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Facts
The assessee, a land aggregator acting as a middleman, received cash of Rs.2.05 Crs and Rs.1.85 Crs for AYs 2017-18 & 2018-19 from Shri M. Vedamurthy for land acquisition, which he immediately passed to land brokers. The transaction ultimately did not complete, but the Assessing Officer levied a penalty under Section 271D for violation of Section 269SS, treating the cash receipt as a 'specified sum' by the assessee.
Held
The Tribunal held that the assessee was an agent/broker acting on behalf of a principal, not the actual recipient of the 'specified sum' in his own independent right, as defined under Section 269SS. It further noted that there was a 'reasonable cause' under Section 273B, given that the amendment introducing 'specified sum' to Section 269SS came after the MoU date, and the assessee, being a middleman, was unaware of the change. Consequently, the penalty levied under Section 271D of the Income Tax Act was not imposable on the assessee.
Key Issues
1. Whether penalty under Section 271D read with Section 269SS is applicable to a broker/agent who receives cash from a buyer for immovable property and immediately hands it over to the sellers. 2. Whether the assessee, acting as an agent, can be considered the 'recipient' of a 'specified sum' in his own right. 3. Whether there was a reasonable cause for the alleged contravention under Section 273B, considering the timing of the amendment to Section 269SS.
Sections Cited
271D, 269SS, 132, 131, 153C, 139, 274, 273B, 226, 2(45), 51, 80P
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-18, (hereinafter in short "the Ld.CIT(A)”), Chennai, both dated 27.09.2023 for the Assessment Years (hereinafter in short "AY”) 2017-18 & 2018-19 confirming the penalty levied u/s. 271D of the Income Tax Act, 1961 (hereinafter in short "the Act”) of Rs.2.05 Crs. (for AY 2017-18) and & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::2 ::
Rs.1.85 Crs. (for AY 2018 Rs.1.85 Crs. (for AY 2018-19) for the alleged violation of provisions of 19) for the alleged violation of provisions of Sec.269SS of the Act. Since both the part Sec.269SS of the Act. Since both the parties agreed that the penalty ies agreed that the penalty levied for both the assessment years u/s.271D of the Act for violation of levied for both the assessment years u/s.271D of the Act for violation of levied for both the assessment years u/s.271D of the Act for violation of Sec.269SS are similar, therefore, the decision of AY 2017 Sec.269SS are similar, therefore, the decision of AY 2017 Sec.269SS are similar, therefore, the decision of AY 2017-18 will apply mutatis mutandis with that of AY 2018 with that of AY 2018-19.
At the outset, the assessee has filed At the outset, the assessee has filed petition for condonation of petition for condonation of delay of ‘262’ days along with affidavit, perusal of which reveals that delay of ‘262’ days along with affidavit, perusal of which reveals that delay of ‘262’ days along with affidavit, perusal of which reveals that since there were glitches in the computer, assessee didn’t receive the since there were glitches in the computer, assessee didn’t receive the since there were glitches in the computer, assessee didn’t receive the impugned order confirming the penalty, which led to delay in filing of the impugned order confirming the penalty, which led to delay in filing of the impugned order confirming the penalty, which led to delay in filing of the appeals. Therefore, the assessee pleads for leniency. After going through Therefore, the assessee pleads for leniency. After going through Therefore, the assessee pleads for leniency. After going through the contents of the affidavit and petition for condonation of delay, we find the contents of the affidavit and petition for condonation of delay, we find the contents of the affidavit and petition for condonation of delay, we find that the assessee doesn’t stand to gain by not filing the appeals. The that the assessee doesn’t stand to gain by not filing the appeals. The that the assessee doesn’t stand to gain by not filing the appeals. The action of the assessee can’t be termed to action of the assessee can’t be termed to be deliberate and therefore, we be deliberate and therefore, we condone the delay of 262 days in filing of both the appeals and proceed to condone the delay of 262 days in filing of both the appeals and proceed to condone the delay of 262 days in filing of both the appeals and proceed to adjudicate the grounds of appeals raised by the assessee. adjudicate the grounds of appeals raised by the assessee.
3. Before adverting to the grounds raised in these appeals, it is first Before adverting to the grounds raised in these appeals, it is first Before adverting to the grounds raised in these appeals, it is first relevant to set out the background facts in context. The brief facts t the background facts in context. The brief facts t the background facts in context. The brief facts relating to the case are that, the assessee, an aggregator of lands, is relating to the case are that, the assessee, an aggregator of lands, is relating to the case are that, the assessee, an aggregator of lands, is engaged in the real estate business. A search u/s.132 of the Act was engaged in the real estate business. A search u/s.132 of the Act was engaged in the real estate business. A search u/s.132 of the Act was carried out in the premise of Dr. Maya Vedamurthy on 02.03.2018 carried out in the premise of Dr. Maya Vedamurthy on 02.03.2018 carried out in the premise of Dr. Maya Vedamurthy on 02.03.2018 which resulted in discovery of certain loose sheets containing Memorandum of resulted in discovery of certain loose sheets containing Memorandum of resulted in discovery of certain loose sheets containing Memorandum of & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::3 ::
Understanding (MoU) between the assessee and Shri M. Vedamurthy on Understanding (MoU) between the assessee and Shri M. Vedamurthy on Understanding (MoU) between the assessee and Shri M. Vedamurthy on 03.07.2014, in terms of which the assessee was engaged to liaison and 03.07.2014, in terms of which the assessee was engaged to liaison and 03.07.2014, in terms of which the assessee was engaged to liaison and negotiate the acquisition of land on his b negotiate the acquisition of land on his behalf. The said document also ehalf. The said document also contained the terms of payment. Since these documents inter alia inter alia related contained the terms of payment. Since these documents to the assessee, the AO made post search enquiries from him and his to the assessee, the AO made post search enquiries from him and his to the assessee, the AO made post search enquiries from him and his statement was recorded u/s 131 of the Act on 06.06.2018. The assessee statement was recorded u/s 131 of the Act on 06.06.2018. The assessee statement was recorded u/s 131 of the Act on 06.06.2018. The assessee is noted to have explained that, he was a middleman who was negotiating e explained that, he was a middleman who was negotiating e explained that, he was a middleman who was negotiating the purchase of 2.65 acres of land for Shri M. Vedamurthy from many the purchase of 2.65 acres of land for Shri M. Vedamurthy from many the purchase of 2.65 acres of land for Shri M. Vedamurthy from many sellers i.e. small land owners. He further stated that, Shri M. Vedamurthy sellers i.e. small land owners. He further stated that, Shri M. Vedamurthy sellers i.e. small land owners. He further stated that, Shri M. Vedamurthy had paid aggregate sum of Rs.7.35 crores, out of which R had paid aggregate sum of Rs.7.35 crores, out of which R had paid aggregate sum of Rs.7.35 crores, out of which Rs.6.10 crores were paid in cash, which the assessee would immediately handover to the paid in cash, which the assessee would immediately handover to the paid in cash, which the assessee would immediately handover to the land brokers in the presence of Shri M. Vedamurthy. The assessee further land brokers in the presence of Shri M. Vedamurthy. The assessee further land brokers in the presence of Shri M. Vedamurthy. The assessee further explained that, since he was only the middleman and the advance was explained that, since he was only the middleman and the advance was explained that, since he was only the middleman and the advance was paid by Shri M. Vedamurthy th paid by Shri M. Vedamurthy through him immediately to the land brokers, rough him immediately to the land brokers, these amounts were not shown in his these amounts were not shown in his accounts. The assessee further accounts. The assessee further offered commission income of Rs.85,00,000/ offered commission income of Rs.85,00,000/- in AY 2016 in AY 2016-17 for facilitating this transaction. The assessee is noted to have also submitted facilitating this transaction. The assessee is noted to have also submitted facilitating this transaction. The assessee is noted to have also submitted that, this particular acquisition of land by Shri M. Vedamurthy was not is particular acquisition of land by Shri M. Vedamurthy was not is particular acquisition of land by Shri M. Vedamurthy was not completed, because the land was not clear due to TNEB erecting high completed, because the land was not clear due to TNEB erecting high completed, because the land was not clear due to TNEB erecting high transmission lines on the said land parcel. transmission lines on the said land parcel.
