MAHESHWARAPPA MUNIRAMU,BANGALORE vs. JOINT COMMISSIONER OF INCOME TAX, RANGE 2(2), BENGALURU, BENGALURU

It is observed that you have received cash of Rs. 20,00,000/- vide sale agreement dated 21.04.2016 against sale of immovable property vide sale deed no. 1401/16-17 dated 30.06.2016 out of total sale consideration of Rs.85,43,100/-. Further, you have received cash as repayment of loan from Sri Harish C.R (Rs.10,00,000/-) and from Sri B.S. Vinay(Rs.10,00,000/-). Hence total amount of Rs.40,00,000/- received in cash by you which contravened the provisions of section 269SS.

3.2 During the course of penalty proceedings, the POA holder submitted that assessee is a senior citizen aged 79 years (DOB 9.3.1943) and suffering from various ailments and is bedridden. Further, the assessee has lost his memory and is not in a fit mental state to brief his tax consultant about the facts of his case. A medical certificate by the Medical Officer, Bowring & Lady Curzon Hospital, Bangalore was also produced before the AO. The tax consultant of the assessee requested to take a humanitarian and lenient view while concluding the penalty proceedings. Further, it is submitted that the assessee owns 50% of the share in the said property and therefore the share of the assessee is Rs.10 lakhs only instead of Rs.20 lakhs as alleged to be received from sale of property. Further, it is submitted that the assessee was under the impression/bonafide belief that the assessee can accept cash on sale of immovable property. The assessee accepted the cash in bonafide belief and due to ignorance of law. It is submitted that the assessee is not well aware of the provisions of income tax. Lastly it is submitted that the penalty u/s 271D is not mandatory. If the transactions are genuine and are so proved by the persons concerned, the rigor of those sections should not be invoked.

3.3 With regard to the receipt of cash of Rs.10,00,000/- each from Shri Harish C.R. and Shri B.S. Vinay, the assessee submitted that these persons are the relatives of the assessee and the money was given for meeting some family and personal requirements. Further the assessee had also not charged any interest from these persons. Therefore, it is contended that the assessee has neither taken any loan nor any deposits from Shri B.S. Vinay and Shri Harish C.R. The AO found the explanation of the assessee partly acceptable.

Maheshwarappa Muniramu, Bangalore Page 5 of 16 3.4 However, with regard to receipt of alleged cash amounting to Rs.20,00,000/-, the ld. JCIT held that the explanation like age factor & health issues for receipt of cash on sale of property is not found convincing especially when the substantial portion of sale consideration i.e. Rs.65,43,100/- was received in cheques and DDs. The JCIT inferred that the assessee has no proper explanation to offer for receiving cash in contravention of section 269SS of the Act. Accordingly, the assessee has failed to explain and substantiate that there was a reasonable cause for receipt of Rs.20 lakhs in cash in violation of provisions of section 269SS of the Act and accordingly levied penalty of Rs.20 lakhs u/s 271D of the Act vide order dated 30.8.2022.

8. The ld. D.R. on the other hand supported the orders of the authorities below and submitted that there is clear violation of the provisions of section 269SS of the Act and therefore, the authorities below have rightly levied the penalty of Rs.20 lakhs and accordingly, the ld. D.R. prayed to dismiss the appeal of the assessee as no reasonable cause was demonstrated by the assessee in accepting the cash.

