SHREE BALAJI ASSOCIATES,BILIMORA vs. ITO, WARD-5, NAVSARI

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH "SMC", SURAT Before: Shri T. R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 818/SRT/2025 Assessment Year: 2017-18

Shree Balaji Associates, Vs ITO, 1, Shree Balaji residency, Ward – 5, Panchal Samajwadi, Gohar Navsari. Baug, Bilimora, Bilimora-396321(Gujarat) PAN: ACBFS 4052 R (Appellant) (Respondent)

Assessee Represented by : Shri Sujesh Suratwala, C.A. Revenue Represented : Shri Ajay Uke, Sr. DR Date of hearing : 30.04.2026 Date of pronouncement : 16/06/2026 आदेश/ORDER PER: RATNESH NANDAN SAHAY, AM: 1. This is an appeal filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [In short, ‘the ld. CIT(A)’] dated 02/07/2025 for the assessment year (AY) 2017-18 wherein the assessee has raised following grounds of appeal: "1. The learned AO as well as CIT(A)/NFAC has erred in levying penalty of U/s 271D of the Act of Rs. 9,46,600/- without considering the facts and cogent evidences produce before him which is contrary to law hence, requires to be deleted. 2. On the facts and in the circumstances of the case and in law, the Learned JCIT, as well as the CIT(A)/NFAC, has grossly erred in

2 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO confirming the levy of penalty under section 271D of the Act without appreciating that the appellant had received the sale consideration in cash from bonafide parties (viz. agriculturists, NRIs) having genuine sources of income and without any intention to avoid tax or generate black money. 3. The Learned. JCIT failed to appreciate that the impugned cash transactions were duly disclosed, genuine, and duly recorded in the registered sale deeds and accepted by the Sub-Registrar, thereby demonstrating transparency and absence of any tax evasion or black money generation. 4. The penalty levied u/s 271D is bad in law in view of the binding CBDT Circular No. 19/2015 dated 27.11.2015, titled explanatory notes to the provisions of the Finance Act 2015 in which this amendment was explained with the preamble. In order to curb generation of black money in cash in immovable transactions which clarifies that the object of introducing the amendment to section 269SS was to curb black money in immovable property transactions, and not to penalize bonafide or genuine transactions like the present one. 5. That both the AO and the CIT(A)/NFAC failed to consider the evidences, affidavits, and submission on record establishing that the purchasers had adequate genuine sources of funds and that the entire transaction was transparent and above board. 6. The authorities below failed to appreciate the judicial pronouncements which have consistently held that penalty u/s 271D is not automatic and cannot be levied in cases where the breach is venial, technical, or caused by a bona fide belief or misunderstanding of law. Reliance is placed on the following decisions:  K.P. Varghese v. ITO (131 ITR 597) (SC)  Hindustan Steels Ltd. v. State of Orissa (83 ITR 26) (SC)  Sudarshan Auto & General Finance v. CIT (60 TTJ 567) (Del)  Choudhary Co. Bhujiawala v. CIT (89 TTJ 357) (Raj.) 7. The Learned JCIT/CIT(A) has overlooked the fact that the assessment u/s 143(3) has been completed after due verification, wherein the source of cash receipts and nature of land were accepted and no adverse inference was drawn in respect of concealment, unexplained income, or black money. 8. The Learned. JCIT erred in concluding that the mere technical contravention of section 269SS mandates penalty, without discharging the burden under section 273B of determining the existence of reasonable cause and intention to evade taxes. 9. Assessee firm has sited various judicial pronouncement in favor of facts and legal position involved which is completely overlook by the AO

3 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO which is bad in law Hence addition made by AO as well as CIT(A)/NFAC is required to be quashed. 10. The appellant craved leaves to add, alter, delete, amend or modify any portion of appeal with the prior permission of CIT (A)." 2. The facts of the case, in brief, are that the assessment order under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) was passed in this case on 26/12/2019 making an addition of ₹ 7,54,000/- under Section 68 of the Act as unexplained cash credit. Penalty proceedings under Section 271D of the Act was also initiated by the Assessing Officer for violation of the provisions of Section 269SS of the Act for accepting the loan, deposit or other specified sum in cash in excess of ₹ 20,000/-. The Assessing Officer after giving due opportunity of being heard to the assessee, finally imposed a penalty of ₹ 9,46,600/-. 3. Aggrieved by the penalty order, the assessee filed appeal before the ld. CIT(A), who vide the impugned order dated 02/07/2025 dismissed the appeal of the assessee and confirmed the penalty order imposed by the Assessing Officer on the ground that the assessee has failed to establish that there were good and sufficient reasons for the contravention of the provisions of Section 269SS of the Act. 4. Aggrieved by the order of the ld. CIT(A), the present appeal has been filed before this Tribunal.

