NIMMATOORI YASHODA,HYDERABAD vs. DCIT., CENTRAL CIRCLE 2(4), HYDERABAD

3 ITA.Nos.602 & 603/Hyd./2025

6. The Ld. CIT(A) ought to have appreciated that the AO, initiating penalty u/s 271D is legally invalid, as the order passed is beyond his legal jurisdiction of the AO, in terms of section 271D(2) of Act.

7. The Ld. CIT(A) ought to have appreciated that the AO has not recorded his satisfaction about initiation of penalty proceedings u/s 271D of the Act 8. The Ld. CIT(A) ought to have appreciated that, as per the provisions of section 271, a proper satisfaction must be recorded to initiate penalty proceedings u/s 271D instead of a mere statement given by the AO in his order dated 21.12.2019. 9. a . The Ld. CIT(A) erred in dismissing ground nos. 11,12,13 & 15 taken before him. b. Without prejudice to other grounds, the Ld. CIT(A) ought to have appreciated that the AO in the assessment passed u/s 143(3) rws 153A of the Act dated 21.12.2019 has treated the sale proceeds of Rs.1,62,70,380/- as income of the assessee for the year under consideration. c. The Ld. CIT(A) ought to have appreciated that the addition of Rs.1,62,70,380/- in the assessment made and the levy of penalty for the same amount of Rs.1,62,70,380/-leads to double taxation.

4 ITA.Nos.602 & 603/Hyd./2025 d. The Ld. CIT(A) ought to have appreciated that the AO in the penalty order treated the amount of Rs.1,62,70,380/- as cash loans/advances, while in the assessment, made u/s 143(3) rws 153A, the same was treated as assessee's income, which amount to two divergent inferences by the AO on one transaction. e. The Ld. CIT(A) erred in relying on Supreme Court Decision in the case of Asst. Director of Inspection vs., Kum. A.B. Shanthi (2002) 255 ITR 258 (S.C) for dismissing ground nos. 11,12,13 & 15 taken before him. f. The Ld. CIT(A) ought to have appreciated that he has misquoted the Supreme Court Judgment which is not relevant to the grounds of appeal taken before him. g. The Ld. CIT(A) ought to have appreciated that the Supreme Court decision in the case of Asst. Director of Inspection vs., Kum. A.B. Shanthi is with regard to the constitutional validity of the provisions of section 26955 of the 1.T Act 1961 but not with regard to the impugned double taxation.

10. Without prejudice to other grounds, the Ld. CIT(A) ought to have appreciated that there is a reasonable cause as referred to in section 273B of the Act for the acceptance of the impugned cash by the assessee and that therefore, the penalty u/s 271D of the Act is not leviable in the appellant's case for the year under consideration.

5 ITA.Nos.602 & 603/Hyd./2025 11. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

2. Briefly stated facts of the case are that, the assessee, an individual and is one of the Trustees of M/s. Aurora Educational Society & Other Group Trusts. The assessee has originally filed her return of income for the Assessment Year 2017-2018 on 29.12.2017 admitting total income of Rs.3,53,050/-, after claiming Chapter-VIA deductions of Rs.1,50,000/-. A Search and Seizure operation u/s 132 of the Income Tax Act, 1961 [in short “the Act”] was conducted in the case of M/s. Aurora Educational Society & others Group in which the assessee was also covered. The warrant of authorization was executed on 23.03.2018. During the course of assessment proceedings, the Assessing Officer noticed that, the assessee was in receipt of monies by ways other than account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode. The 6 ITA.Nos.602 & 603/Hyd./2025 monies were received on account of sale of land at Bommaipally Village to M/s Aishwarya Infra Developers which is evident vide Para-8 of the assessment order dated 21.12.2019, it has been stated that, the assessee, along with others, had sold Ac.29.15 gts of land at Bommaipally Village to M/s Aishwarya Infra Developers. As a part of sale consideration Rs.5.18 crores was received in cash. The land was jointly owned by the assessee along with others. As per sworn statements of Sri N. Durga Prasad, Managing Partner of M/s. Aishwarya Infra Developers, Sri N. Raja Babu, husband of the assessee and Sri N. Ramesh Babu, it is evident that, the assessee has received Rs.1,62,70,380/- in cash which is violation of Section 269SS of the Income Tax Act, 1961. Therefore, the Assessing Officer referred the matter to Addl. CIT, Central Range-2, Hyderabad for initiation of penalty proceedings u/sec.271D of the Income Tax Act, 1961.