In light of the above, the AO issued notices u/s.153C of the Act In light of the above, the AO issued notices u/s.153C of the Act In light of the above, the AO issued notices u/s.153C of the Act dated 11.11.2019 reopening the assessments for AY 2016 dated 11.11.2019 reopening the assessments for AY 2016- -17 & 2017-18.
& 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::4 ::
It was brought to our notice that for AY 2016 It was brought to our notice that for AY 2016-17, the assessee had 17, the assessee had originally filed return of income on 15.10.2016 declari originally filed return of income on 15.10.2016 declaring total income of ng total income of Rs.29,16,160/-. Pursuant to the notice u/s 153C of the Act, the assessee . Pursuant to the notice u/s 153C of the Act, the assessee . Pursuant to the notice u/s 153C of the Act, the assessee is noted to have offered commission income of Rs.85 lakhs in the return is noted to have offered commission income of Rs.85 lakhs in the return is noted to have offered commission income of Rs.85 lakhs in the return of income filed in response thereto. The income returned u/s 153C of the of income filed in response thereto. The income returned u/s 153C of the of income filed in response thereto. The income returned u/s 153C of the Act was accepted by the AO. For AY 2017 the AO. For AY 2017-18, the assessee filed his return 18, the assessee filed his return of income on 04.12.2019 admitting his total income at Rs.9,59,930/ of income on 04.12.2019 admitting his total income at Rs.9,59,930/ of income on 04.12.2019 admitting his total income at Rs.9,59,930/- u/s 153C of the Act, as originally declared u 153C of the Act, as originally declared u/s 139 of the Act. For AY 2018 /s 139 of the Act. For AY 2018- 19, the assessee filed return of income on 13.10.2018 adm 19, the assessee filed return of income on 13.10.2018 adm 19, the assessee filed return of income on 13.10.2018 admitting total income at Rs.15,63,190/ income at Rs.15,63,190/-. The assessments for AYs 2017 . The assessments for AYs 2017-18 & 2018-19 were also completed at the same income as declared by the assessee. also completed at the same income as declared by the assessee. also completed at the same income as declared by the assessee.
However, the AO noted that, the assessee had received a sum of Rs.85 However, the AO noted that, the assessee had received a sum of Rs.85 However, the AO noted that, the assessee had received a sum of Rs.85 lacs, Rs.2.05 Crs. & Rs.1.85 crores i lacs, Rs.2.05 Crs. & Rs.1.85 crores in cash, by way of advance from Shri n cash, by way of advance from Shri M. Vedamurthy (spouse of Dr.Maya M. Vedamurthy (spouse of Dr.Maya Vedamurthy) in AYs 2016 Vedamurthy) in AYs 2016-17, 2017- 18 & 2018-19 respectively, towards purchase of immovable property at 19 respectively, towards purchase of immovable property at 19 respectively, towards purchase of immovable property at Siruseri Village, Tiruporur Taluk, which according to the AO, was in Siruseri Village, Tiruporur Taluk, which according to the AO, was in Siruseri Village, Tiruporur Taluk, which according to the AO, was in violation of provisions of Sec.269SS of the Act. He accordingly, initiated visions of Sec.269SS of the Act. He accordingly, initiated visions of Sec.269SS of the Act. He accordingly, initiated penalty proceedings u/s 271D of the Act. penalty proceedings u/s 271D of the Act.
The assessee is noted to have taken a stand across all the The assessee is noted to have taken a stand across all the The assessee is noted to have taken a stand across all the assessment years that he was a land aggregator who worked for assessment years that he was a land aggregator who worked for assessment years that he was a land aggregator who worked for commission and that he had recei commission and that he had received aggregate commission of Rs.85 ved aggregate commission of Rs.85 lakhs for facilitating the impugned transaction, which he had offered to lakhs for facilitating the impugned transaction, which he had offered to lakhs for facilitating the impugned transaction, which he had offered to & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan tax as his undisclosed income in AY 2016 tax as his undisclosed income in AY 2016-17, and that, the cash of 17, and that, the cash of Rs.6,10,00,000/- was not received by him from Mr. M Vedamurthy in his was not received by him from Mr. M Vedamurthy in his was not received by him from Mr. M Vedamurthy in his own proprietary capacity but, was disbursed immediately to the ary capacity but, was disbursed immediately to the ary capacity but, was disbursed immediately to the facilitators/brokers for acquiring large pieces of land in the presence of facilitators/brokers for acquiring large pieces of land in the presence of facilitators/brokers for acquiring large pieces of land in the presence of Shri M. Vedamurthy.
It was brought to our notice that, post completion of assessment for It was brought to our notice that, post completion of assessment for It was brought to our notice that, post completion of assessment for AYs 2016-17, 2017-18 & 2018 18 & 2018-19 on 27.12.2019, the Addl. CIT issued 12.2019, the Addl. CIT issued notice u/s.274 r.w.s.271D of the Act dated 12.03.2021 asking the notice u/s.274 r.w.s.271D of the Act dated 12.03.2021 asking the notice u/s.274 r.w.s.271D of the Act dated 12.03.2021 asking the assessee to show cause as to why an order imposing penalty u/s.271D of assessee to show cause as to why an order imposing penalty u/s.271D of assessee to show cause as to why an order imposing penalty u/s.271D of the Act should not be made for receiving cash of Rs.85 lacs, Rs.2.05 Crs. the Act should not be made for receiving cash of Rs.85 lacs, Rs.2.05 Crs. the Act should not be made for receiving cash of Rs.85 lacs, Rs.2.05 Crs.
& Rs.1.85 Crs. in AYs 2016 n AYs 2016-17, 2017-18 & 2018-19 respectively, in 19 respectively, in violation of Section 269SS of the Act. After considering the explanation violation of Section 269SS of the Act. After considering the explanation violation of Section 269SS of the Act. After considering the explanation put forth by the assessee, the Addl. CIT is noted to have not levied any put forth by the assessee, the Addl. CIT is noted to have not levied any put forth by the assessee, the Addl. CIT is noted to have not levied any penalty upon the assessee for violation of Section 269SS of penalty upon the assessee for violation of Section 269SS of penalty upon the assessee for violation of Section 269SS of the Act in AY 2016-17, as done in AYs 2017 17, as done in AYs 2017-18 & 2018-19, which are impugned before 19, which are impugned before us.
In the orders impugned in the present appeal, the Addl. CIT is In the orders impugned in the present appeal, the Addl. CIT is In the orders impugned in the present appeal, the Addl. CIT is noted to have referred to the MoU noted to have referred to the MoU dated 03.07.2014 between the dated 03.07.2014 between the assessee [first party] and Shri M. Vedam assessee [first party] and Shri M. Vedamurthy [second party], husband of urthy [second party], husband of Dr. Maya Vedamurthy, who was searched on 02.03.2018. According to Dr. Maya Vedamurthy, who was searched on 02.03.2018. According to Dr. Maya Vedamurthy, who was searched on 02.03.2018. According to the Addl. CIT, Shri M. Vedamurthy h the Addl. CIT, Shri M. Vedamurthy had paid cash of Rs.6,10,00,000/ ad paid cash of Rs.6,10,00,000/- & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan towards purchase of the land parcel to the assessee, which the latter had towards purchase of the land parcel to the assessee, which the latter had towards purchase of the land parcel to the assessee, which the latter had also accepted in his sworn statement dated 27.06.2018. Taking note of n his sworn statement dated 27.06.2018. Taking note of n his sworn statement dated 27.06.2018. Taking note of the details of the schedule of payments given by the assessee, the Addl. the details of the schedule of payments given by the assessee, the Addl. the details of the schedule of payments given by the assessee, the Addl.
