HARI KRISHNA LEELA PRASAD PALADUGU,HYDERABAD vs. INCOME TAX OFFICER, WARD - 6(1), HYDERABAD

Facts

The assessee received Rs.15,78,000/- in cash for the sale of immovable property in April 2016, following an initial advance of Rs.15,00,000/- in May 2015. The A.O. initiated penalty proceedings under Section 271D for contravention of Section 269SS, as the cash receipt occurred after the amendment to Section 269SS came into effect on 01.06.2015, which broadened the definition of "specified sum". The CIT(A) upheld the penalty, leading the assessee to appeal before the Tribunal.

Held

The Tribunal ruled that since the agreement for sale and the initial advance were made before the amendment to Section 269SS, the assessee had a bonafide belief that the section did not apply to property sales at that time. This constituted a reasonable cause under Section 273B for accepting the balance consideration in cash. Therefore, the Tribunal deleted the penalty imposed under Section 271D, finding that the A.O. had erred in levying it. The additional legal ground challenging the validity of the A.O.'s order was dismissed as infructuous.

Key Issues

Whether penalty under Section 271D for contravention of Section 269SS is leviable for cash receipt of sale consideration for immovable property when the agreement and initial advance predated the amendment to Section 269SS; and whether the lack of A.O.'s recorded satisfaction before initiating penalty proceedings invalidates the penalty order.