AJITH KUMAR JAIN,KELAMBAKKAM vs. ITO, NCW-22(1), TAMBARAM

At the outset, it is noticed that the present appeal has been instituted by the assessee with a delay of 192 days beyond the period prescribed under the Act. The assessee has filed an affidavit setting forth the reasons and circumstances which occasioned the delay in preferring the appeal within the stipulated time. We have carefully considered the contents of the affidavit and examined the explanation tendered by the assessee. Having regard to the facts and circumstances of the case, and being satisfied that the assessee was prevented by sufficient and reasonable cause from filing the appeal within the prescribed period, we are of the considered opinion that the delay does not appear to be deliberate, intentional or attributable to any mala fide conduct.

It is a settled proposition of law that, while considering an application for condonation of delay, a liberal and justice-oriented approach is required to be adopted so as to advance substantial justice, particularly when no prejudice is shown to have been caused to the opposite party. In the present case, we are satisfied that sufficient cause has been demonstrated by the assessee for the delay in filing the appeal. Accordingly, the delay of 192 days in filing the present appeal is condoned, and the appeal is admitted for adjudication on merits in accordance with law.

The brief facts of the case are that the assessee is an individual. He filed his return of income for the AY 2017-18 on 25.11.2017 declaring a total income of Rs.3,31,590/-. The case was selected for limited scrutiny and notice u/s.143(2) of the Act was issued on 19.08.2018, followed by notice u/s.142(1) of the Act dated 24.10.2018, in response to which the assessee furnished the details called for. The assessment was completed u/s.143(3) of the Act on 16.12.2019 accepting the returned income of Rs.3,31,590/-.

Subsequently, on the basis of information uploaded in the system, it was noticed that pursuant to a deed of cancellation of sale agreement dated 14.05.2015 and a subsequent agreement dated 12.07.2016, the assessee had received a sum of Rs.1,00,00,000/- in cash from Shri R.C.Sathiyanarayana Rao

Aggrieved by the penalty order, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee contended that the assessment u/s.143(3) of the Act had been completed on 16.12.2019 accepting the returned income after considering the explanation and sources for the cash deposits made during the FY 2016-17, and placed reliance on the decision of the Hon'ble Supreme Court in CIT v. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC) and the decision of the Chennai Bench of the Tribunal in T. Shiju v. JCIT in ITA No.2829/Chny/2018. The assessee also sought the benefit of section 273B of the Act, contending that the transaction was genuine and bona fide. The ld.CIT(A), however, confirmed the penalty and dismissed the appeal by holding as under:-

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us by raising the following grounds of appeal:-

Before us, the ld.AR for the assessee filed written submissions and contended, as a jurisdictional issue going to the root of the matter, that the assessment u/s.143(3) of the Act was completed on 16.12.2019 after examining the details furnished by the assessee in response to the notices u/s.143(2) and 142(1) of the Act, accepting the returned income, and that the assessment order neither records any satisfaction regarding a violation of section 269SS of the Act nor directs initiation of penalty proceedings u/s.271D of the Act. According to the ld.AR, the notice u/s.274 r.w.s.271D of the Act issued on 20.06.2022, about two and a half years after completion of the assessment, cannot supply

On merits, the ld.AR submitted that the assessee had paid an advance of Rs.1 crore under a registered agreement dated 25.08.2014 for purchase of the property; that the agreement was cancelled by a registered deed of cancellation dated 14.05.2015; and that the sum of Rs.1 crore received in July 2016 was merely the refund of the assessee's own advance consequent upon such cancellation, as evidenced by the deed of repayment dated 12.07.2016. Such a refund, it was argued, is neither a loan nor a deposit, nor a “specified sum” receivable in relation to the transfer of an immovable property within the meaning of Explanation (iv) to section 269SS of the Act. Referring to the Budget Speech, the Memorandum explaining the provisions of the Finance Bill, 2015, the Notes on Clauses and CBDT Circular No.19 of 2015 dated 27.11.2015, the ld.AR submitted that the amendment to section 269SS of the Act with effect from 01.06.2015 was aimed at curbing cash advances received in immovable property transactions, whereas the repayment of such advances was separately regulated by the amended section 269T of the Act. Reliance was placed on the decision of the co-ordinate Bench in Smt. Chandra v. ITO in ITA No.308/Chny/2026 dated 23.03.2026 and on the decision of the Hyderabad Bench of the Tribunal in ITO v. Sree SSV Gate Society in ITA No.1214/Hyd/2024 dated 07.03.2025, wherein a cash refund of an advance received on cancellation of an agreement was held to be outside the ambit of section 269SS of the Act. Without prejudice, the ld.AR contended that the original agreement pre-dated the amendment of 01.06.2015, and that, in any event, the assessee had reasonable cause within the meaning of section 273B

Per contra, the ld.DR relied on the orders of the authorities below and submitted that the assessee admittedly received a sum of Rs.1 crore in cash, in contravention of section 269SS of the Act, and that the assessee remained non-responsive throughout the penalty proceedings despite sufficient opportunities. The ld.DR therefore prayed that the order of the ld.CIT(A) be confirmed.

We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record along with the judicial precedents relied on. Ground Nos.1 and 2 are general in nature. Ground No.4 raises a legal issue as to the validity of the initiation of penalty proceedings u/s.271D of the Act, which goes to the root of the matter, and we therefore take it up first.

