DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, AURANGABAD., AURANGABAD. vs. TAPADIYA CONSTRUCTION LTD, AURANGABAD

5. The appellant craves leave to add, alter modify, delete and amend any of the grounds, as per the circumstances of the case.”

3 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) declared in the search statement duly offered to tax in the return of income filed by the assessee subsequent to the completion of search. The Ld.AO completed the assessment for A.Y. 2019-20 on 04/06/2021 assessing income at Rs. 3,02,75,660/- as against the returned income of Rs. 3,02,02,990/-.

4. Based on the assessee‟s statement that an additional amount of Rs. 1,37,73,000/- was received, the Ld.AO observed that the assessee has violated the provisions of sec. 269SS of the Act as the assessee had received the amount more than Rs. 20,000/- from persons otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through bank account in relation to an advance or otherwise in relation to transfer of immovable property, whether or not the transfer takes-place. Based on such observations, penalty proceedings u/s. 271D of the Act were initiated by issuance of notice dated 15/06/2021. In reply to this, assessee submitted that the alleged sum which is found to be entered in the diary found during the course of search from the possession of supervisor, was not towards transfer of any immovable property, but was received merely to fulfill additional requirements asked by the customers after registering the sale deed for transfer of row house and this fact is mentioned in the statement on which reliance has been 4 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) placed by the Department for levying impugned penalty. It is also stated that the alleged sum received for providing additional requirements of interiors and are not related to transfer of row-houses and were charged from the customers based on their requirements. It was also submitted that since the alleged sum received for providing additional amenities, there is no violation of provisions of sec. 269SS of the Act, and, therefore, no penalty is leviable. However, Ld.AO was not satisfied with these submissions and levied penalty of Rs. 1,37,73,000/- u/s. 271D r.w.s. 269SS of the Act observing as follows:-

“5.4 From the above analysis it is crystal clear that 269SS of the I.T. Act is not a deeming provision and it is relevant to mention here that amount received more than 20,000/- cash mode in relation to transfer of immovable property whether or not transfer taken place the same is covered under Specified Sum as mentioned in Section 269SS. In this case, the assessee company has accepted cash more than 20,000/- in respect of sale of immovable property from customer in violation of Section 269SS of the Income Tax Act, 1961. 5.5 The extra amount received by the assessee company over and above the sale consideration in only in connection with the row house. The charges recovered from customer are incidental to the sale of immovable property such as additional amenities. The amount received by assessee in cash having direct nexus with sale consideration and the same has received in violation of Section 269SS. In this support it would be relevant to refer the amendment in Finance Act, 2019 as per which the TDS @1% u/s 1941A would also be required to be deducted for extra amenities such as club membership fees, car parking fee, electricity and water facility. maintenance fee or any other charges of similar nature paid at the time of purchase of property which are incidental to transfer of the immovable property. From the above it is clear that there is no ambiguity that incidental charges recovered from customer are in relation with sale of immovable property and the same is covered under section 269SS of Income Tax Act.

5 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 5.6 Further, on perusal of return of income filed by the assessee company for the assessment year the assessee company has declared total income at Rs. 3,02,02,990/-. In the said return the assessee company has shown 'Additional Undisclosed Income' under the head business income on account of cash received from the customers as on money at Rs. 1,37,73,000/-. Therefore, the assessee company duly admitted the undisclosed income and the contention of the assessee company is not tenable.

6. In view of the above, contention of the assessee company has been rejected and it is established that the assessee has accepted specified sum to the tune of Rs. 1,37,73,000/- from its customers otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through bank account thereby committed default u/s. 269SS and liable for Penalty u/s 271D.

7. Considering the facts narrated above, I am satisfied that the provisions of Section 269SS of the Act are clearly attracted in respect of the cash accepted of Rs. 1,37,73,000/- accepted by the assessee from its customers otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through bank account. Therefore a penalty of Rs. 1,37,73,000/- being imposed to the assessee. Issue Demand Notice.”

5. Aggrieved, the assessee preferred appeal before Ld.CIT(A) making similar submissions and also submitting that the diary found during the course of search was relating to the project „Flora Phase-I‟ in which the assessee constructed row houses. In this project, some of the customers made additional requirements/ modifications. Normally, the builder/ developer makes similar type of construction for all of its customers, but sometimes, the customers want some modification/additional requirements like size of the rooms, quality of tiles and sanitary wears, flooring etc. and for such additional requirements, which are not part of regular deal of sale of immovable property, the builder/developer charges

6 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) extra amount and the alleged amount of Rs. 1,37,73,000/- was for the very same purpose for providing additional amenities/requirements to the customers based on their specific request. The Ld.CIT(A) was satisfied with these contentions and deleted the impugned penalty u/s. 271D of the Act observing that the assessee had not violated the provisions of sec. 269SS of the Act.