4 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO 5. the appellant, while filing the appeal before this Tribunal, has filed ‘statement of facts’ in which it has been stated as under: "The assessee is a partnership firm engaged in the business of land development and real estate. For the year under consideration, the assessee firm had filed its return of income on 18.01.2018, declaring a total income of Rs. 5,44,520/-. The return was selected for scrutiny under CASS guidelines and statutory notices were duly complied with. During the course of assessment proceedings, it was noted by the Jurisdictional Assessing Officer (JAO) that the assessee firm had Total deposited cash aggregating to Rs.29,00,000/- in its bank account maintained with The Gandevi Peoples' Co-op Bank Ltd., Account No. 802091503000489 during the demonetization period. The assessee firm submitted the details and source of cash deposit of Rs 29,00,000/-. The assessee firm had received Partly cash amount towards sale of row house from the following persons during the year under consideration: Sr. Name PAN Reg. sale deed Amount No. No. 1. Jinesh N Tandel ALEPT5159J GND/713/2018 ₹ 1,80,000/- ₹ 2,00,000/- 2. Rohan K Tandel ANSPT4374K GND/929/2018 ₹ 1,40,000/- 3. Yogesh S Kher CIGPK4204A GND/604/2018 ₹ 4,26,000/- 4. Ramilaben B AADHAR No. GND/1045/2016 Tandel 688938697358 ₹ 9,46,000/- Total

Further, assessee firm has withdraw cash amount of Rs. 12,00,000/- on 07/11/2016 (immediately preceding day before of Demonetization). Learned AO while passing the order U/s 143(3) of the Act vide DIN No. ITBA/AST/S/143(3)/2019-20/1023119647(1) dated 26/12/2019 accept the contention of the assessee firm and allowed a total sum of Rs. 21,46,000/-(Rs.9,46,000 + Rs. 12,00,000/-

5 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO ) and remaining Rs. 7,54,000/- were treated as Unexplained Cash credit U/s 68 of the Act. Moreover, learned AO has initiated the penalty proceeding U/s 271D of the Act for violation of the provision of Section 269SS explanation (iv) for accepting cash of Rs. 9,46,000/- towards sale of Immovable property. It is only during the course of assessment that the learned Assessing Officer considered the applicability of Section 269SS, observing that the cash receipts towards sale consideration may constitute a violation of the said provision, potentially inviting penalty under Section 271D of the Act. It is pertinent to submit that the assessee had duly explained the nature and source of cash receipts before the Assessing Officer and during the appellate proceedings before the CIT(A)/NFAC, where Affidavit of the purchasers were also submitted, confirming the source and genuineness of the transactions. The assessee humbly submits that the said cash receipts do not involve any element of black money or unaccounted income and were received from genuine identifiable parties through registered sale deeds. The assessee was under a Bona Fide belief that since the transactions were genuine, accounted for, and backed by documentary evidence, there was no violation of the provisions of Section 269SS. Furthermore, reliance is placed on CBDT Circular No. 19/2015 dated 27.11.2015 titled explanatory notes to the provisions of the Finance Act 2015 in which this amendment was explained with the preamble. In order to curb generation of black money in cash in immovable transactions. The CBDT circular clearly states that the purpose of the amendment to section 269SS was to curb black money. This was the real object and purpose of the enactment of amendment to section

6 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO 269SS and the interpretation of this amendment must fall in line with the advancement of that object and purpose. The object and purpose was not to strike at honest and bonafide transactions. The fact that the cash transactions of the assessee did not generate any black money has been established during the assessment proceedings and this section 269SS is not applicable in this case."

