ALIBHAI ISMAIL VASYAT,NA vs. ARIVS.ITO, WARD-1, NAVSARI

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT ‘SMC’ BENCH, SURAT (HYBRID HEARING) BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1386/SRT/2025 (Assessment Year: 2019-20) M/s. Alibhai Ismail Vasyat Income Tax Department, Rahemaniya Society, Office of the Income Tax Officer, Thala, Chikhli, Vs. Ward – 1, Dist. Navsari – 396521 Navsari – 396445 Gujarat PAN: AGIPV8851E (Appellant) : (Respondent) Assessee by : Shri Sujesh C. Suratwala, CA Respondent by : Shri Ajay Uke, Sr. DR Date of Hearing : 26.03.2026 Date of Pronouncement : 04.06.2026 O R D E R PER : SUCHITRA KAMBLE, J M: The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “Ld. CIT(A)”] dated 03.12.2025 for the Assessment Year (in short “AY”) 2019-20.

ITA No.1386/SRT/2025 M/s. Alibhai Ismail Vasyat Rahemaniya Society 4. The learned CIT(A) failed to apply the binding ratio of the Hon'ble Gujarat High Court that penalty u/s 271D should not be levied for technical or venial breaches in the absence of any intention to introduce unaccounted money. 5. The learned CIT(A) erred in rejecting the Appellant's explanation mechanically, without disproving the bona fides of the transaction or demonstrating any prejudice to the Revenue. 6. The learned CIT(A) erred in law in ignoring favourable ITAT decisions, holding that cash receipt of sale consideration, duly recorded and disclosed, does not attract penalty u/s 271D, or alternatively is protected by Section 273B. 7. The impugned order is arbitrary, excessive, and contrary to the principles of natural justice, and therefore liable to be quashed. 8. The appellant craved leaves to add, alter, delete, amend or modify any portion of appeal with the prior permission of CIT (A)/NFAC.” 3. The assessee is an individual and is an agriculturist. During the financial year 2018-19 the assessee sold his residential house property for a total consideration of Rs.8,90,000/- to Shri Salimahmed Mahmadbhai Shaikh (Non- Resident Indian) residing in USA. The transfer was affected through registered sale deed dated 25.03.2019. Out of the total sale consideration, the assessee received Rs.3,50,000/- in cash on 25.03.2019 aggregating to Rs.5,45,000/- while the balance amount was received through banking channels. The assessee filed return of income for AY 2019-20 on 26.06.2020, declaring total income of Rs.3,46,650/-, which included Long Term Capital Gains (in short “LTCG”) arising from the subject property as well as another property sold during the year. The Assessing Officer (in short “Ld. AO”) held that since the assessee received cash it is in contravention of the provisions of section 269SS of the Income Tax Act, 1961 (in short “the Act”). The Ld. AO issued several show cause notices as well as the penalty proceedings u/s 271D of the Act were initiated. The assessee submitted its reply dated 20.08.2022 via email signed by the chartered accountant. The assessee explained that he is purely an agriculturist and required urgent cash payment and therefore received the cash amount. The assessee submitted copies of 7/12 and 8A extracts along with copies of purchaser’s passport and OCI card. The Ld. AO observed that the assessee

ITA No.1386/SRT/2025 M/s. Alibhai Ismail Vasyat Rahemaniya Society declared taxable income of Rs.3,46,650/- in his return for A.Y. 2019-20 thereby indicating that he had income chargeable to tax and was not exclusively an agriculturist. As the assessee could not prove expenses of reasonable cause u/s 273B of the Act, the Ld. AO levied a penalty of Rs.5,45,000/- being the amount accepted in cash in violation of section 269SS of the Act.

5.1 The Ld. AR further submitted that levy of penalty u/s 271D of the Act on the same amount will cause double taxation and unjust punishment.

ITA No.1386/SRT/2025 M/s. Alibhai Ismail Vasyat Rahemaniya Society 7. Heard both the parties and perused all the relevant materials available on record. It is pertinent to note that in the penalty notice issued u/s 271DA r.w.s. 274 of the Act it has been mentioned the contravention of provisions of section 269ST of the Act whereas the penalty is issued in contravention of section 269SS of the Act and penalty order was passed u/s 271D of the Act. Thus the notice itself is not as per the Income Tax Statutes. Besides this, on merits the assessee has a genuine sale transaction and at no point of time the Ld. AO pointed out that the sale of the land/property was not materialized. In fact, it is not only the cash component but there is a transaction completed through cheques/banking channels as well. The assessee’s difficulty more so over that of purchaser’s difficulty due to his non-resident status. The assessee has offered the tax in respect of the same. These facts were never denied by the Revenue at any point of time. Thus, the penalty levied u/s 271D of the Act does not sustain.

Order pronounced in the open court on 04.06.2026

Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Surat; Dated: 04.06.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Surat Bench