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Facts
The assessee sold agricultural land and received a sum of Rs.1,62,70,380/- (and Rs.90,80,540/- for the second assessee) in cash, which the Assessing Officer deemed a violation of Section 269SS of the Income Tax Act, 1961, and levied a penalty under Section 271D. The assessee argued that the land was rural agricultural land, not a capital asset, and thus the provisions of Section 269SS should not apply, and that she acted under a bonafide belief. The CIT(A) sustained the penalty.
Held
The Tribunal held that the agricultural land sold by the assessee was not a capital asset under Section 2(14) of the Act and the assessee had a bonafide belief that receiving cash for its sale did not attract Sections 269SS and 271D. Finding a 'reasonable cause' under Section 273B for accepting cash and no malafide intention, the Tribunal concluded that the penalty under Section 271D was not warranted and directed the Assessing Officer to delete it, despite the penalty order being within the extended limitation period.
Key Issues
1. Whether penalty under Section 271D was leviable for accepting cash for the sale of agricultural land, considering the assessee's bonafide belief and the nature of the asset. 2. Whether the penalty order passed was barred by limitation under Section 275(1)(c) of the Income Tax Act.
Sections Cited
271D, 269SS, 273B, 2(14), 143(3), 153A, 275(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.Nos.602 & 603/Hyd./2025 Assessment Years 2017-2018 Smt. Nimmatoori The DCIT, Yashoda, Hyderabad. Central Circle-2(4), PAN ACSPN1657J vs. Hyderabad. Smt. Nimmatoori Telangana. Sulochana, Hyderabad. PAN ACSPN1664K Telangana. (Appellant) (Respondent) For Assessee : CA, P. Murali Mohan Rao For Revenue : Sri Siva Prasad SV, Sr. AR Date of Hearing : 13.08.2025 Date of Pronouncement : 10.09.2025 ORDER PER MANJUNATHA G. :
The above appeals are filed by two different assessee’s viz., Smt. Nimmatoori Yashoda and Smt. Nimmatoori Sulochana against the separate orders both dated 12.03.2025 of the learned Commissioner of Income Tax-(Appeals)-12, Hyderabad, relating to the assessment year 2017-2018. Since common issues are involved in both
2 ITA.Nos.602 & 603/Hyd./2025 these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. First, we take-up appeal ITA.No.602/Hyd./2025 as “lead” appeal in the case of Nimmatoori Yashoda for the assessment year 2017-2018, in which the assessee has raised the following grounds :
1. “The order of the Ld. CIT(A) dated 12.03.2025 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant.
The Ld. CIT(A) ought to have appreciated that the Assessing Officer erred in levying penalty of Rs.1,62,70,380/- u/s 271D of the Act without appreciating the facts of the case.
The Ld. CIT(A) has grossly erred in upholding the imposition of penalty u/s 271D for a sum of Rs.1,62,70,380/-. 4. The Ld. CIT(A) ought to have appreciated that the land being agricultural land, the sale proceeds from that land do not represent income so as to attract the provisions of section 271D rws 269SS of the Act. 5. The Ld. CIT(A) ought to have appreciated that the sale consideration of Rs.1,62,70,380/-is in the nature of sale and not in the nature of loans or advances or deposits and thus there is no violation of provisions of section 271D rws 269SS of the Act.
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.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The facts borne from the record shows that, for the assessment year 2017-2018, the Assessing Officer made addition of Rs.1,62,70,380/- under the Head 21 ITA.Nos.602 & 603/Hyd./2025 “Income from Other Sources” towards assessee’s share of consideration received in cash for sale of land admeasuring ac.29.15 guntas in Sy. Nos.711, 720 and 721 of Bhongir village. The Assessing Officer on the basis of addition made towards consideration received in cash for sale of land has sent a proposal for imposition of penalty u/sec.271D of the Act for violation a provisions of sec.269SS of the Act to the Jt./Addl. Commissioner of Income Tax, Central Range-2 vide letter dated 20.12.2019. The Jt./Addl. CIT, Central Range-2, Hyderabad, initiated proceedings u/sec.271D of the Act for the violation of Sec.269SS of the Act vide notice dated 26.12.2019 and called-upon the assessee to file it's explanation, if any, for contravention of provisions of Sec.269SS of the Act. In her defence, the assessee claimed that, the said asset was rural agricultural land and did not constitute ‘capital asset’ for the purpose of ‘capital gain’ and further, since the transactions were not subjected to capital gain, she was under the bonafide belief that, provisions of Sec.269SS of the Act would not apply. The Jt./Addl. CIT, Central Range-2, Hyderabad after considering 22 ITA.Nos.602 & 603/Hyd./2025 relevant submissions of assessee and also by following judicial precedents including the decision of Hon’ble High Court of Madras in the case of P. Bhaskar vs., CIT (supra) and the Judgment of Hon’ble Supreme Court in the case of Assistant Director of Inspection vs., Kum. AB Shanti (supra), has levied penalty of Rs.1,62,70,380/- being 100% of the amount received by way of cash for sale of land on the ground that, the assessee has violated the provisions of Sec.269SS of the Act, which attracts penalty u/sec.271D of the Act. Therefore, it is necessary for us to deal with the issue of penalty levied u/sec.271D of the Act in light of arguments of Counsel for the Assessee and the learned Sr. AR for the Revenue on the issue of limitation provided under section 275(1)(c) of the Act for passing the order imposing penalty and also the arguments of the Counsel for the Assessee in light of provisions of section 273B of the Act.
