SMITHA AAILABOYINA,HYDERABAD vs. ITO(INT TAXN)-1, HYDERABAD

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad �ी रवीश सूद, माननीय �या�यक सद�य एवं �ी मधुसूदन साव�डया, माननीय लेखा सद�य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A. No.2247/Hyd/2025 (�नधा�रणवष�/ Assessment Year:2017-18) Smitha Aailaboyina, VS. Income Tax Officer Hyderabad. (Int. Taxn)-1, PAN: AHDPA6885F Hyderabad. (अपीलाथ�/ Appellant) (��यथ�/ Respondent)

करदाताका��त�न�ध�व/ : Shri Mohd. Afzal, Advocate Assessee Represented by राज�वका��त�न�ध�व/ : Dr. Sachin Kumar, Sr. AR Department Represented by सुनवाईसमा�तहोनेक��त�थ/ : 15/04/2026 Date of Conclusion of Hearing घोषणा क� तार�ख/ : 08/05/2026 Date of Pronouncement ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), 10, Hyderabad, dated 08/11/2024, which, in turn, arises from the order passed by the Addl. DIT (Int. Taxation), Hyderabad, under section 271D of the Income Tax Act, 1961 (for short, “the Act”), dated

2 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO 29/03/2022, for the Assessment Year (AY) 2017-18. The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:

“1. The learned Commissioner ought to have appreciated that the Assessing Officer while completing the assessment has not recorded satisfaction in respect of violation of provisions u/s 269SS and applicability of provisions u/s 271D of the IT Act, as the AO in the assessment proceedings made the addition of Rs.35,00,000/- u/s 69A of the IT Act, therefore, erred in confirming the order of the Addl.CIT levying penalty of Rs.35,00,000/- u/s 271D of the IT Act. 2. The learned Commissioner erred in assuming that there is no reasonable cause in violation of provisions u/s 269SS, therefore, erred in confirming the order u/s 271D of the IT Act levying penalty of Rs.35,00,000/-. 3. The learned Commissioner erred in confirming the order of 3 the Addl.CIT levying penalty of Rs.35,00,000/- u/s 271D of the IT Act, in the facts and circumstances of the case. 4. The learned CIT ought to have appreciated that the learned Additional CIT levied penalty U/s 271D of the IT Act beyond the period provided in section 275 of the IT act, therefore, erred in levying penalty of Rs 35,00,000/- U/s 271D of the IT Act. 5. The learned CIT ought to have appreciated that receipt of Rs 35,00,000/- towards part of sale consideration of the property 5 sold is recorded in the sale deed, which is Registered before the Sub- Registrar Shamshabad therefore, erred in confirming the penalty levied U/s 271D of the IT Act. 6. The appellant craves leave to add to, amend OR modify the 6 above grounds of appeal either before OR at the time of hearing of the appeal, if it is considered necessary.”

3 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO owners (each having equal 1/4th share) had sold an immovable property admeasuring 600 sq yds in Survey No.207 with plinth area of 25,000 sq ft consisting of Cellar + 3 upper floors situated at Madhura Nagar and others (Rallaguda) Shamshabad Village and Gram Panchayat, Ranga Reddy District vide an unregistered sale agreement, dated 27/10/2016 followed by a registered sale deed Document No.199/2017, dated 11/01/2017 for a total consideration of Rs.4.55 crores. The AO, on perusal of an unregistered sale agreement, dated 27/10/2016, observed that the assessee, along with other co-owners, had received part of the sale consideration of Rs. 1.40 crores in cash. Accordingly, the AO, as per the facts gathered from the unregistered sale agreement, dated 27/10/2021, observed that as the assessee had received his 1/4th share of the sale consideration of the aforementioned immovable property, amounting to Rs. 35,00,000/- (1/4th of Rs. 1.40 crores) in cash, which being in violation of the provisions of section 269SS of the Act attracted penalty under section 271D of the Act, referred the matter to the Addl. Commissioner of Income Tax (Int. Taxation), Hyderabad. Acting upon the information received from the ITO (Int. Taxation)-1, Hyderabad that the assessee was in receipt of sale consideration of Rs.35,00,000/- in cash on sale of immovable property in violation of the provisions of section 269SS of the Act, issued notice under section 274 of the Act, dated 22/09/2021 and called upon her to explain as to why the penalty under section 271D of the Act may not be imposed. In reply, the

4 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO assessee had come up with multi-facet submissions, viz., (i) that she was an NRI, and the family property belonging to her and other family members was being looked after by her father, Dr. A B Prem Raj, who had insisted on receiving the entire sale consideration and registering the sale deed as per the market value. Thereafter, the purchasers of the property, viz., Sri Rachuri Venugopal and three others had approached her father and agreed to pay the entire sale consideration on sale of the property of Rs.4.55 crores in official amount and to register the sale deed mentioning the entire amount of market value which was received in two parts, viz., (a) cheque: Rs.3.15 crores; and (b) cash: Rs.1.40 crores; (ii) that as the entire amount of sale consideration falling to the share of the assessee has been disclosed in the registered sale deed, which included the cash component of Rs.35,00,000, the assessee ought not to be subjected to penalty for technical violation of the provisions of section 269SS of the Act; (iii) that the assessee could have accepted the amount as per the value of the stamp duty through cheque and not disclosed the amount received by her in cash, but being a sincere law abiding citizen she had insisted to receive the entire sale consideration officially and declare the same in the sale deed remaining under a bona fide belief that there was no violation of any provisions of the Income Tax Act, 1961 or any other Act as the entire sale consideration received on the transfer of the subject property was being accounted for; (iv) that the sale consideration disclosed by the assessee

