SATHYA KUMAR DEVIREDDY,NELLORE vs. ITO, WARD-1, NELLORE

The brief facts of the case are that the assessee did not file his return of income for A.Y. 2016-17. The assessee's assessment has been reopened under section 147 of the Income-tax Act, 1961 by issuance of notice under section 148 of the Act, on the ground that income chargeable to tax has escaped assessment on account of various financial transactions, including cash deposits into the bank account. During the course of assessment proceedings, it was found that the assessee had sold an immovable property and received consideration in cash in excess of Rs.20,000/-, and accordingly, proceedings under section 271D of the Income-tax Act, 1961 were initiated for violation of the provisions of section 269SS of the Act. During the course of proceedings under section 271D of the Act, the A.O. called upon the assessee to explain as to why penalty should not be levied for contravention of the provisions of section 269SS of the Act for accepting consideration of Rs.8,50,110/- for sale of property. In response to the show- cause notice, the assessee did not make any submission. Therefore, the A.O., taking note of the relevant information, levied penalty of Rs.8,50,110/- under section 271D of the Act, for violation of the provisions of section 269SS of the Act, on the ground that the assessee had accepted cash consideration for sale

Aggrieved by the order passed by the A.O. under section 271D of the Act, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the levy of penalty under section 271D of the Act, on the ground that he had sold the property by way of Agreement of Sale-cum-GPA on 25.05.2015 and received the entire consideration before the amendment to section 269SS of the Income-tax Act, 1961 by the Finance Act, 2015 w.e.f. 01.06.2015, and therefore, penalty cannot be levied. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of certain judicial precedents, including the decision of the Hon'ble Supreme Court in the case of Kum. A.B. Shanthi v. Assistant Director of Inspection reported in (2002) 255 ITR 258 (SC) upheld the penalty levied by the A.O. on the ground that the A.O. had rightly imposed the penalty of Rs.8,50,110/- for contravention of the provisions of section 269SS of the Income-tax Act, 1961.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri Surya Narayana Rao, C.A., submitted that the penalty levied by the A.O. under section 271D of the Act and upheld by the Ld. CIT(A) is unsustainable in law because the amended provisions of section 269SS of the Act for the inclusion of the term "specified sum" by the Finance Act, 2015 w.e.f. 01.06.2015 cannot be applied to the transaction of sale of property and the consequent cash received for the said sale of property prior to the date of amendment. Since the assessee had sold the property on 25.05.2015, the amended provisions of the Act cannot be applied and, therefore, there is no contravention of the provisions of section 269SS of the Act, and consequently, the penalty levied under section 271D of the Act, cannot be sustained. Therefore, he submitted that the penalty levied by the A.O. should be deleted.

The learned Senior A.R. for the Revenue, Ms. T. Mythili, on the other hand, supporting the order of the Ld. CIT(A), submitted that there is a clear violation of the provisions of section 269SS of the Act, by accepting cash towards sale of property and the same falls

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee had sold an immovable property by way of Agreement of Sale-cum-GPA dated 25.05.2015 and also received consideration in cash of Rs.8,50,110/-. The A.O. levied penalty under section 271D of the Act, for contravention of the provisions of section 269SS of the Act. The provisions of section 269SS of the Act, deal with the mode of taking or accepting certain loans, deposits and specified sums. As per the said section, no person shall take or accept from any other person any loan or deposit or any specified sum otherwise than by an account payee cheque or an account payee bank draft or use of an electronic clearing system through a bank account, if such amount is Rs.20,000/- or more. The term "specified sum" has been inserted by the Finance Act, 2015 w.e.f.01.06.2015. Before the amendment, the provisions of section

In the present case, there is no dispute with regard to the fact that the assessee had sold an immovable property by way of Agreement of Sale-cum-GPA dated 25.05.2015, which is prior to the insertion of the term "specified sum" in the provisions of section 269SS of the Act. Therefore, in our considered view, the A.O. erred in levying penalty under section 271D of the Act, of Rs.8,50,110/- for contravention of the provisions of section 269SS of the Act. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the penalty levied by the A.O. Thus, we set aside the order of the Ld. CIT(A) and delete the penalty levied under section 271D of the Act.

In the result, the appeal filed by the assessee is allowed.