Coming back to the arguments of Counsel for the Assessee on the issue of limitation in passing Orders by the Jt./Addl. CIT, Central Range-2, Hyderabad. Learned Counsel for the Assessee referring to various judicial 23 ITA.Nos.602 & 603/Hyd./2025 precedents including decision of Hon’ble Delhi High Court in the case of PCIT vs., Mahesh Wood Products (P.) Ltd., 82 taxman.com 39 (Del.) submitted that, the limitation for passing penalty order u/sec.271D of the Act starts from the date when the Assessing Officer sent proposal to the Jt./Addl. Commissioner for imposition of penalty and in the present case, going by the date on which the Assessing Officer sent proposal i.e., on 20.12.2019 to the Jt./Addl. Commissioner of Income Tax, Central Range-2, Hyderabad, the Assessing Officer ought to have passed the penalty order on or before 30.06.2020. Since the Jt./Addl. Commissioner of Income Tax, Central Range-2, Hyderabad, passed order on 23.06. 2021, the same is beyond the time limit provided under section 275(1)(c) of the Act and is illegal and void abinitio and liable to be quashed. He further submitted that, although, because of the Covid pandemic, the limitation has been extended in view of TOLA 2020, but, the said extension was only up-to 31.03.2021, but, not beyond as considered by the learned CIT(A) in his order in para 6.3 and thus, the order passed by the Jt./Addl. CIT, Central Range-2, 24 ITA.Nos.602 & 603/Hyd./2025 Hyderabad on 23.06.2021 is clearly barred by limitation and liable to be quashed.
We have gone through the relevant arguments of the Learned Counsel for the Assessee in light of provisions of section 275(1)(c), TOLA 2020 and relevant Notification Nos. 10/2021, 38/2021 and 74/2021 dated 27.02.2021, 27.04.2021 and 25.06.2021, respectively issued by the CBDT from time to time and we find that, the TOLA 2020 has extended the limitation for passing orders under chapter XXI of the Act up-to 31.03.2021 and the same has been extended from time to time up-to 30.09.2021. Since the Central Government has extended various income tax due dates, including for passing order u/sec.271D of the Act, in our considered view, the Order passed by the Assessing Officer u/sec.271D of the Act on 23.06.2021 is well within the time limit provided under section 275(1)(c) of the Act coupled with TOLA 2020 and notifications issued by the CBDT from time to time. Therefore, we are of the considered view that, there is no merit in the arguments of Counsel for the Assessee that, the Order passed by the 25 ITA.Nos.602 & 603/Hyd./2025 Assessing Officer imposing penalty u/sec.271D of the Act is barred by limitation and liable to be quashed and thus, we reject the grounds taken by the assessee.