5 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO in the sale deed was more than the stamp duty value, as determined by the SRO and as the amendment to section 269SS was very recent as on the date of agreement, i.e., 27/10/2016, she had remained unaware and was not advised even by the SRO about the violation of the provisions of section 269SS of the Act; and (v) that the penalty under section 271D of the Act was barred by limitation as provided in section 275 of the Act. However, the assessee's explanation did not find favor with the Addl. DIT (Int. Taxation), Hyderabad, who vide his order passed under section 271D of the Act, dated 29/03/2022, imposed a penalty of Rs. 35 lakhs, i.e., the sum equal to the amount specified sum accepted by the assessee in cash towards the part consideration on sale of immovable property in violation of the provisions of section 269SS of the Act.

6 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO 7. Shri Mohd. Afzal, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the penalty imposed by the Addl. DIT (Int. Taxation), Hyderabad vide his order passed under section 271D of the Act, dated 29/03/2022, is barred by limitation. Elaborating on his contention, the Ld. AR submitted that as per section 275(1)(c) of the Act, no order imposing a penalty shall be passed after the expiry of the Financial Year in which the proceedings, in the course of which the penalty action was initiated, are completed; or six months from the end of the month in which the action for imposition of penalty is initiated, whichever period expires later. The Ld. AR submitted that in the present case, the penalty proceedings were initiated by the AO on 23/12/2019; therefore, the last date for passing the penalty order would be 30/06/2020, being the six months from the end of the month in which the penalty proceedings were initiated. Carrying his contention further, the Ld. AR submitted that as the penalty order under section 271D of the Act was passed on 29/03/2022, it was barred by limitation and thus liable to be quashed.

7 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO Act, dated 22/09/2021; therefore, he remained well within his jurisdiction to impose the penalty under section 271D of the Act, latest by 31/03/2022. The Ld. Sr-DR submitted that the Addl. DIT (Int. Taxation), Hyderabad, had imposed the penalty under section 271D of the Act, vide his order dated 29/03/2022, which was well within the limitation prescribed by mandate of law. The Ld. Sr-DR to support his contention relied upon the order of the Hon’ble High Court of Kerala in Grihalakshmi Vision vs. Addl. CIT, ITA Nos. 83 & 86 of 2014, dated 07/08/2015, wherein it was held that the date of initiation of penalty proceedings is the date of notice issued by the JCIT. The Ld. Sr-DR, based on his aforesaid contention, submitted that as the penalty imposed by the Addl. DIT (Int. Taxation), Hyderabad vide his order passed under section 271D of the Act, dated 29/03/2022, is well within the prescribed time limit contemplated under law; there was no substance in the contentions advanced by the assessee’s counsel that the same was barred by limitation.

8 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO Hon’ble High Court, after considering the judgment of the Hon’ble High Court of Kerala in Grihalakshmi Vision s. Addl. CIT (supra) had held that the reference by the AO to the Addl. CIT would trigger the penalty. Carrying his contention further, the Ld. AR submitted that the judgment of the Hon’ble High Court of Karnataka, being later in time (dated 17/01/2025), should prevail in the present case, but even otherwise, considering the conflicting views of the Hon’ble non-jurisdictional High Courts, one in favor of the assessee has to be adopted. The Ld. AR to support his contention had relied upon the judgment of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd (1973) 88 ITR 192 (SC). Apart from that, the Ld. AR had pressed into service the orders of the coordinate Benches of the Tribunal, viz., (i) ITAT, Hyderabad “B” Bench in Kesireddy Ravinder Reddy vs. ITO, Ward- 11(1), Hyderabad, ITA No.1617 & 1722/Hyd/2025 (AY: 2017-18), dated 11/02/2026; and (ii) ITAT, Hyderabad “B” Bench in Shri Balreddy Gade vs. Addl. Commissioner of Income Tax, Central Range-1, Hyderabad, ITA Nos. 575 & 578/Hyd/2025, dated 28/08/2025. Also, the Ld. AR had relied upon the judgment of the Hon’ble High Court of Delhi in the case of Property Plus Realtors vs. UOI and Ors, CWP No.15717/2024, dated 20/11/2024. The Ld. AR, based on his aforesaid contention, submitted that as the order passed by the Addl. DIT (Int. Taxation), Hyderabad, under section 271D of the Act, dated 29/03/2022, was barred by limitation; the same cannot be sustained and is liable to be struck down.

9 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO 10. We have thoughtfully considered the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the material available on record.