6. Aggrieved, the Revenue is in appeal before this Tribunal.

7. Ld.DR vehemently argued supporting the observations of the AO in the penalty order u/s. 271D of the Act.

8. On the other hand, learned counsel for the assessee supported the order of the Ld.CIT(A) and referred to the following written submissions:-

“1. BACKGROUND 1.1 The Assessee is a company formed under the Companion Act, 1956, and is in the business of construction and property development since over 35 years. The Assessee Company is one of the oldest and renowned name in Aurangabad in the construction business. 1.2 Being a company, the accounts of the Assessee company are audited by an independent statutory auditor, who, after full verification, has certified the accounts as depicting true and fair view of the accounts. 1.3 The Assessee has impeccable track record in so far as the Income tax Act, 1961 ['the Act'] is concerned.

2. THE ROW HOUSE PROJECT 2.1 In the year 2007, the Assessee started a project at Aurangabad, called Flora Phase - 1, for construction of 68 rowhouses. This was one of its kind projects catering to the needs of higher social class.

7 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 2.2 Owning a rowhouse gives a sense of individual/ independent home with a personal touch. Consequently, a prospective purchaser has his/her personal test and requirements with respect to the home he/she is going to live in, with best possible interior decoration. In view of this, some of the customers desire to have additional/ better interior decoration, over and above the standard construction /provision of amenities that are agreed to be provided to all the purchasers. 2.3 Usually, such additional requirements are fulfilled by the such customers by hiring a third-party agency once soft possession is given. Some of such customers, however, face lack of time, expertise and proper agency to get such additional work done individually and on their own. On the other hand, logistically and economically, they find more feasible and convenient to seek assistance of the already available facilities existing at the site to get such additional work done. It is only as per such specific request and demand of such customers that such additional work is undertaken at the site by using the existing facilities. 2.4 However, the fact remains that such additional amenities are desired only by few, and not by all. Such additional work is only qua a particular customer, undertaken strictly as per his/her personal choice. It is not a part of the flat/rowhouse agreed to be transferred by the builder and the consideration agreed to be paid by the buyer. Such work is totally independent to the main agreement to transfer the flat; neither such work is a part of the agreement /negotiation at the time of entering into the agreement nor it is envisaged at that stage. It has no direct nexus with the sale consideration. Such additional work is undertaken strictly for and on behalf of the customer, and is in the nature of reimbursement of the cost incurred for such additional work so undertaken on his behalf. 2.5 The management generally is not directly involved for such extra amenities. Such work is generally undertaken by the contractor at the site directly. For this purpose, a diary is maintained, which is kept in the office of the builder with an employee for ready reference.

3. THE SEARCH OPERATION 3.1 In the morning hours of 21.08.2018, a search and seizure operations were carried out against Tapadia Group at Aurangabad, which covered the Assessee. The search lasted for four consecutive days and was concluded on 24.08.2018 at 10:45 pm. 3.2 In course of the search, a diary was seized (Annexure A, Item No. 3), which included two pages in which certain 8 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) details concerning 12 rowhouse purchasers were jotted down. The entries were not made by the any of the management personal, nor the diary was found within the control and possession of the management. The details were jotted down by Shri Harish Deshpande, Manager, and the diary was found in a filing cupboard near his chair.

4. THE DIARY [Pages 36 to 43] Some of the relevant aspects of these two pages are as under: 4.1 It contains jotting down of certain figures against twelve rowhouse purchasers. 4.2 Most importantly, it contains date / month, but does not refer any year. However, by applying simple logic, it becomes clear that it does not pertain to the calendar year 2018. This is for this simple reason that the search took place on 21.08.2018 and the latest months reflected in these pages pertain to November & December, which are after the month of the search. Obviously, therefore, it cannot pertain to the calendar year 2018. At the most, it can relate to the calendar year 2017 or any earlier calendar year; but in no case it relates to the calendar year 2018. As such, undisputedly, these two pages and the entries therein are concerned the period beyond the accounting year 01.04.2018 to 31.03.2019. 4.3 In the left side of the second page, the total of 12 entries against each row house is shown as "137.73". There is no word about rupees, much less rupees in lakhs. 4.4 In any case, if the right side of these pages is to be seen, the same appears to reflect the amount being paid by the purchasers in part/gradual. Ex-facie, the entire amount as mentioned at the left side is not paid by any of the purchasers mentioned therein. In fact, no amount appears against Sr. No.