The undisputed facts are that the assessment of the assessee for the AY 2017-18 was completed u/s.143(3) of the Act on 16.12.2019, under limited scrutiny, accepting the returned income of Rs.3,31,590/-. The ld.CIT(A) has himself recorded in para 6.2 of the impugned order that the assessment was completed without any demand, and that it was thereafter that notice u/s.274 r.w.s.271D of the Act was issued on 20.06.2022. The penalty order dated 22.12.2022 also records that the proceedings were initiated on the basis of information uploaded in the system and not on the basis of any finding recorded in the assessment order. The ld.DR has not been able to point out any satisfaction recorded in the assessment order dated 16.12.2019 regarding a contravention of section 269SS of the Act, or any direction therein for initiation of penalty proceedings u/s.271D of the Act. The assessee's contention before the ld.CIT(A), that the assessment was completed after considering the explanation and the sources of the cash deposits made during the FY 2016-17, has also not been controverted by the Revenue.

The Hon'ble Supreme Court in CIT v. Jai Laxmi Rice Mills (supra), in the context of penalty u/s.271E of the Act, upheld the view that where no satisfaction regarding the default was recorded in the assessment order, the penalty could not be levied. The Hon'ble Telangana High Court in Srinivasa Reddy Reddeppagari v. JCIT (W.P. No.44285 of 2022), noticing that sections 271D and 271E of the Act are pari materia and complementary to each other, applied the ratio of Jai Laxmi Rice Mills (supra) to penalty u/s.271D of the Act. Likewise, the Hon'ble Gujarat High Court in PCIT v. Parivar Television (P.) Ltd. (supra), following the said decision, held that no penalty u/s.271D of the Act could be levied where the assessment order made no mention of initiation of such proceedings, and the Special Leave Petition preferred by the Revenue against the said judgment has been dismissed by the Hon'ble Supreme Court.

Following the above decisions, the co-ordinate Benches of this Tribunal in T.Shiju v. JCIT in ITA No.2829/Chny/2018 dated 07.06.2019 and DCIT v. AKMG Alloys (P.) Ltd. (supra) have held that recording of satisfaction by the AO in the assessment order regarding the violation of section 269SS of the Act is a mandatory requirement for a valid initiation of penalty proceedings u/s.271D of the Act. In Siluvaikani Chelliah v. ITO (supra), on facts which are strikingly similar to the present case, namely, an assessment for the AY 2017-18 completed u/s.143(3) of the Act under limited scrutiny, followed by a show cause notice u/s.274 r.w.s.271D of the Act issued in June, 2022 and a penalty order passed by the Faceless Assessing Officer in December, 2022, this Tribunal quashed the penalty on the ground that no satisfaction had been recorded in the assessment order. The Revenue has not brought to our notice any distinguishing feature in the present case, or any decision to the contrary of the Hon'ble jurisdictional High Court.

Respectfully following the above decisions, we hold that, in the absence of any satisfaction recorded by the AO in the assessment order dated 16.12.2019 regarding the alleged violation of section 269SS of the Act, the penalty proceedings u/s.271D of the Act initiated by the notice dated 20.06.2022 have not been validly initiated. Consequently, the penalty order dated

Even otherwise, we find merit in the contention of the assessee on the applicability of section 269SS of the Act to the impugned receipt. It is an undisputed fact, recorded by the ld.CIT(A) in para 6 of the impugned order, that the assessee had paid an advance of Rs.1 crore through cash and Rs.1 crore through banking channel under the registered sale agreement dated 25.08.2014 for the purchase of the property, that the said agreement was cancelled by a registered deed of cancellation dated 14.05.2015, and that the sum of Rs.1 crore received by the assessee by cash in three instalments of Rs.50,00,000/- on 01.07.2016, Rs.25,00,000/- on 05.07.2016 and Rs.25,00,000/- on 12.07.2016 was the refund of that very advance. The ld.CIT(A) has characterised the receipt as a ‘deposit’, but there is nothing on record to suggest that the other party placed any money with the assessee as a deposit, or that the assessee borrowed any sum from them. The amount was merely the return of the assessee's own money upon the cancellation of the proposed purchase.

Clause (iv) of the Explanation to section 269SS of the Act defines “specified sum” as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. The provision is thus directed at a person who receives money, as advance or otherwise, towards a proposed transfer of immovable property. The Memorandum explaining the provisions of the Finance Bill, 2015 and paras 54.3 and 54.4 of CBDT Circular No.19 of 2015 dated 27.11.2015, which have been extracted by the co-ordinate Bench in Smt.Chandra v. ITO (supra), make it clear that while section 269SS of the Act was amended to regulate the acceptance of loans, deposits and specified sums, the repayment of a “specified advance” received in relation to the transfer of an immovable property was separately brought within the ambit of the amended section 269T of the Act, with the consequential penalty u/s.271E of the Act on the person making such repayment. In the present case, the assessee was the intending

In view of our findings above, the other grounds raised by the assessee, including Ground No.3 regarding limitation u/s.275(1)(c) of the Act and the grounds regarding reasonable cause u/s.273B of the Act, have become academic in nature and are therefore not adjudicated. Therefore, we direct the AO to delete the penalty of Rs.1,00,00,000/- levied u/s.271D of the Act by setting aside the order of the ld.CIT(A).

In the result, the appeal of the assessee is allowed.