CIT observed that the assessee was in receipt of cash of Rs.2.05 crores CIT observed that the assessee was in receipt of cash of Rs.2.05 crores CIT observed that the assessee was in receipt of cash of Rs.2.05 crores and Rs.1.85 crores in AYs 2017 and Rs.1.85 crores in AYs 2017-18 & 2018-19 respectively 19 respectively. According to the Addl. CIT, the receipt of this sale consideration fell within the meaning the Addl. CIT, the receipt of this sale consideration fell within the meaning the Addl. CIT, the receipt of this sale consideration fell within the meaning of ‘specified sum’ as defined in Section 269SS of the Act and the fact that of ‘specified sum’ as defined in Section 269SS of the Act and the fact that of ‘specified sum’ as defined in Section 269SS of the Act and the fact that the assessee had paid these sums immediately to the brokers will not the assessee had paid these sums immediately to the brokers will not the assessee had paid these sums immediately to the brokers will not rescue him from the rigors of Section 269SS of the Act. The Addl. CIT e rigors of Section 269SS of the Act. The Addl. CIT e rigors of Section 269SS of the Act. The Addl. CIT therefore concluded that, since the assessee had received part sale therefore concluded that, since the assessee had received part sale therefore concluded that, since the assessee had received part sale consideration towards transfer of immovable property in cash amounting consideration towards transfer of immovable property in cash amounting consideration towards transfer of immovable property in cash amounting to Rs.2.05 crores and Rs.1.85 crores in AYs 2017 to Rs.2.05 crores and Rs.1.85 crores in AYs 2017-18 & 2018 18 & 2018-19 respectively, then irrespective whether the transfer ultimately took place pectively, then irrespective whether the transfer ultimately took place pectively, then irrespective whether the transfer ultimately took place or not, or that the payer had offered the impugned sum as their income or not, or that the payer had offered the impugned sum as their income or not, or that the payer had offered the impugned sum as their income or not, the assessee was liable to be penalized under Section 271D read or not, the assessee was liable to be penalized under Section 271D read or not, the assessee was liable to be penalized under Section 271D read with Section 269SS of the Act. The Addl. with Section 269SS of the Act. The Addl. CIT is accordingly noted to have CIT is accordingly noted to have levied penalty of Rs.2.05 crores and Rs.1.85 crores u/s 271D of the Act in levied penalty of Rs.2.05 crores and Rs.1.85 crores u/s 271D of the Act in levied penalty of Rs.2.05 crores and Rs.1.85 crores u/s 271D of the Act in AYs 2017-18 & 2018-19 respectively. 19 respectively.
Being aggrieved by the above orders of the Addl. CIT, the assessee Being aggrieved by the above orders of the Addl. CIT, the assessee Being aggrieved by the above orders of the Addl. CIT, the assessee preferred appeal before the Ld. CIT(A) wh preferred appeal before the Ld. CIT(A) who confirmed the same. Now the o confirmed the same. Now the assessee is in appeal before us. assessee is in appeal before us.
& 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::7 ::
In the several grounds raised in the appeal, the assessee has in In the several grounds raised in the appeal, the assessee has in In the several grounds raised in the appeal, the assessee has in sum & substance assailed the action of lower authorities levying the sum & substance assailed the action of lower authorities levying the sum & substance assailed the action of lower authorities levying the impugned penalty on several fronts. The Ld. AR for the a impugned penalty on several fronts. The Ld. AR for the assessee has first ssessee has first contended that, the impugned order was barred by limitation as the contended that, the impugned order was barred by limitation as the contended that, the impugned order was barred by limitation as the impugned proceedings u/s 271D of the Act was initiated after a lapse of impugned proceedings u/s 271D of the Act was initiated after a lapse of impugned proceedings u/s 271D of the Act was initiated after a lapse of four years. The assessee has further contended that even the date on four years. The assessee has further contended that even the date on four years. The assessee has further contended that even the date on which the impugned orders were which the impugned orders were passed were barred by limitation. The passed were barred by limitation. The assessee further urged that, even on merits, the provisions of Section assessee further urged that, even on merits, the provisions of Section assessee further urged that, even on merits, the provisions of Section 269SS did not apply to the impugned issue and therefore pleaded that the 269SS did not apply to the impugned issue and therefore pleaded that the 269SS did not apply to the impugned issue and therefore pleaded that the penalty be set aside. The penalty be set aside. The main argument of the assessee was that, he argument of the assessee was that, he was only the broker / middleman and not the ‘seller’ in the transaction only the broker / middleman and not the ‘seller’ in the transaction only the broker / middleman and not the ‘seller’ in the transaction who had received the advance in his own right and therefore he could not who had received the advance in his own right and therefore he could not who had received the advance in his own right and therefore he could not be subjected to penalty in terms of Section 269SS of the Act. Referring to be subjected to penalty in terms of Section 269SS of the Act. Referring to be subjected to penalty in terms of Section 269SS of the Act. Referring to the MOU as well as the sworn statement, the MOU as well as the sworn statement, the Ld. AR for the assessee the Ld. AR for the assessee argued that, it was not in dispute that the assessee was the agent of Shri argued that, it was not in dispute that the assessee was the agent of Shri argued that, it was not in dispute that the assessee was the agent of Shri M Vedamurthy and was assisting him in acquiring land of 2.65 acres. The Vedamurthy and was assisting him in acquiring land of 2.65 acres. The Vedamurthy and was assisting him in acquiring land of 2.65 acres. The cash paid by Shri M Vedamurthy was immediately handed over to the cash paid by Shri M Vedamurthy was immediately handed over to the cash paid by Shri M Vedamurthy was immediately handed over to the land brokers through whom the land was being purchased and that the through whom the land was being purchased and that the through whom the land was being purchased and that the assessee never received any advance in his own right. Further, the assessee never received any advance in his own right. Further, the assessee never received any advance in his own right. Further, the contention that the assessee was only a land broker was evidenced by the contention that the assessee was only a land broker was evidenced by the contention that the assessee was only a land broker was evidenced by the fact that the commission income offered by the assessee in th fact that the commission income offered by the assessee in th fact that the commission income offered by the assessee in this land dealing had been accepted and assessed to tax by the Revenue. The Ld. dealing had been accepted and assessed to tax by the Revenue. The Ld. dealing had been accepted and assessed to tax by the Revenue. The Ld.
& 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::8 ::
AR accordingly submitted that, the advance paid by Shri M Vedamurthy AR accordingly submitted that, the advance paid by Shri M Vedamurthy AR accordingly submitted that, the advance paid by Shri M Vedamurthy through the assessee to the land brokers for the small land owners cannot through the assessee to the land brokers for the small land owners cannot through the assessee to the land brokers for the small land owners cannot be regarded as ‘advance received to be regarded as ‘advance received towards sale consideration’ by the wards sale consideration’ by the assessee, as wrongly held by the lower authorities to subject the assessee assessee, as wrongly held by the lower authorities to subject the assessee assessee, as wrongly held by the lower authorities to subject the assessee to the rigors of Section 269SS of the Act. The Ld. AR accordingly to the rigors of Section 269SS of the Act. The Ld. AR accordingly to the rigors of Section 269SS of the Act. The Ld. AR accordingly contended that the impugned penalty ought to be set aside. contended that the impugned penalty ought to be set aside. contended that the impugned penalty ought to be set aside.