7 ITA.Nos.602 & 603/Hyd./2025 3. The Jt./Addl. CIT, Central Range-2, Hyderabad, issued notices dated 26.12.2019, 19.10.2020 and 11.02.2021 u/sec.271D of the Income Tax Act, 1961 of the 1.T. Act. In response to the notice, the assessee filed her reply on 19.02.2021 contending, inter alia, that, the said assets were rural agricultural lands and did not constitute capital assets for the purpose of capital gains. Since, the transactions were not subject to capital gains, the assessee claimed that, provisions of section 269SS would not apply. The assessee, however, has not contested the fact that, she received the above quantified amount in cash. The learned Jt./Addl. CIT, Central Range-2, Hyderabad after considering the submissions of the assessee noted that, the assessee did not submit any evidence in support of her claim of the asset being agricultural land such as proof of cultivation, revenue records, distance from municipal limits etc. Further, the claim of the assets not being capital assets for the purpose of capital

8 ITA.Nos.602 & 603/Hyd./2025 gains was made during the assessment proceedings too. The Jt./Addl. CIT, Central Range-2, Hyderabad further noted that, the Assessing Officer at para 8.4 of the assessment order categorically rebutted the claim with the assertion that, the said villages are urban areas as they are a part of Hyderabad Metropolitan Region notified by the Government of Andhra Pradesh vide G.O.Ms No. 570 dated 25.08.2008. Further, the Assessing Officer brought to light that, no agricultural activity was carried on by the assessee in the said lands. The Jt./Addl. CIT, Central Range-2, Hyderabad further observed that, a plain reading of section 269SS of the Income Tax Act, 1961, reveals that, the assessee has violated its provisions. The said section prohibits a person from accepting specified sum otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. The section defines "Specified Sum as any sum of money receivable, whether as advance or otherwise,

9 ITA.Nos.602 & 603/Hyd./2025 in relation to transfer of an immovable property, whether or not the transfer takes list. The section does not discriminate the amounts received on the basis of their taxability under the Act. Further, the Jt./Addl. CIT, Central Range-2, Hyderabad noted that, to invoke the section, it is not necessary that, the amount received should partake the nature of being an income under the Act. In view of the above, the Jt./Addl. CIT, Central Range-2, Hyderabad noted that, the assessee fails in his attempt to seek shelter from the attendant penalty provisions under the garb of the incomes not being liable to tax. The assessee in his submissions has not disputed the quantum of the amounts determined by the Assessing Officer as receipts from the aforesaid transactions. The presumption of the assessee that, incomes not liable to tax are not subject to provisions of section 269SS of the Act, does not constitute a ‘reasonable cause’ for the purposes of section 273B, Since, both the payer and payee in transaction 10 ITA.Nos.602 & 603/Hyd./2025 possessed valid operational bank accounts, no reasonable cause has been demonstrated for receiving the monies outside the banking channels. In support of the above observations, the learned Jt./Addl. CIT, Central Range-2, Hyderabad has relied on the decision of Hon’ble Madras High Court in the case of P. Bhaskar vs. C.I.T. (Mad) 340 ITR 560 (Mad.) and also the Judgment of Hon’ble Supreme Court in the case of Assistant Director of Inspection vs. Kum. A.B.Shanthi (2002) 255 ITR 258 (SC)], where it has been held that, “relief from the penal provisions of section 271D is possible, if the assessee proves that, there was reasonable cause to take a loan otherwise than by account payee cheque or account payee demand draft”. In light of the above observations, the learned Jt./Addl. CIT, Central Range-2, Hyderabad noted that, in the present case, during the assessment proceedings, the assessee was unable to submit any document which could prove that, the said transaction was carried 11 ITA.Nos.602 & 603/Hyd./2025 through banking channel/electronic mode. Further, the assessee could substantiate the unavoidable circumstances/bonafide reasons under which it accepted the cash more than Rs.20,000/- otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. Hence, the case of the assessee falls clearly within the provisions of section 271D of the Income Tax Act, 1961. The learned Jt./Addl. CIT, Central Range-2, Hyderabad noted that, the section 269SS does not deal with the genuineness or otherwise of the loans and deposits accepted by the assessee, but, it only requires the regulation of loans and deposits in a specific manner exceeding a specified limit. However, the assessee has claimed that, "the cash deposited in the bank accounts are shown in the final accounts and are duly reflected in the balance sheets of the society, hence the transaction is not a violation", cannot be accepted. The said section does not grant immunity even if the 12 ITA.Nos.602 & 603/Hyd./2025 transactions are found to be genuine or recorded in the books. In the light of above discussion, the learned Jt./Addl. CIT, Central Range-2, Hyderabad held that, the sum of Rs.1,62,70,380/- for the assessment year 2017-2018 is held to be falling within the definition of 'specified sum' as per the provisions of section 269SS of the Income Tax Act, 1961 and thus, the submissions made by the assessee are not acceptable. Since the assessee had violated the provisions of section 269SS of the I.T. Act, 1961, the Jt./Addl. CIT, Central Range-2, Hyderabad held that, the assessee is liable for penalty u/sec.271D of the I.T. Act, 1961 being 100% of the amount received by way of cash. Accordingly, penalty under section 271D is levied on the assessee for receiving Rs.1,62,70,380/- by ways other an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other prescribed electronic mode which 13 ITA.Nos.602 & 603/Hyd./2025 should be paid as per the demand notice u/sec.156 of the Income Tax Act, 1961.

