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Facts
The assessee sold an immovable property for Rs. 20 lakhs, receiving Rs. 13 lakhs by Demand Draft and Rs. 7 lakhs in cash. This cash receipt was found to be in violation of Section 269SS of the Income Tax Act. The assessee argued that the cash was received on 31.1.2015 as per an agreement of sale, prior to the amendment of Section 269SS which came into effect from 1.6.2015.
Held
The Tribunal held that the cash receipt of Rs. 7 lakhs was received on 31.1.2015, before the amended provisions of Section 269SS were applicable. The Tribunal also found that the CIT(A) incorrectly dismissed the appeal on grounds of delay. Therefore, the penalty levied under Section 271D was not sustainable.
Key Issues
1. Whether the cash receipt of Rs. 7 lakhs prior to the amendment of Section 269SS attracted penalty under Section 271D. 2. Whether the appeal before the CIT(A) was rightly dismissed on grounds of delay.
Sections Cited
271D, 269SS, 148, 250, 273B, 49, 17
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Income Tax Appellate Tribunal, “A” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by Bhavanishanker Naik (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 12.8.2024 wherein the appeal filed by the assessee against the penalty order u/s. 271D of the Income-tax Act, 1961 [the Act] levying a penalty of Rs.7 lakhs vide order dated 24.11.2023 passed by the Assessment Unit was confirmed and therefore the assessee is in appeal raising the following grounds:-
“1. The order passed by the learned Commissioner of Income Tax (Appeals) under section 250 of the Income Tax Act, 1961 ("the Act"), insofar as it is against the Appellant, is opposed to law, weight of evidence, natural justice and probabilities on the facts and circumstances of the Appellant's case.
2. The impugned penalty order passed under section 271D of the Act is without jurisdiction on the facts and circumstances of the case.
3. The impugned penalty order passed under section 2710 of the Act is non est, bad in law and barred by limitation on the facts and circumstances of the case.
4. The learned CIT(A) failed to appreciate that the rigours of section 271D r.w.s. 269SS of the Act is not applicable to the facts and circumstances of the case. 5, The learned CIT(A) erred in giving a perverse fact finding on the facts and circumstances of the case.
6. The learned CIT(A) erred in law and on facts in upholding the findings of the Assessing Officer and the imposition penalty under section 271D of the Act amounting to Rs. 7,00,000/- on the facts and circumstances of the case.
7. The authorities below erred in law and on facts in holding that a Sale Agreement must be registered to be valid on the facts and circumstances of the case.
8. Without prejudice, if the Sale Agreement were to be held as invalid, then the cash received at the time of registration would not fall under the ambit of section 269SS of the Act and consequently, no penalty under section 271D of the Act could have been levied on the facts and circumstances of the case.
9. Without further prejudice, the authorities below failed to appreciate that the Appellant had 'reasonable cause' within the meaning of Section 273B of the Act for contravening the provisions of section 269SS of the Act and consequently. no penalty under section 271D of the Act ought to have been levied on the facts and circumstances of the case. The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds at the time of hearing the appeal. In view of the above and other grounds that may be urged at the time of the hearing of appeal, the Appellant prays that the appeal may be allowed in the interests of equity and justice.”
Thus the assessee has raised 9 different grounds of appeal, but challenges the confirmation of penalty u/s. 271D of the Act only.
Briefly stated the facts of the case show that assessee is an individual, who has sold an immovable property on 31.5.2016 for a total consideration of Rs.20 lakhs, out of which Rs.13 lakhs was received by a Demand Draft and Rs.7 lakhs was received by the assessee in cash, which was found to be in violation of section 269SS of the Act.
For the impugned assessment year, the assessee did not file any return of income, therefore the case of assessee was reopened by issue of notice u/s. 148 of the Act which resulted into passing of assessment order on 24.5.2023 assessing the total income of assessee at Rs.2,70,990.