On the other hand, On the other hand, the Ld. DR appearing for the Revenue supported the Ld. DR appearing for the Revenue supported the order of the lower authorities. He particularly relied upon the findings the order of the lower authorities. He particularly relied upon the findings the order of the lower authorities. He particularly relied upon the findings rendered by the Ld. CIT(A) holding that, even if the recipient was not the rendered by the Ld. CIT(A) holding that, even if the recipient was not the rendered by the Ld. CIT(A) holding that, even if the recipient was not the buyer or seller in the transaction involving transfer of buyer or seller in the transaction involving transfer of buyer or seller in the transaction involving transfer of immovable property, then also such recipient would be liable to the rigors of penalty property, then also such recipient would be liable to the rigors of penalty property, then also such recipient would be liable to the rigors of penalty u/s 269SS of the Act, in absence of any such exception being laid down u/s 269SS of the Act, in absence of any such exception being laid down u/s 269SS of the Act, in absence of any such exception being laid down the said provision.
We have heard both the parties and perused the material placed We have heard both the parties and perused the material placed We have heard both the parties and perused the material placed before us. Before adverting to the facts of the case, let us first have a . Before adverting to the facts of the case, let us first have a . Before adverting to the facts of the case, let us first have a look at the relevant penal provisions of Section 269SS, which is in dispute at the relevant penal provisions of Section 269SS, which is in dispute at the relevant penal provisions of Section 269SS, which is in dispute before us. The said provision is noted to read as under: before us. The said provision is noted to read as under:-
“No person shall take or accept from any other person No person shall take or accept from any other person (he (herein referred to as the depositor), any loan or deposit or to as the depositor), any loan or deposit or any specified sum, otherwise any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of than by an account payee cheque or account payee bank draft or use of than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic clearing system through a bank account or through such other electronic clearing system through a bank account or through such other electronic mode as may be electronic mode as may be prescribed, if,— & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::9 ::
(a) the amount of such loan or deposit or specified sum or the aggregate the amount of such loan or deposit or specified sum or the aggregate the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified on the date of taking or accepting such loan or deposit or specified on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum sum, any loan or deposit or specified sum taken or accepted earlier by taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment such person from the depositor is remaining unpaid (whether repayment such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining has fallen due or not), the amount or the aggregate amount remaining has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) the amount or the aggregate amount referred to in clause (a) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause h the amount or the aggregate amount referred to in clause h the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: is twenty thousand rupees or more:
Provided that the provisions of this section shall not apply to any loan or Provided that the provisions of this section shall not apply to any loan or Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit deposit or specified sum taken or accepted from, or any loan or deposit deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, ied sum taken or accepted by,—
(a) the Government; the Government;
(b)any banking company, post office savings bank or co any banking company, post office savings bank or co-operative bank; operative bank;
(c) any corporation established by a Central, State or Provincial Act; any corporation established by a Central, State or Provincial Act; any corporation established by a Central, State or Provincial Act;
(d)any Government company65 as defined in clause (45) of sectio any Government company65 as defined in clause (45) of sectio any Government company65 as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); the Companies Act, 2013 (18 of 2013);
(e) such other institution, association or body or class of institutions, such other institution, association or body or class of institutions, such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons associations or bodies which the Central Government may, for reasons associations or bodies which the Central Government may, for reasons to be recorded in writing, notify be recorded in writing, notify in this behalf in the Official Gaz in this behalf in the Official Gazette:
Provided further that the provisions of this section shall not apply to any Provided further that the provisions of this section shall not apply to any Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan loan or deposit or specified sum, where the person from whom the loan loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by or deposit or specified sum is taken or accepted and the person by or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified whom the loan or deposit or specified sum is taken or accepted, are sum is taken or accepted, are both having agricultural income and neither of them has any income both having agricultural income and neither of them has any income both having agricultural income and neither of them has any income chargeable to tax under this Act: chargeable to tax under this Act:
Provided also that the provisions of this section shall have effect, as if Provided also that the provisions of this section shall have effect, as if Provided also that the provisions of this section shall have effect, as if for the words "twenty thousand rupees", the words for the words "twenty thousand rupees", the words "two lakh rupees" "two lakh rupees" had been substituted in the case of any deposit or loan where, had been substituted in the case of any deposit or loan where, had been substituted in the case of any deposit or loan where,––
(a) such deposit is accepted by a primary agricultural credit society or a such deposit is accepted by a primary agricultural credit society or a such deposit is accepted by a primary agricultural credit society or a primary co-operative agricultural and rural development bank from its operative agricultural and rural development bank from its operative agricultural and rural development bank from its member; or & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::10 ::
(b) such loan is taken from a primary agricultural credit society or a taken from a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its operative agricultural and rural development bank by its operative agricultural and rural development bank by its member.]
Explanation.—For the purposes of this section, For the purposes of this section,—
(i) "banking company" means a company to which the provisions of the "banking company" means a company to which the provisions of the "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any Regulation Act, 1949 (10 of 1949) applies and includes any Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; bank or banking institution referred to in section 51 of that Act; bank or banking institution referred to in section 51 of that Act;
(ii)"co-operative bank", "primary agricultural credit society" and operative bank", "primary agricultural credit society" and operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" operative agricultural and rural development bank" operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to have the meanings respectively assigned to them in the Explanation to have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80 section (4) of section 80P;
(iii)"loan or deposit" (iii)"loan or deposit" means loan or deposit of money;
(iv) "specified sum" means any sum of money receivable, whether as (iv) "specified sum" means any sum of money receivable, whether as (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in advance or otherwise, in relation to transfer of an immovable property, relation to transfer of an immovable property, whether or not the transfer takes place whether or not the transfer takes place.”
Reading of the above provision shows Reading of the above provision shows that the prohibition that the prohibition postulated in this provision applies to a person who accepts from another postulated in this provision applies to a person who accepts from another postulated in this provision applies to a person who accepts from another person any loan or deposit person any loan or deposit or specified sum otherwise than by an otherwise than by an account-payee cheque or account payee cheque or account-payee bank draft. The provisions are payee bank draft. The provisions are not absolute. The first proviso, attached to the section, excludes he first proviso, attached to the section, excludes he first proviso, attached to the section, excludes government, banking companies, post office savings bank; corporations government, banking companies, post office savings bank; corporations government, banking companies, post office savings bank; corporations established by a Central or State Governments; the second proviso a Central or State Governments; the second proviso a Central or State Governments; the second proviso exempts persons having agricultural income, whose income is not exempts persons having agricultural income, whose income is not exempts persons having agricultural income, whose income is not chargeable to Income-tax Act tax Act. The category of exemptions is also not The category of exemptions is also not exhaustive. By implication there may be certain cases in which the exhaustive. By implication there may be certain cases in which the exhaustive. By implication there may be certain cases in which the provision may not apply. For example, if a servant or agent accepts the sion may not apply. For example, if a servant or agent accepts the sion may not apply. For example, if a servant or agent accepts the deposits or receives the loan deposits or receives the loan or receives the specified sum or receives the specified sum on behalf of & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::11 ::
his master or principal then such agent or servant cannot be treated to b his master or principal then such agent or servant cannot be treated to b his master or principal then such agent or servant cannot be treated to be a person receiving the specified sum a person receiving the specified sum because such agent or servant is use such agent or servant is working only in fiduciary capacity or intermediary. The amount is actually working only in fiduciary capacity or intermediary. The amount is actually working only in fiduciary capacity or intermediary. The amount is actually deposited on behalf of the master or the principal as the case may be and deposited on behalf of the master or the principal as the case may be and deposited on behalf of the master or the principal as the case may be and thus the violation of section 269SS is to be considered in the case of the thus the violation of section 269SS is to be considered in the case of the thus the violation of section 269SS is to be considered in the case of the master or the principal for whom an ter or the principal for whom and on whose behalf of the specified d on whose behalf of the specified sum was received.
The term ‘specified sum’ is noted to have been defined in Clause The term ‘specified sum’ is noted to have been defined in Clause The term ‘specified sum’ is noted to have been defined in Clause (iv) of the Explanation to Section 269SS, to mean any sum of money (iv) of the Explanation to Section 269SS, to mean any sum of money (iv) of the Explanation to Section 269SS, to mean any sum of money receivable, whether as advance or receivable, whether as advance or otherwise, in relation to transfer of an otherwise, in relation to transfer of an immoveable property, whether or not the transfer ultimately takes place. immoveable property, whether or not the transfer ultimately takes place. immoveable property, whether or not the transfer ultimately takes place.