9. We have heard the rival submissions and perused the materials available on record. On going through the assessment Maheshwarappa Muniramu, Bangalore Page 7 of 16 order passed u/s 143(3) of the Act dated 6.12.2019 for the Asst. year 2017-18, we take a note of the fact that there is no finding of the AO regarding any violation of provisions of section 269SS of the Act. The order of the assessment dated 06/12/2019 is very cryptic and only affirm that after verifying the details filed, the assessment is completed accepting the income declared. We also take a note of the fact that penalty proceedings u/s 271D of the Act were not initiated by the AO on or before the completion of the assessment proceedings. Thereafter, to the surprise of the assessee, a notice u/s 274 r.w.s. 271D of the Act was issued to the assessee on 10.2.2022 by the ld. JCIT Range-2(2) Bangalore after a gap of approx 2 years 2 months from the date of concluding the assessment. On going through the submissions made before the authorities below, we take note of the fact that the assessee along with his son Shri M. Sumanth had jointly sold an immovable property vide sale deed registered as document No.1401/2016-17 on 30.6.2016 for a total sale consideration of Rs.85,43,100/-, out of which Rs.20 lakhs was received in cash. The assessee owns 50% share in the said property and accordingly the assessee had received his share of sale consideration amounting to Rs.42,71,550/- only, which is inclusive of cash consideration of Rs.10,00,000/-. The buyers had also deducted tax at source @1% on the assessee’s share of sale consideration amounting to Rs.42,714/-, which had been claimed as credit in the income tax return filed by the assessee. The AO completed the assessment proceedings u/s 143(3) of the Act on 6.2.2019 by accepting the returned income without making any additions and disallowances. The ld. CIT(A)/NFAC had also observed in his Order that the assessee received substantial portion of sale consideration in cheques & DDs. We are of the considered opinion that there is no dispute by the either side with regard to the receipt of cash in the impugned transaction on sale of immovable property by the Maheshwarappa Muniramu, Bangalore Page 8 of 16 assessee & therefore the genuineness of the transactions is clearly established. The contention of the assessee before both the authorities below are that the assessee is a senior citizen aged 82 years (DOB 9.3.1943) and he has studied only up to 4th Standard. Further, the assessee is a layman and did not understand the complicacy of the Income Tax Act, 1961. The assessee was under the impression/honest and Bonafide belief that the assessee can accept cash on sale of immovable property. It is submitted that the assessee is not well aware of the provisions of income tax. Thus, assessee contended that he had accepted the cash in Bonafide belief and due to ignorance of law and the assessee had no intention to disobey the law of land. We are of the considered opinion that the assessee has received his portion of share in cash amounting to Rs.10 lakhs only towards the sale consideration for transfer of immovable property. The assessee was under an honest and Bonafide belief that the receipt of cash are not covered u/s 269SS of the Act and accepted his share of sale consideration of Rs.10 lakhs in cash. This bonafide belief clearly established from the fact that the assessee had deposited the cash received on sale of immovable property into his bank account maintained with canara bank & thereafter deposited/transferred the same to the bank account opened under the capital gains account scheme. The assessee had duly disclosed the capital gains in his return of income. Moreover, the amendment effected by Finance Act, 2015, w.e.f 01/06/2015 to section 269SS of the Act, which had laid a restriction for receiving cash for transfer of immovable property would not have come to the knowledge of the assessee who is a senior citizen aged 82 years having elementary education and no knowledge of tax laws. Therefore, in our considered opinion there is a reasonable cause for contravention to section 269SS of the Act in accepting cash otherwise than account payee cheque/account payee draft.

9.1 The purpose of introduction of section 269SS of the Act was discussed in the judgement of Hon’ble Allahabad High Court in the case of Dimple Yadav reported in 379 ITR 177 (All.), wherein the Court considered the recourse of section 271D of the Act and also the provisions of section 273B of the Act to hold as under:

“6. The short question that arises for consideration is, whether any penalty could be imposed under Section 271D of the Act? 7. The learned counsel for the department contended that the unsecured loan, which was more than Rs.20,000/- taken by the assessee from a political party should have been taken by a cheque or a demand draft through banking channels, which had not been done. The taking of the loan in cash, which was more than Rs.20,000/- was in gross violation of Section 269SS of the Act and, consequently, by operation of law, the penalty was rightly imposed, which had wrongly been deleted by the appellate authorities. The learned counsel contended that there was no urgency for the assessee to receive the entire amount in cash nor any dire need was shown for taking such huge amount in cash. In support of his submission, the learned counsel has placed reliance upon a decision of the Punjab and Haryana High Court, Charan Dass Ashok Kumar v. CIT [2014] 365 ITR 367/[2015] 231 Taxman 513/[2014] 52 taxmann.com 424 and Auto Piston MFG. Co. (P.) Ltd. v. CIT [2013] 355 ITR 414/218 Taxman 150 (Mag.)/38 taxmann.com 61 (Punj. & Har.) as well as the decision of the Madras High Court P. Baskarv. CIT [2012] 340 ITR 560/21 taxmann.com 78.