12. In other words, out of the alleged amount for Rs. 137.73 lacs - which is assumed to have been received by the Assessee simply on basis of these two pages even as per this very same material, it appears that, if at all, the payments were only Rs. 67.72 lacs.

5. THE SEARCH STATEMENT [Pages 14 to 31] 5.1 A statement of one of the directors of the Assessee, Shri Jugalkishor Chhaganlal Tapadia ['Mr. Tapadia'], came to recorded u/s. 132(4) of the Income-tax Act at the end of four days of continuous search on 24.08.2018. The recording of the statement started at 4 p.m. and ended at 10.30 p.m.

9 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 5.2 Pertinently, Mr. Tapadia was aged about 65 years at that time. He was detected with a serious disease, Spastic Dysarthria, in year 2015, which disease is relating to brain disorder and it causes multiple problems, including speech issues. The effect of the disease is that it slowly damages the neurons of the brain. More particularly, during the period of search proceedings, Mr. Tapadia was unable to walk and was having difficulties in swallowing and speaking. 5.3 Some of the relevant aspects of the statement are as under: (i) Mr.Tapadia gave satisfactory explanation to various queries. (ii) No discrepancy in the accounts was noticed. No unaccounted asset in the form of cash or other assets was found. (iii) No incriminatory material was found. It was only that Mr. Tapadia was compelled to offer alleged undisclosed income with respective to two documents/loose papers, which two disclosures were purely to buy peace and to avoid litigation. (iv) As far as the present appeal is concerned, the relevant question and answer are Q & A 12. In this answer, the director surrendered Rs. 1,37,73,000/- towards provision of additional amenities. A very important aspect is that, additionally, independently, he also disclosed Rs. 1,07,85,000/-, being 30% of the total sale consideration on account of profit of 12 rowhouses, over and above the agreement values. As such, these two disclosures were independent to each other and there for distinct items of disclosure. (v) Interestingly, on the similar basis the director also surrendered 30% of total sale consideration with respect to another project of another concern [Ref: Q & A 41]. Pertinently, there is not even an allegation that there was any extra consideration for additional amenities for this other project. As such, undisputedly, providing such additional amenities was not a part of the normal /regular transaction of sale of the flats. (vi) Significantly, the search party had found all agreements to sale with respect to this project and a specific question was put with respect to such agreements. The Director replied that the rowhouses were agreed to be sold as per the sale consideration mentioned in the respective agreement. No discrepancy was found and no further question was raised in that regard.

10 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.)

(vii) In the backdrop of the entire background and upon reading the entire statement - more specifically the manner and the contents of the surrender - it becomes clear that the surrender was made to buy peace and to avoid litigation. As such, the offer was in exchange of avoiding all litigations, which included levy of any penalty, and was based on the oral understanding so given by the search party. Otherwise also, this was obvious and logical, as nobody would voluntarily surrender any income if he is to be saddled also with such penalty, with the total outgo in terms of the taxes and the penalty exceeding the amount of surrender itself. As such, it was an offer of settlement of all legal disputes by discharging the tax liability arising from surrender of the two amounts. Nothing else was bargained for, much less for levy of such penalty. (viii) Pertinently, the search party did not dispute such surrender nor sought any further clarification or asked any further question on this aspect, nor indicated any reservation.

6. RETURN OF INCOME [Pages 2 to 81 6.1 In terms of the settlement, in the accounts for the financial year 2018-19, the Assessee credited these two amounts income and paid the taxes thereon. Importantly, in the accounts, these two items of surrender were accounted separately and distinctively. While the 30% of the project receipts was offered as profit from the project and added to work in progress, this surrender in the form of additional amenities was credited independently to profit and loss account under the head "Amenities charges received". 6.2 The return of income was filed on 02.10.2019, which included the amount so surrendered.