For the receipt of Rs.7 lakhs in cash, assessee was issued a notice u/s. 274 r.w.s. 271D of the Act on 12.5.2023. This was complied with by the assessee on 10.6.2023. Further a show cause notice was issued on 12.9.2023 which was complied with on 19.9.2023 and 13.11.2023. The main reason provided by the assessee was that assessee has received a sum of Rs.7 lakhs from Mr. Prakash Jogi, buyer of the property on 31.1.2015 at the time of executing the agreement of sale. In that agreement in Annexure-II, a sum of Rs.7 lakhs was received from the buyer was specifically mentioned.
It was also submitted that word “specified sum” was inserted in section 269SS of the Act w.e.f. 1.6.2015 and therefore the sum received on 31.1.2015 could not be considered as ‘specified sum’ as it was brought into Act only w.e.f. 1.6.2015 and therefore penalty u/s. 271D is not attracted.
The ld. AO asked the assessee to furnish the registered copy of agreement of sale along with receipt of cash of Rs.7 lakhs along with the bank statement where Rs.7 lakhs is deposited. The assessee contended that copy of the agreement of sale is already provided, but the same is not registered. It was also submitted that there is no requirement of registration of agreement to sell. The receipt of Rs.7 lakhs is already acknowledged in the agreement to sell and further the amount of Rs.7 lakhs received from the buyer is not deposited into bank account, but is partly used in the business of assessee and partly for renovation of the house.
The ld. AO after considering the explanation of the assessee held that agreement to sale is a non-registered document which is required to be registered u/s. 17 of the Registration Act, 1908 and as the same is unregistered, according to the provisions of section 49 of that Act, it is legally not enforceable. Therefore, that agreement was not considered. Further in the sale deed also, the ld. AO noted that there is no mention of the date of receipt of Rs.7 lakhs in cash. The sale deed is entered on 31.5.2016 and therefore it could not be verified that cash was received on 31.1.2015. Therefore the AO considered the date of sale deed i.e., 31.5.2016 as the date of receipt of cash of Rs.7 lakhs. Accordingly after considering the provisions of section 269SS penalty u/s. 271D of Rs.7 lakhs was levied by penalty order dated 24.11.2023.
Aggrieved with the penalty order, the assessee challenged the same before the ld. CIT(Appeals). The main contentions of the assessee were that agreement for sale was entered into on 31.1.2015 where the amount of Rs.7 lakhs is received in cash. The amendment to provisions of section 269SS including the specified sum was inserted w.e.f. 1.6.2015 and therefore the sum received on 31.1.2015 could not be said to be in violation of section 269SS of the Act. The registration of agreement to sell is not compulsory and further even if it is unregistered, it is legal enforceability is question u/s. 49 of the Registration Act, but it does not mean that assessee has received cash on the date of sale deed and not on the date of entering in to agreement to sale. Even otherwise, even such unregistered agreement to sale is an evidence of receipt of Rs.7 lakhs by the assessee and payment by the buyer.
The ld. CIT(Appeals) noted that this appeal is instituted on 23.6.2024 wherein the penalty order was passed on 24.11.2023. Thus there is a delay in filing of the appeal. In Form 35 the assessee has not mentioned the above delay and also did not file any Affidavit showing sufficient cause for delayed filing of the appeal. The ld. CIT(A) recorded that appeal was filed with inordinate delay of more than 94 days. Therefore he held that delay cannot be condoned in absence of any submission and hence dismissed the appeal of the assessee.
Even on merits of the case, he held that assessee has not produced any documentary evidence to show that amount was received on 31.1.2015 and the burden of proof lies on the assessee that the findings of the AO are incorrect. He also confirmed the penalty order on merits. Appellate order was passed on 12.8.2024.