It is well understood that, in a ‘transfer’ of a capital asset by way of It is well understood that, in a ‘transfer’ of a capital asset by way of It is well understood that, in a ‘transfer’ of a capital asset by way of immoveable property, there are two parties involved, viz. buyer and immoveable property, there are two parties involved, viz. buyer and immoveable property, there are two parties involved, viz. buyer and seller. Accordingly, in relation to the transfer of an immoveable property, seller. Accordingly, in relation to the transfer of an immoveable property, seller. Accordingly, in relation to the transfer of an immoveable property, any advance or deposit or earnest money etc., would be received by the any advance or deposit or earnest money etc., would be received by the any advance or deposit or earnest money etc., would be received by the seller from the buyer. The specified sum as defined in Clause (iv) of the seller from the buyer. The specified sum as defined in Clause (iv) of the seller from the buyer. The specified sum as defined in Clause (iv) of the Explanation to Section 269SS of the Explanation to Section 269SS of the Act is meant to act as a deterrent for Act is meant to act as a deterrent for the sellers to transfer their immoveable property in cash. In such a the sellers to transfer their immoveable property in cash. In such a the sellers to transfer their immoveable property in cash. In such a scenario, if the seller receives monies in cash for transferring his scenario, if the seller receives monies in cash for transferring his scenario, if the seller receives monies in cash for transferring his immoveable property, then the entire monies would essentially have to be immoveable property, then the entire monies would essentially have to be immoveable property, then the entire monies would essentially have to be paid by way of penalty u/s 269SS r.w.s.271D of the Act, to the by way of penalty u/s 269SS r.w.s.271D of the Act, to the by way of penalty u/s 269SS r.w.s.271D of the Act, to the & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::12 ::
Government. The term ‘specified sum’ is therefore applicable in the Government. The term ‘specified sum’ is therefore applicable in the Government. The term ‘specified sum’ is therefore applicable in the context of the ‘seller’ of the property. The broker or agent, who is context of the ‘seller’ of the property. The broker or agent, who is context of the ‘seller’ of the property. The broker or agent, who is facilitating the transfer of immoveable property, cannot be s facilitating the transfer of immoveable property, cannot be s facilitating the transfer of immoveable property, cannot be said to be the recipient of the ‘specified sum’ as he is not receiving the same in his own recipient of the ‘specified sum’ as he is not receiving the same in his own recipient of the ‘specified sum’ as he is not receiving the same in his own capacity but for and on behalf of his Principal. Only because the payment capacity but for and on behalf of his Principal. Only because the payment capacity but for and on behalf of his Principal. Only because the payment was routed through him, i.e. he received the payment from the buyer and was routed through him, i.e. he received the payment from the buyer and was routed through him, i.e. he received the payment from the buyer and immediately handed over the same to the seller will not make him the ver the same to the seller will not make him the ver the same to the seller will not make him the recipient of the ‘specified sum’ as neither the sum of money was recipient of the ‘specified sum’ as neither the sum of money was recipient of the ‘specified sum’ as neither the sum of money was receivable by him nor is it an advance given to him nor is he the receivable by him nor is it an advance given to him nor is he the receivable by him nor is it an advance given to him nor is he the transferor of the immoveable property. transferor of the immoveable property. Thus, in light of in light of the foregoing analogy we can say that the liability on account of the violation of section gy we can say that the liability on account of the violation of section gy we can say that the liability on account of the violation of section 269SS cannot be fastened on the servant or the agent. 269SS cannot be fastened on the servant or the agent. Accordingly, the Accordingly, the inference drawn by the Ld. CIT(A) that, any and all parties to a inference drawn by the Ld. CIT(A) that, any and all parties to a inference drawn by the Ld. CIT(A) that, any and all parties to a transaction of transfer of immoveable property, transaction of transfer of immoveable property, including brokers, would including brokers, would be liable to the rigors of Section 269SS of the Act, cannot be be liable to the rigors of Section 269SS of the Act, cannot be be liable to the rigors of Section 269SS of the Act, cannot be countenanced. In our considered view, only the person who is the owner countenanced. In our considered view, only the person who is the owner countenanced. In our considered view, only the person who is the owner of the advance or monies received in relation to transfer of immoveable of the advance or monies received in relation to transfer of immoveable of the advance or monies received in relation to transfer of immoveable property can be subjected property can be subjected to the rigors of Section 269SS of the Act. to the rigors of Section 269SS of the Act.
The above view can further be verified by examining the proviso of view can further be verified by examining the proviso of view can further be verified by examining the proviso of section 271D which provides that if a person takes or accepts any loan or section 271D which provides that if a person takes or accepts any loan or section 271D which provides that if a person takes or accepts any loan or deposit or specified sum or specified sum in contravention of section 269SS then he in contravention of section 269SS then he shall & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan be liable to pay, by way of penalty, a sum equal to the amount of loan or be liable to pay, by way of penalty, a sum equal to the amount of loan or be liable to pay, by way of penalty, a sum equal to the amount of loan or deposit or specified sum or specified sum so taken or accepted. If a servant or agent takes so taken or accepted. If a servant or agent takes the specified sum and hands it over to the Principal i.e. the contracting the specified sum and hands it over to the Principal i.e. the contracting the specified sum and hands it over to the Principal i.e. the contracting party in contravention of in contravention of section 269SS then, he cannot be treated to be he cannot be treated to be a person taking or accepting a person taking or accepting the specified sum because he has not taken because he has not taken or accepted the specified sum specified sum for himself but on behalf of somebody else for himself but on behalf of somebody else and, therefore, penal provision of section 271D cannot be attrac and, therefore, penal provision of section 271D cannot be attrac and, therefore, penal provision of section 271D cannot be attracted in his case.
In this regard, gainful reference may be made to S In this regard, gainful reference may be made to Section 226 of the ection 226 of the Indian Contract Act, stating that the stating that the obligations arising from the acts of obligations arising from the acts of the agent are discharged by the principal. Thisprovision is as under: the agent are discharged by the principal. Thisprovision is as under: the agent are discharged by the principal. Thisprovision is as under:
"Contracts entered "Contracts entered into through an agent, and obligations arising from into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner and will acts done by an agent, may be enforced in the same manner and will acts done by an agent, may be enforced in the same manner and will have the same legal consequences, as if the contracts had been entered have the same legal consequences, as if the contracts had been entered have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person." into and the acts done by the principal in person."
In view of the above f the above provision of the Indian Contract Act, it is clear provision of the Indian Contract Act, it is clear that the act of an agent is to be considered as an act of the Principal. that the act of an agent is to be considered as an act of the Principal. that the act of an agent is to be considered as an act of the Principal.
Accordingly, the liability of the agent has to be limited and it cannot be Accordingly, the liability of the agent has to be limited and it cannot be Accordingly, the liability of the agent has to be limited and it cannot be held liable for any act done on behalf of the held liable for any act done on behalf of the Principal. Hence, in light of Principal. Hence, in light of the discussions made in the foregoing, we are of the considered view that the discussions made in the foregoing, we are of the considered view that the discussions made in the foregoing, we are of the considered view that an agent in a transaction of transfer of immoveable property between a an agent in a transaction of transfer of immoveable property between a an agent in a transaction of transfer of immoveable property between a buyer and seller, cannot be held liable for penal consequence u/s 269SS buyer and seller, cannot be held liable for penal consequence u/s 269SS buyer and seller, cannot be held liable for penal consequence u/s 269SS & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan of the Act for receiving, for and on behalf, and handing over the money to t for receiving, for and on behalf, and handing over the money to t for receiving, for and on behalf, and handing over the money to his Principal.