Coming back to another argument of Counsel for the Assessee in light of decision of Hon’ble High Court of Delhi in the case of PCIT vs., Mahesh Wood Products (P.) Ltd., (supra). The Counsel for the Assessee argued that, limitation for passing the order u/sec.271D of the Act commences from the date when the Assessing Officer send proposal to the Range Head for imposition of penalty and if we go by the said date, in the present case, the Order passed by the Jt/Addl. CIT, Central Range-2, Hyderabad was on 23.06.2021 is barred by limitation. We once again do not subscribe to the arguments of the Counsel for Assessee for the simple reason that, even if we consider the date, on which, the Assessing Officer sent proposal to the Range Head for imposition of penalty on 20.12.2019, the time limit for passing the Order u/sec.271D of the Act will be up-to 30.06.2020 because, as per the provisions of section 275(1)(c) of the Act, the order imposing the penalty, 26 ITA.Nos.602 & 603/Hyd./2025 shall be passed within 6 months from the end of the month in which action for imposition of penalty is initiated. In the present case, even if we go by the date, on which, the Assessing Officer sent proposal to the Range Head for imposition of penalty, the due date for passing the Order u/sec.271D of the Act is up-to 30.06.2020 and thus, our findings in the preceding paragraph in light of TOLA 2020 and subsequent Notifications issued by the CBDT extending limitation up-to 30.09.2021, is applicable and thus, the Order passed by the Assessing Officer/ Jt./Addl. CIT, Central Range-2, Hyderabad on 23.06.2021 is well with the limitation provided under the Act. Therefore, we reject the arguments of the Counsel for the Assessee.
Coming back to the penalty levied by the Jt./Addl. CIT, Central Range-2, Hyderabad, for violation of provisions of sec.269SS of the Act for accepting cash consideration towards sale of immovable property. The provisions of sec.271D of the Act deals with penalty for failure to comply with the provisions of sec.269SS of the Act. As per the provisions of sec.271D of the Act, “if a person takes or 27 ITA.Nos.602 & 603/Hyd./2025 accepts any loan or deposit or specified sum in contravention of sec.269SS of the Act, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit or specified sum so taken or accepted”. The term “specified sum” has been defined in sec.269SS of the Act, which means, “any sum or money receivable whether as advance or otherwise in relation to transfer of any immovable property whether or not, the transfer takes place”. In the present case, the Assessing Officer has levied the penalty u/sec.271D of the Act for accepting cash for sale of immovable property within the meaning of the “specified sum” as defined u/sec.269SS of the Act . It was the argument of the Counsel for the Assessee that, the properties sold by the assessee is an agriculture land, situated beyond the limit specified under section 2(14) of the Act and it is not a capital asset and, therefore, she was under the bonafide belief that, accepting cash for sale of agriculture land, does not attract provisions of sec.269SS of the Act and consequently, provisions of sec.271D of the Act, is not attracted. Learned Counsel for the Assessee took us 28 ITA.Nos.602 & 603/Hyd./2025 to the Order passed by the Tribunal in appellant’s own case for the assessment year 2016-2017 in ITA.No.337/2022, Order dated 14.08.2024 and submitted that, the Tribunal has considered the land sold by the assessee and held that, “it is an agriculture land situated beyond the specified limit and consequently is not liable to tax”. We find that, the Tribunal has considered the very same land sold by the assessee to M/s. Aishwarya Infra Developers and upon consideration of relevant facts, came to the conclusion that, impugned land sold by the assessee is an agriculture land and outside scope of the tax. Therefore, it is necessary for us to examine the arguments of the Counsel for Assessee in light of provisions of secs.269SS of the Act and 271D of the Act and 273B of the Act.
First of all, we have to understand, whether the transaction attracts the provisions of sec.269SS of the Act and if so, whether the assessee has demonstrated ‘reasonable cause’ envisaged under section 273B of the Act to attract penalty u/sec.271D of the Act. It is not disputed that, the transactions in the present case is genuine and 29 ITA.Nos.602 & 603/Hyd./2025 duly recorded in the Registered Sale Deed. The land sold by the appellant is agriculture land and is not a capital asset within the meaning of section 2(14) of the Act. The assessee has explained that, cash was received at the time of sale of agriculture land on the bonafide belief that, agriculture land is exempt from tax and consequent receiving cash for sale of said agriculture land, will not attract provisions of sec.269SS of the Act and sec.271D of the Act. In our considered view, the provisions of sec.271D of the Act are not automatic and the exceptions of ‘reasonable cause’ exonerates an assessee to exempt from penalty. The Hon’ble Supreme Court in the case of CIT vs., M/s. Eli Lilly and Company (India) Private Limited, [2009] 312 ITR 225 (SC) held that, penalty provision, such as sec.271C read with section 273B of the Act are not automatic and the exceptions of ‘reasonable cause’ exonerates an assessee from penalty. The Supreme Court observed that, “where a tax payer acts under a bonafide belief or in a situation where the legal position is un-settled and there is no intention to evade tax, penalty is not warranted”. The sum and 30 ITA.Nos.602 & 603/Hyd./2025 substance of ratio laid down by the Hon’ble Supreme Court was that, levy of penalty is not automatic and it depends upon the explanation of assessee in light of provisions of Section 273B of the Act and if explanation of assessee ‘reasonable cause’, comes under then, the penalty u/sec.271D of the Act, cannot be levied. In the present case, going by the facts available on record, the assessee has satisfactory demonstrated a ‘reasonable cause’ for the acceptance of cash consideration for sale of agriculture land. There is no material brought on record by the Revenue to establish any malafide intention or tax evasion. The transaction was part of bonafide sale of agriculture land and squarely falls within the protective ambit of section 273B of the Act. Therefore, in our considered view, once the assessee has explained the reasons for accepting cash consideration for sale of agriculture land and the said explanation is bonafide and reasonable, merely for violation of sec.269SS of the Act, the rigors of provisions of sec.271D of the Act, cannot be invoked.