Assessee, aggrieved with the above appellate order, is in appeal before us. Firstly the ld. AR submitted that appeal was filed before the ld. CIT(Appeals) on 23.12.2023 which is in time, therefore there is no delay in fling of the appeal. The ld. CIT(Appeals) has wrongly taken the date of 26.3.2024 and therefore held that there is a delay. But in fact, there is no delay in filing of appeal. On merits of the case, it was submitted that as per agreement for sale executed between the assessee and the buyer, where the sum of Rs.7 lakhs was received on 31.1.2015. On that date, there is no prohibition of law wherein the assessee could not have accepted cash from the buyer. He submitted that the amendment to the provisions of law is w.e.f. 1.6.2015 and as the impugned sum of Rs. 7 lakhs is received prior to that, provisions of section 269SS cannot apply. He further submitted that whether the agreement to sale is registered or not is irrelevant so far as the fact of receipt of 7 lakhs is concerned. It was submitted that provisions of section 49 is with respect to the rights of the immovable property and cannot be considered as evidence of transaction affecting such property. In this case, same is paid by the buyer who has not denied this and sum is received by the assessee who has received the sale consideration and there is no question of not accepting that sum was received on 31.1.2015. In the sale deed cash receipt of Rs. 7 lakhs is disclosed, though there was no reference to agreement of sale, but that does not mean that the agreement to sell so far as receipt of cash cannot be considered. He referred to agreement of sale which is also the receipt issued by the assessee of the above sum of 7 lakhs received. Therefore, in absence of any contrary evidence and in view of agreement of sale, the above sum of 7 lakhs cannot be considered as specified sum u/s. 269SS of the Act which could lead to levy of penalty u/s. 271D of the Act.
We have carefully considered the rival contentions and perused the order of ld. lower authorities. The issue involved in this appeal is that at the time of sale of property by sale deed dated 31.5.2016, the assessee was shown to have received a consideration of Rs.7 lakhs in cash from the buyer out of total sales consideration of Rs 20 lakhs. As part of consideration was received in cash, assessee was asked to explain why penalty u/s. 271D should not be levied on a sum of 7 lakhs
received by the assessee from the buyer in cash which is in violation of provisions of section 269SS of the Act. As the sum was received in excess of Rs.20,000 and therefore penalty is leviable u/s. 271D of the Act. The argument of the assessee is that above sum of 7 lakhs was received by the assessee on 31.1.2015 as per agreement for sale executed between the parties and therefore as on that date i.e., on 31.1.2015 there was no prohibition in accepting cash more than Rs.20,000. The amendment to provisions of section 269SS was inserted w.e.f. 1.6.2015 and therefore no penalty could have been levied as there is no violation.
We find that the provisions of section 269SS were amended by Finance Act, 2015 along with consequential amendment in section 271D providing penalty for failure to comply with the provisions of section 269SS. It was provided that from that date no person shall accept from any person whether as advance or otherwise, any sum in relation to transfer of immovable property otherwise by an account payee cheque or account payee bank draft or though electronic clearing service, If the amount of loan or such deposit or such specified sum is Rs.20,000 or more. The above amendment has taken effect from 1st day of June, 2015.
15. In the case of assessee, agreement to sale was entered on 31.1.2015 and registered sale deed was executed on 31.5.2016. In both these documents it is mentioned that assessee has received 7 lakhs in cash from the buyer of the property. The date of agreement of sale is prior
to 1st day of June, 2015 i.e. on the date on which definition of specified sum provided in section 269SS of the Act is introduced. Further sale deed is post 1/6/2015. Therefore, as on the date of executing the agreement to sale there was no prohibition in law against accepting cash on sale of property as Such amendment was brought into statute on 1.6.2015 only.
16. The Revenue has not considered the agreement to sale dated 31/1/2015 as this agreement is not registered. Revenue authorities have held that unregistered agreement does not have any enforceability. What are the advantages of registration is described by Honourable supreme court in Suraj Lamp and Industries (P) Ltd. through. DIR vs. State of Haryana and Anr. (15.05.2009 - SC) AIR 2009 SC 3077(2009) 7 SCC 363 as under: -
“Advantages of registration
In the earlier order dated 15-5-2009 [ MANU/SC/1021/2009 : 2009:INSC:818 : (2009) 7 SCC 363 : (2009) 3 SCC (Civ) 126], the objects and benefits of registration were explained and we extract them for ready reference: (SCC p. 367, paras 15-18)
"15. The Registration Act, 1908 was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer. This is achieved by requiring compulsory registration of certain types of documents and providing for consequences of non-registration.
Section 17 of the Registration Act clearly provides that any document (other than testamentary instruments) which purports or operates to create, declare, assign, limit or extinguish whether in present or in future 'any right, title or interest whether vested or contingent of the value of Rs. 100 and upwards to or in immovable property.