3. On being aggrieved by the penalty order dated 23.06.2021 passed by the learned Jt./Addl. CIT, Central Range-2, Hyderabad, u/sec.271D of the Income Tax Act, 1961, the assessee preferred an appeal before the learned CIT(A) and filed his written submissions dated 09.11.2023 which are reproduced in para-5.2 of the learned CIT(A)’s order. The learned CIT(A), during the course of appellate proceedings, forwarded the written submissions filed by the assessee to the Assessing Officer [ACIT, Central Circle-2(4), Hyderabad] vide letter dated 15.04.2024 to submit remand report. In response, the Assessing Officer submitted his remand report vide letter dated 19.06.2024. Further, the learned CIT(A) has forwarded the remand report to the assessee to furnish his comments. In response, the assessee has also filed the objections to the remand report which are 14 ITA.Nos.602 & 603/Hyd./2025 reproduced by the learned CIT(A) in para 5.4 of his order. The learned CIT(A) after considering the submissions of the assessee, findings of the Assessing Officer in the assessment order, remand report and penalty order passed by the Jt./Addl. CIT, Central Range-2, Hyderabad, has sustained the penalty levied by Jt./Addl. CIT, Central Range-2, Hyderabad for violating the provisions of sec.269SS of the Income Tax Act, 1961, by rejecting all the grounds raised by the assessee.

4. Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

4. CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, right from the very beginning the assessee explained the source of cash deposit, out of sale consideration received on sale of agriculture land. Further, the Assessing Officer has considered the source and has not made any addition towards cash deposit, but, considered Rs.1,62,70,380/- under section 15 ITA.Nos.602 & 603/Hyd./2025 269SS of the Act, for accepting cash for sale of agriculture land. The Learned Counsel for the Assessee submitted that, the learned CIT(A) without appreciating the fact that, consideration received for sale of agricultural land in cash cannot fall under the definition of “loans or deposit” or “specified sum” as defined u/sec.269SS of the Act, has upheld penalty u/sec.271D of the Act. Further, the specified sum referred in sec.269SS of the Act cannot be stretched to the consideration received for transfer of property at the time of registration in the presence of witnesses. Therefore, he submitted that, although, the assessee has explained the reasons for accepting cash, the learned CIT(A) without appreciating the relevant facts, sustained the penalty levied by the Assessing Officer. Learned Counsel for the Assessee further submitted at the outset that, penalty levied by the Assessing Officer lacked the legal authority and the penalty proceedings are also barred by limitation u/sec.275(1)(c) of the Income Tax Act, 1961. The learned CIT(A) without considering the submissions of the assessee, rejected the ground.