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.
Coming back to case law relied upon by the Learned Counsel for the Assessee. The Counsel for the Assessee relied upon decision of ITAT, Bangalore Bench in the case of Rakesh Ganapathy vs., JCIT [2025] 170 taxman.com 239. We have considered the relevant case law relied upon by the Counsel for the Assessee and the facts of the present case and we find that, the case of the assessee squarely covered by the decision of ITAT Bangalore Bench in the case of Rakesh Ganapathy vs., JCIT (supra). The Coordinate Bench of ITAT, Bangalore on identical set of facts in light of penalty levied u/sec.271D of the Act, has held as under :
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
Coming back to the case law relied upon by the learned Sr. AR for the Revenue. The learned Sr. AR for the Revenue has relied upon decision of Hon’ble High Court of Madras in the case of P. Bhaskar vs., CIT 340 ITR 560 (Mad.). We have gone through the relevant case law relied upon by the learned Sr. AR for the Revenue and we find that, in the above case, it was the finding of the Hon’ble 40 ITA.Nos.602 & 603/Hyd./2025 High Court of Madras that, “where there was no material to show that in fact there was a real exigency that compelled assessee to go for cash loan, penalty u/sec.271D of the Act rightly levied.” In the present case, going by the facts available on record, there is a ‘reasonable cause’ for the assessee for accepting cash for sale of agricultural land on the bonafide belief that, the said transaction is outside the scope of sec.269SS of the Income Tax Act, 1961. Therefore, in our considered view, the case law relied upon by the Revenue is not applicable and thus, rejected. Further, the learned Sr. AR for the Revenue relied upon Judgment of Hon’ble Supreme Court in the case of Assistant Director of Inspection vs., Kum. A.B. Shanti (supra). We once again do not appreciate the arguments of Revenue in light of above Judgment going by the facts and record because, the issue before the Hon’ble Supreme Court in the above case is constitutional validity of sec.269SS of the Act and penalty order u/sec.271D of the Act, but, it does not deal with facts related to ‘reasonable cause’ provided u/sec.273B of the Act. Therefore, the case law relied upon by the learned Sr.
41 ITA.Nos.602 & 603/Hyd./2025 AR for the Revenue does not come to the rescue of the Revenue and thus, rejected.
In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the Jt./Addl. CIT, Central Range-2, Hyderabad is erred in levying penalty u/sec.271D of the Act for contravention of sec.269SS of the Act towards consideration received in cash for sale of agricultural land. The learned CIT(A) without considering the relevant facts, has simply sustained the penalty levied by the Assessing Officer. Thus, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the penalty levied u/sec.271D of the Income Tax Act, 1961.
In the result, appeal of the assessee is allowed.
ITA.No.603/Hyd./2025 – A.Y. 2017-2018 :
Facts of the case in the instant appeal are that, the assessee viz., Smt. Nimmatoori Sulochana has received a sum of Rs.90,80,540/- towards sale consideration on sale of agricultural land. Since the facts are identical that are 42 ITA.Nos.602 & 603/Hyd./2025 decided by us in the preceding paragraphs in ITA.No.602/Hyd./2025 for the assessment year 2017-2018 in the case of Smt. Nimmatoori Yashoda, the findings given by us in the preceding paragraph nos.8 to 15 shall apply mutatis mutandis in the case of present assessee viz., Smt. Nimmatoori Sulochana in her appeal ITA.No.603/Hyd./ 2025 for the assessment year 2017-2018. Accordingly, the appeal of the assessee ITA.No.603/Hyd./2025 is allowed.
In the result, ITA.No.603/Hyd./2025 of the assessee is allowed.
To sum-up, appeals ITA.Nos.602 and 603/Hyd./ 2025 of the assessee’s are allowed. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 10.09.2025.