7. ASSESSMENT PROCEEDING 7.1 In course of the assessment proceeding, the Assessee placed on record all the relevant documents and explanations to the satisfaction of the assessing officer ['A.O.']. Admittedly, there was full and proper compliance by the Assessee to all notices and requirements of the A.O., which is evident from the fact that the provisions of section 144 were not invoked, which would have been the case had there been any non-compliance. 7.2 The A.O. passed assessment order on 04.06.2021 u/s 143 (3) of the Act, accepting the returned income, except 11 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) for making a petty disallowance of Rs. 72,665/- out of the depreciation claimed. (Refer: Pages 32 to 35) 7.3 Very significantly, the books of accounts and the book result have not been rejected. This is very crucial because, as pointed out at para 6.1 above, the surrender in the form of extra amenities was distinct than the surrender towards extra profit from the project. 7.4 Some of the salient features of the assessment order are as under: (i) The return so filed and the income so offered therein were accepted as proper fair and reasonable and without any reservation. (ii) Admittedly, there was no other 'undisclosed income'. No other incriminating material or asset was found in course of the entire search operations lasting over four days. (iii) Significantly, it is accepted that out of 68 rowhouse purchasers, only 12 had opted for such additional amenities (around 17%). Further, it is also not disputed that the agreement value for all the purchasers were same /similar, whether opted for amenities or not. Pertinently, the sale consideration pertaining to all such other rowhouse purchasers have been accepted genuine, proper and reasonable. (iv) So is also the case with respect to the Ready Reckoner values ['RR values']. All agreement values were above the RR values. (v) Pertinently, the A.O. accepted and taxed the other disclosure of Rs. 1.07 crore as the profit arising from the project separately. In other words, admittedly, even as per the A.O., the surrender in the form of extra amenities was not towards the project profit or a part of the project. (vi) However, it was only that while referring to the disclosure of Rs. 137 lacs, the A.O. erroneously mentioned that the director had disclosed this amount as 'on money', which is self-contradicting with the facts already on record.

8. PENALTY PROCEEDING 8.1 Unfortunately, penalty proceeding u/s. 269SS of the Act was initiated by the A.O. vide notice dated 8.3.2022. The Assessee made detailed submissions, some the salient features of which are as under:

12 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) (i) The declaration of Rs. 1,37,73,000/- was made under sheer pressure, to buy peace and to avoid litigation. (ii) The Assessee had complied with all notices of the A.O. (iii) The quantum proceeding and a penalty proceeding are independent and distinct. Consequently, the disclosure made for the quantum assessment is not automatically binding on the assessee. (iv) Without prejudice, section 269SS is a deeming provision, which is to be interpreted strictly. Further, in case of any doubt about applicability of a provision, the benefit of doubt is to be given to the assessee. (v) Without prejudice, assuming but not admitting that the Assessee had received any cash during the year, the alleged receipt was merely for providing additional amenities to the customers, in terms of the very statement being relied upon by the A.O. The amenities were not related to the transfer of the rowhouse but were to satisfy the demand of the customers for getting best possible amenities. The same was not mandatory but optional. (vi) Generally, the work for additional amenities start after the maximum amount of the consideration is made. The amenities were different for different customers, depending upon the requirement of the customers. (vii) Without prejudice, even the diary shows that the entire sum of Rs. 137 lacs were not received. paid. In fact, amount of Rs. 70.01 lacs was not received at all by the Assessee. (viii) Without prejudice, the levy of penalty u/s 271D is discretionary. The customers insisted upon accepting cash payment towards providing of the additional amenities. In terms of the provisions of section 273B, the Assessee had reasonable cause for accepting the cash from its customers. 8.2 Pertinently, the A.O. has not disputed any of the above basic facts. 8.3 The AO levied the penalty u/s. 271D by principally relying on the amendment made in section 194 IA vide the Finance (No. 2) Act, 2019, wherein in the definition of the term 'consideration for transfer of any immovable property' is defined to include "all charges of the nature of club membership, car parking fee, electricity or water 13 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property". Pertinently, this amendment is effective only from 01.09.2019.”

9. In the course of the hearing, learned counsel for the assessee was asked to provide copy of agreement to sale and registered sale deed for sale of row houses in 'Flora Phase-I‟ and the same have been filed by the assessee along with certain details and following written submissions:-

“1. The Assessee is in the constructions business and property development since over 35 years. The Assessee is one of the oldest and renowned name in Aurangabad in the construction business.

3. In the year 2007, the Assessee started a project at Aurangabad, called Flora Phase -I, for construction of 68 rowhouses. This was one of its kind projects catering to the needs of higher social class.