In light of the above therefore, we now revert back to the facts of In light of the above therefore, we now revert back to the facts of In light of the above therefore, we now revert back to the facts of the present case to ascertain as to whether the assessee in the present the present case to ascertain as to whether the assessee in the present the present case to ascertain as to whether the assessee in the present case could be said to be recip case could be said to be recipient of the ‘specified sum’ in his own right or ient of the ‘specified sum’ in his own right or was he only an agent, as contended by his Ld. AR before us. On perusal was he only an agent, as contended by his Ld. AR before us. On perusal was he only an agent, as contended by his Ld. AR before us. On perusal of the terms of the MoU dated 03.07.2014, it is noted that the recital of the terms of the MoU dated 03.07.2014, it is noted that the recital of the terms of the MoU dated 03.07.2014, it is noted that the recital makes it clear that the assessee mediates and liaisons for identif makes it clear that the assessee mediates and liaisons for identif makes it clear that the assessee mediates and liaisons for identifying and acquiring different parcels of land from various parties and make the said acquiring different parcels of land from various parties and make the said acquiring different parcels of land from various parties and make the said land into a composite land. Shri M Vedamurthy, the second party to the land into a composite land. Shri M Vedamurthy, the second party to the land into a composite land. Shri M Vedamurthy, the second party to the agreement, had therefore allotted only the scope of necessary mediation agreement, had therefore allotted only the scope of necessary mediation agreement, had therefore allotted only the scope of necessary mediation and liaison to acquire the sa and liaison to acquire the said land from the concerned owners to the first id land from the concerned owners to the first party, i.e. the assessee. Further, the scope of work laid down therein party, i.e. the assessee. Further, the scope of work laid down therein party, i.e. the assessee. Further, the scope of work laid down therein clearly reveals that the assessee was acting as a broker for identifying clearly reveals that the assessee was acting as a broker for identifying clearly reveals that the assessee was acting as a broker for identifying land, negotiating terms and fixing sales consideration with the l land, negotiating terms and fixing sales consideration with the l land, negotiating terms and fixing sales consideration with the land owners for and on behalf of the buyer and ensure smooth transfer of title owners for and on behalf of the buyer and ensure smooth transfer of title owners for and on behalf of the buyer and ensure smooth transfer of title from the sellers to the buyer. The relevant clauses of the MoU, as taken from the sellers to the buyer. The relevant clauses of the MoU, as taken from the sellers to the buyer. The relevant clauses of the MoU, as taken note of by us, is as follows: note of by us, is as follows:
a) “The First Party is primarily a real estate business person who has been The First Party is primarily a real estate business person who has been The First Party is primarily a real estate business person who has been dealing with properties all over Tamilnadu. The First Party is well versed aling with properties all over Tamilnadu. The First Party is well versed aling with properties all over Tamilnadu. The First Party is well versed with the process of mediation and liaison for identifying and acquiring with the process of mediation and liaison for identifying and acquiring with the process of mediation and liaison for identifying and acquiring major extents of lands owned in different parcels by various parties and major extents of lands owned in different parcels by various parties and major extents of lands owned in different parcels by various parties and to make the said lands into a composit to make the said lands into a composite land. b) The Second Party is interested in purchasing a property measuring The Second Party is interested in purchasing a property measuring The Second Party is interested in purchasing a property measuring about 2 acres 65 cents in Siruseri Village, Thiruporur taluk and about 2 acres 65 cents in Siruseri Village, Thiruporur taluk and about 2 acres 65 cents in Siruseri Village, Thiruporur taluk and & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan developing the same, since the Second Part finds it as a prospective developing the same, since the Second Part finds it as a prospective developing the same, since the Second Part finds it as a prospective option option option of of of investment investment investment in in in view view view of of of the the the remarkable remarkable remarkable progress of developments happening in and around the said area. developments happening in and around the said area. c) The First Party has identified the said lands and offered the same to the The First Party has identified the said lands and offered the same to the The First Party has identified the said lands and offered the same to the Second Party and the Second Party has physically inspected the said Second Party and the Second Party has physically inspected the said Second Party and the Second Party has physically inspected the said lands with due diligence and considered all lands with due diligence and considered all necessary factors for necessary factors for finalising the purchase of the said lands. The Second Party has decided finalising the purchase of the said lands. The Second Party has decided finalising the purchase of the said lands. The Second Party has decided to allot the scope of necessary mediation and liaison required for to allot the scope of necessary mediation and liaison required for to allot the scope of necessary mediation and liaison required for acquiring the said lands from the concerned owners/claimants to the acquiring the said lands from the concerned owners/claimants to the acquiring the said lands from the concerned owners/claimants to the First Party-since the First since the First Party is conversant with the parties from Party is conversant with the parties from whom the lands can be procured. Further, the Second Party has offered whom the lands can be procured. Further, the Second Party has offered whom the lands can be procured. Further, the Second Party has offered the said scope to the First Party since the Second Party intends to the said scope to the First Party since the Second Party intends to the said scope to the First Party since the Second Party intends to ensure the smooth and assured transfer of the said lands into the name ensure the smooth and assured transfer of the said lands into the name ensure the smooth and assured transfer of the said lands into the name of the Second Party or their nominees. he Second Party or their nominees.
…….
The Second Party assigns the following scope in favour of the First Party The Second Party assigns the following scope in favour of the First Party The Second Party assigns the following scope in favour of the First Party i. Proper identification of lands Proper identification of lands ii. Negotiating terms and conditions with the actual owners or appropriate Negotiating terms and conditions with the actual owners or appropriate Negotiating terms and conditions with the actual owners or appropriate claimants of the lands and negotiate claimants of the lands and negotiate with them for purchasing the lands with them for purchasing the lands iii. Covering the scope of basically verifying title of the seller by engaging a Covering the scope of basically verifying title of the seller by engaging a Covering the scope of basically verifying title of the seller by engaging a legal professional legal professional iv. Fixing appropriate sale considerations in lines with the market Fixing appropriate sale considerations in lines with the market Fixing appropriate sale considerations in lines with the market v. Making site inspections Making site inspections vi. Ensuring the interest of the Secon Ensuring the interest of the Second Party and facilitate/liaise for smooth d Party and facilitate/liaise for smooth transfer of the title and ownership of the property to and in favour of the transfer of the title and ownership of the property to and in favour of the transfer of the title and ownership of the property to and in favour of the Second Party or their nominees by complying with the applicable legal Second Party or their nominees by complying with the applicable legal Second Party or their nominees by complying with the applicable legal provisions and procedures. provisions and procedures.”
It is further noted that, the above It is further noted that, the above MoU was confronted to the MoU was confronted to the assessee and his statement or note was recorded u/s 131 of the Act, on assessee and his statement or note was recorded u/s 131 of the Act, on assessee and his statement or note was recorded u/s 131 of the Act, on 06.06.2018. On perusal of the statement, we find that the assessee had 06.06.2018. On perusal of the statement, we find that the assessee had 06.06.2018. On perusal of the statement, we find that the assessee had clearly stated that he was a land aggregator and was acting as the clearly stated that he was a land aggregator and was acting as the clearly stated that he was a land aggregator and was acting as the middleman between Shr middleman between Shri M Vedamurthy and many sellers, for which he y sellers, for which he had entered into an MoU with his Principal, i.e. Shri M Vedamurthy. The had entered into an MoU with his Principal, i.e. Shri M Vedamurthy. The had entered into an MoU with his Principal, i.e. Shri M Vedamurthy. The assessee is also noted to have stated that he would hand over the cash to assessee is also noted to have stated that he would hand over the cash to assessee is also noted to have stated that he would hand over the cash to & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan the land brokers in presence of his Principal, Shri M Vedamurthy the land brokers in presence of his Principal, Shri M Vedamurthy the land brokers in presence of his Principal, Shri M Vedamurthy, and give him acknowledgement for the receipt of cash. The relevant questions and him acknowledgement for the receipt of cash. The relevant questions and him acknowledgement for the receipt of cash. The relevant questions and the answers given by him, is noted as under: the answers given by him, is noted as under:
“Q10. Please state what is the purpose of above Memorandum of Q10. Please state what is the purpose of above Memorandum of Q10. Please state what is the purpose of above Memorandum of Understanding entered between yourself and Sri.M.Vedamurthy? Understanding entered between yourself and Sri.M.Vedamurthy? Understanding entered between yourself and Sri.M.Vedamurthy?
