly controverted this explanation by bringing any material to show that the explanation was false, mala fide, or inherently improbable. It is trite law that penalty u/s.271D of the Act is not automatic merely because there is a technical breach. Once the assessee offers an explanation and demonstrates surrounding circumstances showing bona fides, the authority is required to examine the same in the light of section 273B. In the instant case, the explanation of medical emergency has not been meaningfully dealt with either in the penalty order or in the appellate order, except by mechanically observing that the amount was received in cash in excess of the prescribed threshold.

13.

The judicial precedents cited by the ld.AR also lend support to the view that where cash is received as part of genuine sale consideration of immovable property and the transaction is duly recorded, section 269SS

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may not be invoked in a rigid or mechanical manner. The coordinate bench decisions referred to by the assessee, namely Noordeen Ahmed Amina v. ITO, Wahid Ali v. JCIT, and ITO v. R. Dhinagharan HUF (supra), have taken the view that genuine and disclosed cash sale consideration recorded in registered property documents does not automatically justify levy of penalty u/s.271D. Though each case turns on its own facts, the ratio emerging from these decisions is that the substance of the transaction and the legislative purpose of the provision must prevail over a purely literal or technical approach. 14. The reliance placed by the assessee on the decision of the Hon’ble Supreme Court in Hindustan Steel Ltd. v. State of Orissa is also apposite to the extent that penalty is not to be imposed merely because it is lawful to do so. Even in fiscal statutes, penalty provisions are required to be invoked with due regard to the conduct of the assessee, the surrounding circumstances, and the existence of contumacious or deliberate default. In the present case, the material on record does not indicate any attempt at tax evasion, concealment,or introduction of unaccounted money. The transaction is admitted, documented, and acted upon by the Department itself in the reassessment proceedings. 15. Having regard to the totality of the facts, we are of the considered view that the impugned penalty u/s.271D of the Act is not sustainable. Firstly, the cash receipt in question formed part of the disclosed and completed sale consideration of immovable property and cannot, in the facts of the present case, be equated with a loan, deposit, or such “specified sum” as would attract penal consequences u/s.271D of the Act in the manner understood by the lower authorities. Secondly, even assuming that there was a technical infraction, the explanation furnished by the assessee regarding medical urgency constitutes a plausible and bona fide explanation, thereby bringing the case within the protective ambit of section 273B of the Act. 16. Accordingly, we hold that the ld. CIT(A) was not justified in confirming the penalty of Rs.12,62,000/- levied by the AO u/s.271D of the Act. The same is directed to be deleted. The grounds raised by the assessee are allowed.”

6.

The ratio laid down in the above decision is that genuine and disclosed cash sale consideration recorded in registered property documents does not automatically justify levy of penalty u/s. 271D of the Act for the reason that the substance of the transaction and the legislative purpose of the provision must prevail over a purely literal or technical approach. Considering that the

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facts in the assessee's case are being identical, we are of the view that the above ratio is applicable in assessee's case also. Accordingly, we direct the A.O to delete the penalty levied u/s. 271D of the Act.

7.

In the result, the appeal of the assessee is allowed.

Order pronounced on 21st day of July, 2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (पदमावती यस) (Padmavathy.S) (George George K) उपा�� / Vice President लेखा सद�य सद�य /Accountant Member लेखा लेखा लेखा सद�य सद�य चे�नई/Chennai, �दनांक/Dated: 21st July, 2026. EDN, Sr. P.S EJTADA Digitally signed by EJTADA DURGA NARESH DURGA आदेश क� �ितिल�प अ�े�षत/Copy to: Date: 2026.07.22 17:02:31 NARESH +05'30' 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

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