Section 49 of the said Act provides that no document required by Section 17 to be registered shall, affect any immovable property comprised therein or received as evidence of any transaction affected such property, unless it has been registered. Registration of a document gives notice to the world that such a document has been executed.
Registration provides safety and security to transactions relating to immovable property, even if the document is lost or destroyed. It gives publicity and public exposure to documents thereby preventing forgeries and frauds in regard to transactions and execution of documents. Registration provides information to people who may deal with a property, as to the nature and extent of the rights which persons may have, affecting that property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is or are the person(s)
presently having right, title, and interest in the property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire and ascertain what the particulars are and as far as land is concerned what obligations exist with regard to them. It ensures that every person dealing with immovable property can rely with confidence upon the statements contained in the registers (maintained under the said Act) as a full and complete account of all transactions by which the title to the property may be affected and secure extracts/copies duly certified."
Thus only purpose of registration is that Registration of documents makes the process of verification and certification of title easier and simpler. It reduces disputes and litigations to a large extent as held by Honourable supreme court in M.S. Ananthamurthy and Ors. vs. J. Manjula and Ors. (27.02.2025 - SC) : MANU/SC/0269/2025.
17. Provision of section 49 of the Registration act provides that
Effect of non-registration of documents required to be registered. No document required by section 17 [or by any provision of the Transfer of Property Act, 1882 (4 of 1882)], to be registered shall
(a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
[Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877) *** or as evidence of any collateral transaction not required to be effected by registered instrument.]"
18. Thus except the right over immovable property all other transaction of civil nature cannot be negated if such a document otherwise required to be registered remains unregistered.
Assessee has produced the agreement to sale though unregistered has culminated in to sale deed subsequently. Therefore there is no dispute over the title of Immovable property . But the only issues is whether the consideration of cash received by the assessee in that deed should be accepted or not. Assessee has submitted the copy of the agreement to sale where the name and address of the person who paid cash of Rs 7 lakhs to the assessee is mentioned. Neither the ld. AO nor the ld. CIT (A) thought it fit to verify from the payer about the date of cash payment and the veracity of agreement to sale. Thus, the ld. Lower authorities have rejected the claim of the assessee that cash was received at the time of execution of agreement to sale, without any cogent reason or on any inquiry. Thus, we do not find any reason to doubt the facts that cash of Rs 7 lakhs is received by the assessee at the time of executing agreement to sale on 31.1.2015.
Therefore as on the date on which money is received in cash by the assessee of Rs. 7 lakhs from the buyer on sale of immovable property was not in violation of provisions of section 269SS of the Act. Therefore, on this ground itself, penalty is not leviable.
The ld. DR could not show us any reason that sum so received in cash by the assessee is in violation of provisions of section 269SS of the Act. Therefore, on the merits, we do not find any reason to uphold the penalty order passed by the ld. AO on 24.11.2023 and confirmed by the appellate order dated 12.8.2024 by the ld. CIT(Appeals). Accordingly, on merits, we direct the ld. AO to delete the penalty.
Even on the issue of dismissal of appeal of the assessee stating that there is a delay in filing of appeal, we hold that the ld. CIT(Appeals) on the top of his appellate order has stated that ‘appeal was instituted on 23.12.2023 from the order of assessment unit dated 24.11.2023’. Thus it is filed within the prescribed time limit. However, in the first para of the appellate order, he mentioned that appeal was instituted on 26.3.2024, we do not know wherefrom he has taken this date which is contrary to the date mentioned in the appellate order itself. As there is no delay in filing of the appeal, naturally in Form 35 assessee has mentioned that there is no delay in filing of appeal and therefore there
is no condonation petition. Therefore, the ld. CIT(Appeals) is incorrect in dismissing the appeal of the assessee on that ground also.
In view of the above facts, the appeal filed by the assessee is allowed and the ld. AO is directed to delete the penalty u/s 271D of the Act of Rs.7 lakhs.
In the result, the appeal by the assessee is allowed.
Pronounced in the open court on this 20th day of May, 2025.