Ans. Madam, I have entered into Memorandum of Understanding with Madam, I have entered into Memorandum of Understanding with Madam, I have entered into Memorandum of Understanding with Sri.M.Vedamurthy towards purchase of 2 acres and 65 cents land Sri.M.Vedamurthy towards purchase of 2 acres and 65 cents land Sri.M.Vedamurthy towards purchase of 2 acres and 65 cents land property at Siruseri village, Thiruporur Talk at the rate of 4.2 crores per property at Siruseri village, Thiruporur Talk at the rate of 4.2 crores per property at Siruseri village, Thiruporur Talk at the rate of 4.2 crores per acre. I am a land aggregator who is the middleman betwee acre. I am a land aggregator who is the middleman betwee acre. I am a land aggregator who is the middleman between one common buyer (Sri.M. Vedamurthy) and many sellers (small land common buyer (Sri.M. Vedamurthy) and many sellers (small land common buyer (Sri.M. Vedamurthy) and many sellers (small land owners).
….. Q12. Please state what is the total amount received by you in cash from Q12. Please state what is the total amount received by you in cash from Q12. Please state what is the total amount received by you in cash from Sri.M.Vedamurthy towards purchase of land property at Siruseri village Sri.M.Vedamurthy towards purchase of land property at Siruseri village Sri.M.Vedamurthy towards purchase of land property at Siruseri village as per MOU dated 03.07.2014 to as per MOU dated 03.07.2014 to till date.
Ans. Out of Rs.7.35 crores, I have received an amount of Rs. 6.10 Ans. Out of Rs.7.35 crores, I have received an amount of Rs. 6.10 Ans. Out of Rs.7.35 crores, I have received an amount of Rs. 6.10 crores in cash from Shri.M.Vedamurthy. Though I used to give crores in cash from Shri.M.Vedamurthy. Though I used to give crores in cash from Shri.M.Vedamurthy. Though I used to give acknowledgement for receipt of cash, I immediately handed over the acknowledgement for receipt of cash, I immediately handed over the acknowledgement for receipt of cash, I immediately handed over the cash to the land brokers in presence of Sri.M.Veda cash to the land brokers in presence of Sri.M.Vedamurthy.”
Further, as noted from the facts discussed in the preceding Further, as noted from the facts discussed in the preceding Further, as noted from the facts discussed in the preceding paragraphs, even the Revenue had acknowledged and accepted the paragraphs, even the Revenue had acknowledged and accepted the paragraphs, even the Revenue had acknowledged and accepted the assessee to be a land broker and had assessed the commission income assessee to be a land broker and had assessed the commission income assessee to be a land broker and had assessed the commission income offered by him to tax in AY 2016 offered by him to tax in AY 2016-17. Hence, we find merit in the Ld. AR’s merit in the Ld. AR’s plea that the Revenue cannot blow hot and cold at the same time i.e. tax plea that the Revenue cannot blow hot and cold at the same time i.e. tax plea that the Revenue cannot blow hot and cold at the same time i.e. tax the commission income on one hand and thereafter treat the assessee to the commission income on one hand and thereafter treat the assessee to the commission income on one hand and thereafter treat the assessee to be the owner of the purported ‘specified sum’ and levy penalty as well. be the owner of the purported ‘specified sum’ and levy penalty as well. be the owner of the purported ‘specified sum’ and levy penalty as well.
We also note that the Revenue has not disputed the fact that, the the Revenue has not disputed the fact that, the the Revenue has not disputed the fact that, the impugned land in question was not owned by the assessee. Further, impugned land in question was not owned by the assessee. Further, impugned land in question was not owned by the assessee. Further, & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan pursuant to the MoU, the assessee had attempted to obtain the land pursuant to the MoU, the assessee had attempted to obtain the land pursuant to the MoU, the assessee had attempted to obtain the land parcels for Shri M Vedamurthy but ultimately the transaction did not go parcels for Shri M Vedamurthy but ultimately the transaction did not go parcels for Shri M Vedamurthy but ultimately the transaction did not go through and that the monies were refunded. This fact is noted to have ough and that the monies were refunded. This fact is noted to have ough and that the monies were refunded. This fact is noted to have been stated by the assessee in his sworn statement as well in as much as been stated by the assessee in his sworn statement as well in as much as been stated by the assessee in his sworn statement as well in as much as the details thereof were also provided. It is also not the Revenue’s case the details thereof were also provided. It is also not the Revenue’s case the details thereof were also provided. It is also not the Revenue’s case that any of the land parcels at that any of the land parcels at Siruseri Village, Thiruporur Taluk iruporur Taluk, was conveyed in favour of Shri M Vedamurthy. Overall therefore, we note that conveyed in favour of Shri M Vedamurthy. Overall therefore, we note that conveyed in favour of Shri M Vedamurthy. Overall therefore, we note that the contemporaneous facts on record shows that the assessee had acted the contemporaneous facts on record shows that the assessee had acted the contemporaneous facts on record shows that the assessee had acted as a broker for the Shri M Vedamurthy, who had given cash advances to as a broker for the Shri M Vedamurthy, who had given cash advances to as a broker for the Shri M Vedamurthy, who had given cash advances to the land sellers through the assessee and later on since the transaction ers through the assessee and later on since the transaction ers through the assessee and later on since the transaction did not go through, the land seller or the broker had refunded back the did not go through, the land seller or the broker had refunded back the did not go through, the land seller or the broker had refunded back the money to the Principal, i.e. Shri M Vedamurthy. It is therefore noted that money to the Principal, i.e. Shri M Vedamurthy. It is therefore noted that money to the Principal, i.e. Shri M Vedamurthy. It is therefore noted that the assessee was never the ‘recipient’ in real s the assessee was never the ‘recipient’ in real sense of the advances nor ense of the advances nor was he the owner of the same in his own independent right and rather he was he the owner of the same in his own independent right and rather he was he the owner of the same in his own independent right and rather he had acted on behalf of his Principal, which was Shri M Vedamurthy and it had acted on behalf of his Principal, which was Shri M Vedamurthy and it had acted on behalf of his Principal, which was Shri M Vedamurthy and it is through him that the buyer had made payments to the intended sellers. is through him that the buyer had made payments to the intended sellers. is through him that the buyer had made payments to the intended sellers.
We thus find merit in the assessee’s contention that he was never in merit in the assessee’s contention that he was never in merit in the assessee’s contention that he was never in receipt of the ‘specified sum’ in as much as he was not transferring any receipt of the ‘specified sum’ in as much as he was not transferring any receipt of the ‘specified sum’ in as much as he was not transferring any immoveable property to the buyer. immoveable property to the buyer.
It is noted that the lower authorities had factually erred in holding It is noted that the lower authorities had factually erred in holding It is noted that the lower authorities had factually erred in holding that, the assessee was in ‘receipt’ of part ‘sale consideration’ and was in ‘receipt’ of part ‘sale consideration’ and was in ‘receipt’ of part ‘sale consideration’ and therefore, irrespective of whether the transfer ultimately took place or therefore, irrespective of whether the transfer ultimately took place or therefore, irrespective of whether the transfer ultimately took place or & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan not, since he was in receipt of the ‘specified sum’, he is liable to be not, since he was in receipt of the ‘specified sum’, he is liable to be not, since he was in receipt of the ‘specified sum’, he is liable to be penalized u/s 269SS r.w.s. 271D of the Act. As noted above, penalized u/s 269SS r.w.s. 271D of the Act. As noted above, penalized u/s 269SS r.w.s. 271D of the Act. As noted above, there was no ‘sale consideration’ involved in true sense, as no transfer ever took place. ‘sale consideration’ involved in true sense, as no transfer ever took place. ‘sale consideration’ involved in true sense, as no transfer ever took place.