7 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO assessee proves that there was reasonable cause for such failure. In other words, penalty is not automatic under Section 271D of the Act on mere violation of the provisions of Section 269SS of the Act. 11. The Tribunal has found that there is no evidence on record to show that infraction of the provisions was with the knowledge or in defiance of the provisions. It has further been held that there is nothing on record to indicate that the assessee had indulged in any tax planning or tax evasion. To the contrary, the Tribunal has recorded that by making the book entries the assessee has made the adjustment bona fide without having the knowledge that such book entries may render the assessee liable to penalty under Section 271D of the Act on account of violation of the provisions of Section 269SS of the Act. That there was a reasonable cause and hence no penalty was leviable. 12. In the light of the findings of facts recorded by the Tribunal after appreciating the evidence on record and applying the ratio of the apex court decisions it is not possible to find any legal infirmity in the impugned order of the Tribunal. Not only there is a reasonable cause, as found by the Tribunal, but in the light of the finding of the Tribunal that the breach, if any, is merely a technical or venial breach no penalty is leviable as laid down by the apex court merely because it is lawful to do so without exercising discretion before imposing the penalty. In the result, the question referred is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs." 7. The appellant has also placed reliance on the order of the Coordinate Bench of Amritsar Tribunal in the case of Aggarwal

8 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO Construction Company Vs DCIT in ITA No. 370/Asr/2023 order dated 20/09/2024, ITAT, Bangalore Bench in the case of Smt. Pushpalatha Vs ITO Ward 3(2)(1) in ITA No. 1192/Bang/2024 order dated 26/07/2024 and the ITAT Delhi Bench in the case of Wahid Ali Vs JCIT, Range-48, New Delhi in ITA No. 1916/Del/2020 order dated 08/01/2024 where penalty under Section 271D have been deleted on similar principles. 8. On the other hand, the ld. Sr. DR submitted that the penalty under Section 271D of the Act is imposed for the contravention of the provisions of Section 269SS of the Act where loan, deposits or advances are received in cash in excess of Rs. 20,000/-. It has also been held by the Hon'ble Courts that onus is on the assessee to establish that the amount has been received in cash for bona fide reasons and the transactions fall in exceptional clause. The ld. Sr. DR further, argued that there is no discretion on the part of the Assessing Officer to waive the penalty under Section 271D of the Act if loan or deposit was accepted in cash beyond the specified limit. 9. We have carefully considered the rival submissions. It is found that it is the case of appellant that though, the appellant has accepted the loans, deposits or advances in cash in excess of Rs.

9 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO 20,000/- but the same has been duly reflected in the books of account of the assessee as "stock in trade" as the assessee is a builder. The amounts were received from genuine and identifiable parties and properties were registered by the stamp authority through proper sale deeds. The appellant's counsel further submitted that the assessee was under a bona fide belief that since the transactions were genuine and duly accounted for, there was no violation of the provisions of Section 269SS of the Act. The appellant has also cited the CBDT circular No. 19/2015 dated 27/11/2015 in its support where in the explanatory notes, the amendment was explained with the preamble of the provisions of the Finance Act 2015 that the amendments has been done to curb generation of black money in cash in immovable transactions and this was the real object and purpose of the enactment of amendment to section 269SS and the interpretation of this amendment must fall in line with the advancement of that object and purpose. We agree with the appellant’s contention that the object and purpose was not to strike at honest and bona fide transactions. Further, the Coordinate Benches of the Tribunal, have also held that if the transactions are genuine and bona fide, the imposition of penalty under Section 271D of the Act cannot be

10 ITA No. 818/Srt/2025 Shree Balaji Associates Vs ITO imposed. Thus, considering that the appellant has fully established that the said transactions were genuine and bona fide and duly reflected in its books of account and sale deeds, we hold that the penalty u/s 271D of the Act should not be imposed in this case and thus, we delete the penalty. 10. In the result, this appeal of the assessee stands allowed. Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 16/06/2026.

Sd/- Sd/- (T. R. SENTHIL KUMAR) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Dated 16/06/2026 *Ranjan आदेश�ȧĤǓ�ͧ �ͪ �\ Ē ȯͪ��/ Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेशसे,

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