Maheshwarappa Muniramu, Bangalore Page 13 of 16 17. In the light of the aforesaid, we are of the view that reasonable cause had been shown by the assessee and the provisions of Section 273B of the Act was applicable. The appellate authorities were justified in holding that no penalty could be imposed since a reasonable cause was shown by the assessee.” 9.2 Though the judgment cited (supra) was given before the introduction of amendment, wherein property transaction in cash was included, but the basic premise of section 269SS of the Act remains the same i.e. to deter the use of unaccounted money and allow relief as per provisions of section 273B of the Act considering reasonable cause. On a similar footing, the Hon’ble Gujarat High Court in CIT Vs. Panchsheel Owners Associations (2017) 395 ITR 380 (Guj) (HC), held that “genuineness of the transaction had not been disputed and there is reasonable cause”. The Hon’ble Supreme Court in the case of Chamundi Granites (Pvt.) ltd. (2002) (122 taxman 574) (SC) while considering hardship caused by section 269SS of the Act as appended to the provisions of section 273B of the Act and held that “section 273B of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan and otherwise than by account payee cheque, or account payee demand draft, then the penalty may not be levied”.

9.3 The test to be provided for reasonable cause u/s 273B of the Act by Hon’ble Supreme Court (255 ITR 258) for section 271D r.w.s. 269SS of the Act which are as under: a) Reasonable cause to take a loan otherwise than by account payee cheque or draft and b) Transaction is Bonafide.

Maheshwarappa Muniramu, Bangalore Page 14 of 16 9.4 If assessee does not fulfill both of these tests of reasonable cause, assessee fails to substantiate with evidences, Bonafide not of taking/accepting the sales consideration in cash and he was unable to procure the sales consideration by account payee cheque or account payee demand draft.

9.5 Section 273B starts with a non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. A clause beginning with 'notwithstanding anything' is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict, an over-riding effect over the provision or Act mentioned in the non obstante clause - Orient Paper & Industries Ltd. v. State of Orissa AIR 1991 SC 672. A non obstante clause may be used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances - T.R. Thandur v. Union of India AlR 1996 SC 1643. The true effect of the non obstante clause is that in spite of the provision or the Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstanteclause will not be an impediment for the operation of the enactment - Smt. Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi ÅIR 1996 SC 1963. Therefore, in order to bring in application of section 27ID of the Act in the backdrop of section 273B, absence of reasonable cause, existence of which has to be established by the assessee, is the sine qua non.

9.6. Levy of penalty under section 271D is not automatic. Before levying penalty, that concerned officer is required to find out that Maheshwarappa Muniramu, Bangalore Page 15 of 16 even if there was any failure referred to in the concerned provision, the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. 'Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow.

9.7 In the instant case, sale of property and consequent receipt of sale consideration in cash are not disputed by the either side. The genuineness of the transaction is also accepted by the AO in the Assessment proceedings. The assessee after receiving the cash amounting to Rs.10,00,000/- on sale of property immediately deposited the cash of Rs.10,00,000/- into his bank Account and transfer the same into the capital gain account scheme. The assessee accepted the cash only on an honest & Bonafide belief and due to ignorance of law and therefore the assessee had no intention to disobey the law of land.

9.8 Keeping all facts and relevant case laws (supra) into consideration, in our considered opinion, there is a reasonable Maheshwarappa Muniramu, Bangalore Page 16 of 16 cause for contravention to section 269SS of the Act in accepting cash otherwise than account payee cheque/account payee draft in the case of the assessee and further the genuineness of the transactions is also accepted by the AO. We find the claim of the assessee is Bonafide and within the meaning of provisions of section 273B of the Act and accordingly we direct the AO to delete the penalty levied u/s 271D of the Act amounting to Rs.20,00,000/-.

Order pronounced in the open court on 26th Sept, 2025