Having regard to the facts as already narrated in the preceding Having regard to the facts as already narrated in the preceding Having regard to the facts as already narrated in the preceding paragraphs, the sums impugned in this appeal were paid by Shri M paragraphs, the sums impugned in this appeal were paid by Shri M paragraphs, the sums impugned in this appeal were paid by Shri M Vedamurthy by way of ‘advance’. Altho Vedamurthy by way of ‘advance’. Although it is indeed true that the ugh it is indeed true that the provisions of Section 269SS would still apply in case of an ‘advance’, provisions of Section 269SS would still apply in case of an ‘advance’, provisions of Section 269SS would still apply in case of an ‘advance’, whether or not the transfer took place, but as held above, it would apply whether or not the transfer took place, but as held above, it would apply whether or not the transfer took place, but as held above, it would apply in the hands of the ‘recipient’ of the monies in real sense i.e. the person in the hands of the ‘recipient’ of the monies in real sense i.e. the person in the hands of the ‘recipient’ of the monies in real sense i.e. the person who would be transferring the immoveable property. As noted above, the would be transferring the immoveable property. As noted above, the would be transferring the immoveable property. As noted above, the assessee was not the ‘recipient’ but only the agent or facilitator through assessee was not the ‘recipient’ but only the agent or facilitator through assessee was not the ‘recipient’ but only the agent or facilitator through whom the payment was made, he cannot be subject to provisions of whom the payment was made, he cannot be subject to provisions of whom the payment was made, he cannot be subject to provisions of Section 269SS of the Act. Section 269SS of the Act.
We have taken cogn We have taken cognizance of the Revenue’s argument that, there izance of the Revenue’s argument that, there was no explicit language used in Section 269SS of the Act that, it would was no explicit language used in Section 269SS of the Act that, it would was no explicit language used in Section 269SS of the Act that, it would apply only to ‘buyer’ and ‘seller’ of immoveable property. The lower apply only to ‘buyer’ and ‘seller’ of immoveable property. The lower apply only to ‘buyer’ and ‘seller’ of immoveable property. The lower authorities failed to appreciate that the provision would apply ‘in r authorities failed to appreciate that the provision would apply ‘in r authorities failed to appreciate that the provision would apply ‘in relation to transfer of immovable property’ and that is broad enough to to transfer of immovable property’ and that is broad enough to to transfer of immovable property’ and that is broad enough to encompass not only vanilla transaction of buy & sell of immovable encompass not only vanilla transaction of buy & sell of immovable encompass not only vanilla transaction of buy & sell of immovable property, but even extinguishment of rights in immovable property viz., property, but even extinguishment of rights in immovable property viz., property, but even extinguishment of rights in immovable property viz., where occupier or tenant is vacated therefrom, where occupier or tenant is vacated therefrom, or where there is a long or where there is a long- term lease in the nature of ‘transfer’ between lessor and lessee etc., term lease in the nature of ‘transfer’ between lessor and lessee etc., term lease in the nature of ‘transfer’ between lessor and lessee etc., & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan ::19 ::
Hence, there can be several situations of transfer of immovable property Hence, there can be several situations of transfer of immovable property Hence, there can be several situations of transfer of immovable property which can be envisaged, apart from simple conveyance of immovable which can be envisaged, apart from simple conveyance of immovable which can be envisaged, apart from simple conveyance of immovable property between a bu property between a buyer and seller. The provisions of Section 269SS yer and seller. The provisions of Section 269SS would apply to recipient of monies in relation to transfer of immovable would apply to recipient of monies in relation to transfer of immovable would apply to recipient of monies in relation to transfer of immovable property viz., who actually receives the monies in his own independent property viz., who actually receives the monies in his own independent property viz., who actually receives the monies in his own independent right. We are therefore unable to countenance the Revenue’s argum right. We are therefore unable to countenance the Revenue’s argum right. We are therefore unable to countenance the Revenue’s argument that even a broker, who receives from a principal and immediately pays that even a broker, who receives from a principal and immediately pays that even a broker, who receives from a principal and immediately pays the monies to the other principal, shall be regarded as ‘recipient’ of the monies to the other principal, shall be regarded as ‘recipient’ of the monies to the other principal, shall be regarded as ‘recipient’ of monies in relation to transfer of immovable property. monies in relation to transfer of immovable property.
Further, on the facts of the present case, we also Further, on the facts of the present case, we also find that there is a find that there is a ‘reasonable cause’ as mandated u/s 273B of the Act, as Section 269SS of ‘reasonable cause’ as mandated u/s 273B of the Act, as Section 269SS of ‘reasonable cause’ as mandated u/s 273B of the Act, as Section 269SS of the Act was amended by the Finance Act 2015, wherein the term the Act was amended by the Finance Act 2015, wherein the term the Act was amended by the Finance Act 2015, wherein the term ‘specified sum’ was introduced to include amount received for transfer of ‘specified sum’ was introduced to include amount received for transfer of ‘specified sum’ was introduced to include amount received for transfer of immoveable property, wherea immoveable property, whereas the MoU pursuant to which the advances s the MoU pursuant to which the advances were paid, in the present case, admittedly was entered into on were paid, in the present case, admittedly was entered into on were paid, in the present case, admittedly was entered into on 03.07.2014 viz., prior to the introduction of the aforesaid amendment, we 03.07.2014 viz., prior to the introduction of the aforesaid amendment, we 03.07.2014 viz., prior to the introduction of the aforesaid amendment, we agree with the Ld. AR that this amendment would not have come to the agree with the Ld. AR that this amendment would not have come to the agree with the Ld. AR that this amendment would not have come to the knowledge of the assessee who is a middle man having elementary of the assessee who is a middle man having elementary of the assessee who is a middle man having elementary education and no knowledge of tax laws. The assessee would have not education and no knowledge of tax laws. The assessee would have not education and no knowledge of tax laws. The assessee would have not been under a belief that there was any contravention of any provision of been under a belief that there was any contravention of any provision of been under a belief that there was any contravention of any provision of the Act. Further, since the assessee was only the middleman the Act. Further, since the assessee was only the middleman the Act. Further, since the assessee was only the middleman and was & 2166 2165 & 2166/Chny/2024 (AYs 20 2017-18 & 2018-19) Mr. R. Anbuvelrajan never the recipient of the monies in real sense, his conduct cannot be never the recipient of the monies in real sense, his conduct cannot be never the recipient of the monies in real sense, his conduct cannot be treated to be contumacious or malafide. treated to be contumacious or malafide.
In view of the aforesaid reasoning In view of the aforesaid reasoning on the facts of the case on the facts of the case, we are of the considered opinion that penalty u/s 271D of the Act was not opinion that penalty u/s 271D of the Act was not opinion that penalty u/s 271D of the Act was not imposable on the assessee and therefore we direct the AO to delete the imposable on the assessee and therefore we direct the AO to delete the imposable on the assessee and therefore we direct the AO to delete the same.
Since, on merits, we have deleted the penalty levied u/s 271D of Since, on merits, we have deleted the penalty levied u/s 271D of Since, on merits, we have deleted the penalty levied u/s 271D of the Act, the other legal contentions raised as to the validity of the the Act, the other legal contentions raised as to the validity of the the Act, the other legal contentions raised as to the validity of the impugned penalty orders have become a impugned penalty orders have become academic in nature and is cademic in nature and is therefore not being separately adjudicated upon. therefore not being separately adjudicated upon.
In the result, both the appeals of the assessee stand allowed. In the result, both the appeals of the assessee stand allowed. In the result, both the appeals of the assessee stand allowed. Order pronounced on the 29th day of January, 2025, in Chennai. Order pronounced on the , in Chennai.