10 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) is received by the Principal Commissioner or Commissioner, whichever is later, (b) in a case where the relevant assessment or other order is the subject-matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.” (emphasis supplied by us)

11 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO assessment order being taken as the outer limit; or the date when the notice under section 274 of the Act was issued by the Addl. DIT (Int. Taxation), Hyderabad, to the assessee, i.e., 22/09/2021. We find that the Hon’ble High Court of Kerala in Grihalakshmi Vision vs. Addl. CIT (2015) 379 ITR 100 (Kerala) has held that the date of initiation of penalty is the date on which the notice is issued by the JCIT. However, we find that the Hon’ble High Court of Karnataka in PCIT vs. K. Umesh Shetty (2025) 479 ITR 270 (Karnataka), vide its subsequent order dated 17/01/2025, had, after considering the judgment of the Hon’ble High Court of Kerala in the case of Grihalakshmi Vision vs. Addl. CIT (supra) had held that the reference made by the AO to the Addl. CIT is the date of initiation of penalty for the purpose of section 275(1)(c) of the Act. In our view, the decision of the Hon’ble High Court of Karnataka in PCIT vs. K. Umesh Shetty (supra) is later in time (17/01/2025) and thus deserves to be followed. We say so, for two-fold reasons, viz., (i) that the Hon’ble High Court of Karnataka in the PCIT vs. K. Umesh Shetty (supra) had considered the decision of the Hon’ble High Court of Kerala in Grihalakshmi Vision vs. Addl. CIT (supra); and (ii) that even otherwise, where two possible interpretations, one favoring the revenue and the other favoring the assessee, are available, then as per the settled position of law as had been emphasized by the Hon’ble Supreme Court in CIT vs. Vegetable Products Ltd (1972) 83 ITR 192 (SC), the view favorable to the assessee must be adopted.

12 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO 15. We thus, in terms of our aforesaid deliberations, respectfully follow the view taken by the Hon’ble High Court of Karnataka in the case of PCIT vs. K. Umesh Shetty (supra), and herein observe that the penalty proceedings in the present case before us are deemed to have been initiated on the date on which the AO had made a reference to the Addl. DIT (Int. Taxation), Hyderabad. At this stage, we may herein observe that though the AO vide his order passed under section 143(3) of the Act, dated 23/12/2019, Page-14/Para-17 observed that the instance of violation of section 269SS of the Act detected during the course of the assessment proceedings, has been referred to Addl. Commissioner of Income Tax (IT), Hyderabad, separately, but there is no mention of the date on which the said reference was made. Although the Ld. Sr-DR in the course of the hearing of the appeal had submitted that the requisite date on which the reference was made by the AO to the ADID (Int. Taxation), Hyderabad, would be made available, but to date, nothing has been placed before us.

13 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO dated 23/12/2019. In our view, even if the date of reference which was made in the course of the assessment proceedings is taken as the date on which the assessment order was passed under section 143(3) of the Act, i.e, 23/12/2019, the penalty under section 271D of the Act could have been validly imposed as per the time limit prescribed under section 275(1)(c) of the Act latest by 30/06/2020. However, in the present case, as the penalty has been imposed by the Addl. DIT (Int. Taxation), Hyderabad vide his order passed under section 271D of the Act, dated 29/03/2022, the same, based on our aforesaid deliberations, is barred by limitation. Our aforesaid view is supported by the orders of the ITAT, Hyderabad “B” Bench in Kesireddy Ravinder Reddy vs. ITO, Ward- 11(1), Hyderabad, ITA No.1617 & 1722/Hyd/2025, dated 11/02/2026, and that in the case of Shri Balreddy Gade vs. Addl. Commissioner of Income Tax, Central Range-1, Hyderabad, ITA Nos. 575 & 578/Hyd/2025, dated 28/08/2025. Apart from that, we find support from the order of the Hon’ble High Court of Delhi in the case of Property Plus Realtors vs. UOI and Ors, CWP No.15717/2024, dated 20/11/2024. In the said case, the Hon’ble High Court after relying upon its earlier orders in the case of PCIT vs. JKD Capital & Finlease Ltd, 2015 SCC OnLine Delhi 14476 and CIT (TDS)-2, Delhi vs. Turner General Entertainment Networks India Private Limited, 2024 SCC OnLine Delhi 7760, had, in context of penalty under section 271DA of the Act, observed that the date of receipt of reference is required to be

14 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO considered as date of initiation of penalty proceedings, which, thus, was required to be imposed within six months from the end of the month in which the reference was received. We thus, in terms of our aforesaid deliberations, quash the penalty imposed by the Addl. DIT (Int. Taxation), Hyderabad vide his order under section 271D of the Act, dated 29/03/2022, as barred by limitation.

15 ITA No. 2247/Hyd/2025 Smitha Aailaboyina vs. ITO आदेशानुसार / BY ORDER Digitally signed by KAMALA KAMALA KUMAR KUMAR ORUGANTI ORUGANTI Date: 2026.05.08 17:32:30 +05'30' Sr. Private Secretary ITAT, Hyderabad.