VETRICHELVAN VIJAYASARATHY,CHENNAI vs. ITO, NCW-10(6), CHENNAI

ITA 1097/CHNY/2026Status: DisposedITAT Chennai07 October 2026AY 2017-1814 pages
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What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 271D of the Act was not sustainable. The Tribunal found that the assessee had established a reasonable cause within the meaning of Section 273B. The reasoning was based on the cumulative effect of several circumstances: the assessee being an individual receiving cash for immediate personal commitments, the buyer being a senior citizen who offered cash to secure the property, the assessee's bona fide belief that the transaction, being duly recorded and disclosed, would not result in contravention, and the subsequent deposit of the cash advance into the bank account. The Tribunal noted that the CIT(A) had not appreciated the cumulative effect of these circumstances. The ratio decidendi is that the expression 'reasonable cause' in Section 273B should be construed in light of the facts and circumstances of each case, and it is not restricted to exceptional financial emergencies. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the penalty.

What were the facts?

The assessee, an individual, sold a residential property for Rs. 32 lakhs in AY 2017-18. He received Rs. 6,75,000/- as an advance in cash in November 2016, with the balance received through banking channels on the sale deed execution date, February 3, 2017. The Assessing Officer (AO), based on information from the Sub-Registrar's office, found a violation of Section 269SS of the Income-tax Act, 1961, for accepting cash. Consequently, the AO levied a penalty of Rs. 6,75,000/- under Section 271D. The assessee's appeals to the Commissioner of Income-tax (Appeals) [CIT(A)] were dismissed, upholding the penalty.

What were the issues?

1. Whether the penalty levied under Section 271D of the Income-tax Act, 1961, for accepting a cash advance of Rs. 6,75,000/- in contravention of Section 269SS is sustainable, considering the assessee's plea of reasonable cause under Section 273B? Assessee's Contention: The assessee argued that the cash advance was accepted due to the buyer's urgency as a senior citizen, who wished to secure the property purchase without delay. The assessee was unaware of Section 269SS and believed that the transaction being recorded in the sale deed and disclosed in the return was sufficient compliance. The cash was deposited into the bank account promptly. The assessee relied on the Vishakapatnam Tribunal's decision in Smt. Vijapurapu Sudha Rao. Revenue's Contention: The revenue, as represented by the AO and upheld by the CIT(A), contended that the assessee failed to provide evidence of financial urgency and that the genuineness of the transaction or disclosure of income does not absolve the assessee from the penalty provisions. The jurisdictional High Court decisions were cited to support the levy.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269SS,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 10.09.2026Pronounced: 07.10.2026

PER S. R. RAGHUNATHA, AM : This appeal has been preferred by the assessee against the order passed by the Learned Commissioner of Income Tax, Appeal (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”], dated 13.12.2025, arising from the penalty order dated 09.11.2020 for the Assessment Year (AY) 2017-18 passed by the Addl.Commissioner of Income-tax, Non-Corporate

The order continues below.

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