16 ITA.Nos.602 & 603/Hyd./2025 5. Sri Siva Prasad SV, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the Assessing Officer has proposed for initiation of penalty proceedings u/sec.271D of the Income Tax Act, 1961, in view of violation of provisions of sec.269SS of the Income Tax Act, 1961. The assessee could not substantiate her claim with supporting documentary evidences. Therefore, the Assessing Officer has rightly levied the 100% penalty. The learned CIT(A) after considering the written submissions of the assessee, remand report from the Assessing Officer has rightly sustained the penalty levied by the Assessing Officer. He, therefore, submitted that, the penalty sustained by the learned CIT(A) should be upheld.

5.1. Further, the learned Sr. AR for the Revenue, has filed written submissions on the issue including on the issue of limitation in passing the penalty order u/sec.271D of the Act and submitted that, there is no merit in the grounds taken by the Learned Counsel for the Assessee on the issue of limitation because, in the present case, the 17 ITA.Nos.602 & 603/Hyd./2025 Joint/Addl. Commissioner of Income Tax, Central Range-2, Hyderabad, has initiated penalty proceeding by issuing notice u/sec.271D of the Act dated 26.12.2019 and as per the provisions of section 275(1)(c) of the Act, there is a time limit up-to 30.06.2020 for passing the order imposing the penalty. Further, due to on-going Covid, the CBDT has issued various Notification Nos.10/2021, 38/2021 and 74/2021 dated 27.02.2021, 27.04.2021 and 25.06.2021, respectively, in light of Taxation and Other Laws Amendment Act, 2020 [in short “TOLA”] and extended the time limit for passing orders imposing penalty in terms of Chapter XXI of the Act initially up-to 31.03.2021 and the same has been extended from time to time by issuing further notifications to finally up-to 30.09.2021. Since the Assessing Officer has passed the Order imposing penalty u/sec.271D of the Act on 23.06.2021, it is well within the time limit extended by the CBDT and, therefore, the argument of the Counsel for the Assessee that, the Order passed by the Assessing Officer imposing penalty u/sec.271D of the Act, is barred by limitation is incorrect.

18 ITA.Nos.602 & 603/Hyd./2025 The learned Sr. AR for the Revenue further submitted that, there is no merit in the arguments of Counsel for the Assessee that, provisions of sec.271D of the Act has no application for sale of agriculture land in cash because, the Legislature has amended the provisions of Sec.269SS of the Act w.e.f. 01.06.2015 by insertion of the word “specified sum” and in order to curb generation a black money by way of dealings in cash in immovable property transactions. Therefore, once the law has been defined the term “specified sum” which includes consideration received for sale of immovable property whether or not registration is taken place, also covers sale of agriculture land within the ambit of provisions of Sec.269SS of the Act. Therefore, an attempt to draw a parallel to the exceptions given to payments in respect of purchase of agricultural produce as per the provisions of section 40A(3) read with Rule 6DD is incorrect. Learned Sr. AR further referring to certain judicial precedents including decision cited by the Learned Counsel for the Assessee in the case of Rakesh Ganapathy vs., JCIT [2025] 170 taxman.com 239 [ITAT-Bangalore] submitted 19 ITA.Nos.602 & 603/Hyd./2025 that, the facts in the above case are distinguishable from the facts of the present case because, in the said case, the assessee has sold ancestral agricultural land to his relatives and received sale consideration in cash on a honest and bonafide belief that, sale proceed received in cash from sale of agricultural land was not covered u/sec.269SS of the Act. Under those facts, the Tribunal came to the conclusion that, there is a reasonable cause for the assessee for accepting cash for sale of agricultural land and thus, directed the Assessing Officer to delete the penalty. In the present case, the assessee being a person regularly assessed to tax is well aware of the knowledge of tax law and, therefore, it is presumed that, the assessee is aware of the provisions of sec.269SS of the Act and consequently, now, the assessee cannot plead that, he was under bonafide belief that, provisions of sec.269SS of the Act are not applicable for sale of agriculture land. Therefore, the argument of the Counsel for the Assessee lacks merit and the same should be rejected.

20 ITA.Nos.602 & 603/Hyd./2025 5.2. The learned Sr. AR for the Revenue further submitted that, the argument of Counsel for Assessee that, if a transaction is included in the return of income, penalty is not attracted is also incorrect going by the plain reading of sec.269SS of the Act and 271D of the Act. The purpose of introduction of “specified sum” in the provisions of sec.269SS of the Act was to curb black money and, therefore, payment of tax on income and genuine nature of transactions does not absolve the liability of the assessee. In this regard, he relied upon decision of the Hon’ble Supreme Court in the case of Assistant Director of Inspection vs., Kum. AB Shanti and the decision of Hon’ble High Court of Madras in the case of P. Bhaskar vs., CIT 340 ITR 560 (Mad.). He accordingly pleaded that, the order of the CIT(A) should be upheld.

31 ITA.Nos.602 & 603/Hyd./2025 12. Coming back to another argument of Counsel for the Assessee. The term “specified sum” has been inserted in section sec.269SS of the Act w.e.f. 01.06.2015 by the Finance Act 2015. The memorandum explaining the Finance Bill 2015, narrates the purpose of insertion of the term “specified sum” u/sec.269SS of the Act and as per the memorandum explaining the Finance Bill, the “specified sum” would mean any “sum or money in the nature of advance by whatever name called in relation to transfer of an immovable property whether or not the transfer takes place or not”. If we go by the purpose of insertion of term “specified sum” u/sec.269SS of the Act and explanation to the Finance Bill 2015, in our considered view, the legislature has intended to curb the black-money in immovable property transactions. If we go by the said amendment, in our considered view, stretching the genuine consideration received for sale of an immovable property including agriculture land before the witnesses at the time of registration, cannot be brought within the ambit of the term “specified sum” merely because, the same has been 32 ITA.Nos.602 & 603/Hyd./2025 received in cash. In our considered view, if we really understand the purpose of insertion of said term in sec.269SS of the Act, it is only to check the abuse of law by the tax-payers by entering into various kinds of agreements for transfer of immovable property showing consideration paid or received in cash and finally the registration has not taken place. In a situation, where the consideration paid for transfer of any immovable property at the time of registration before the witnesses and further, the said transaction is a genuine transaction and also part of regular books of accounts of the assessee or disclosed in the return of income filed for the relevant assessment year, then, in our considered view, the said transaction cannot be brought within the ambit of “specified sum” merely because the ‘consideration’ has been received in cash. Therefore, we are of the considered view that, imposition of penalty u/sec.271D of the Act for violation of provisions of sec.269SS of the Act towards consideration received in cash for sale of agriculture land by bringing the said consideration within the ambit of “specified sum” as defined 33 ITA.Nos.602 & 603/Hyd./2025 u/sec.269SS of the Act is totally incorrect and defeats the very purpose of law. Since, the assessee has accepted the cash consideration for sale of agriculture land, which is outside the scope of capital asset as defined under section 2(14) of the Act and further, it is exempt from tax, in our considered view, the said transaction cannot be brought within the ambit of provisions of sec.269SS of the Act, for the purpose of sec.271D of the Act.

34 ITA.Nos.602 & 603/Hyd./2025 35 ITA.Nos.602 & 603/Hyd./2025 36 ITA.Nos.602 & 603/Hyd./2025 37 ITA.Nos.602 & 603/Hyd./2025 38 ITA.Nos.602 & 603/Hyd./2025 39 ITA.Nos.602 & 603/Hyd./2025

41 ITA.Nos.602 & 603/Hyd./2025 AR for the Revenue does not come to the rescue of the Revenue and thus, rejected.

ITA.No.603/Hyd./2025 – A.Y. 2017-2018 :

Order pronounced in the open Court on 10.09.2025.