12. As regards the statement of the director, it has to be evaluated in the context in the peculiar circumstances as already narrated in the note. The declaration was made under sheer pressure, to buy peace and to avoid litigation.”

15 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 10. We have heard rival contentions and perused the material placed before us. The Revenue is aggrieved with the following findings of Ld.CIT(A) deleting the impugned penalty levied u/s. 271D of the Act by the Ld.AO for violation of sec.269SS of the Act; alleging that, the assessee has received specified sum exceeding Rs. 20,000/- otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through bank account:-

5.2 I have gone through the assessment order, penalty order and submissions filed by the appellant. Brief facts are that during the course of search at the office premises of the appellant, several loose papers/documents were seized and inventorised as Annexure-A wherein notings suggested that the appellant company has received on money of Rs. 1,37,73,000/- from the customers. During the course of statement of Shri Jugalkishore C. Tapadia u/s 132(4) on 24.08.2018 vide question No. 12, he was asked to explain on money received of Rs. 1,37,73,000/-. In reply, Shri Tapadia stated that amount of Rs. 1,37,73,000/- had been received by the appellant over and above the agreement to sale value, for provision of additional amenities in the project 'Flora Phase-I' and therefore, to buy peace of mind and not to enter into protracted litigation he was offering amount of Rs 1,37,73,000/- as additional income in the hands of the appellant company for AY 2019-20. Total disclosure of Rs. 3,02,02,990/- including the amount of Rs 1,37,73,000/- was made in the hands of the appellant company for the year under consideration. The AO accepted the additional income offered by the appellant including of Rs. 1,37,73,000/- on account of additional money received from the customers According to the AO, the appellant had taken an amount more than two lakh rupees from persons otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through bank account in violation of the provisions u/s 269SS of the Act. Therefore, matter was referred to Addl. CIT who initiated the penalty u/s 271D equal to the sum of cash received 5.3 During the course of appellate proceedings, the appellant submitted that the diary found during the search was relating to the project 'Flora Phase-1'. In this project, the appellant has constructed row houses. In this project, some of the customers had raised additional requirement or modification. It is the 16 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) general practice in real estate that, where if any additional requirement or modification is required by the customer and if the cost of the same is higher than the amenities being provided by the builder in all the units in that case the additional cost of the same is recovered from the customer. The same was explained in reply to question No.12 of statement u/s 132(4), the appellant never admitted acceptance of on money. The relevant part of the statement is as under.

Q.12 After going through the different hand written entries made in item no. 03 of Annexure-A found and seized in this office premises, it can be fairly concluded that, you have received an on-money component of Rs. 1,37,73,000/-against sales of different row houses in Flora Phase-1 (Tapadia Constructions Ltd.) Please, comments on the same. Ans. Sir, we confirm that the amount of Rs. 1,37,73,000/- has been received by us, over and above the agreement to sale value, for provision of additional amenities in the above mentioned project to the respective customers. The expenses for the same have already been booked by us in our regular books of accounts. Hence, on account of profit of the said Row houses and the above mentioned amounts received towards provision of additional amenities, we offer an amount of Rs. 2,45,58,000/- (Rs.1,37,73,000/- as additional amount received + Rs. 1,07,85,000/- being 30% of the total sale consideration of the Row houses totaling to Rs. 3,59,50,000/-) as the additional income of M/s Tapadia Constructions Ltd. for A.Y. 2019-20. We offering the profitability of these 12 Row houses as we have handed over." 5.4 In the present case, the dispute revolves around the provisions of Sec. 269SS of the Act. The provisions of this section prohibit an assessee to accept from any other person any loan or deposit exceeding Rs.20,000/- or more otherwise than by an account payee cheques or an account payee bank draft. In the present case, the appellant being the company has accepted deposits in cash exceeding 20,000/- from its customers which was prohibited under the provisions of section 269SS of the Act. During the course of search a diary was seized which contained some entries of amounts received from the customers. Director of the Appellant was asked to explain the notings in the diary. According to the appellant, the director of the appellant company, to buy peace of mind, declared an amount of Rs. 1,37,73,000/- as cash received for providing additional amenities to the customers. Just to avoid the litigation and not to distract the focus from the business the appellant declared the said amount as income. In the present case, it was only under peculiar circumstances that the appellant had surrendered the amount as income just to buy peace and avoid litigation. The diary does not specify the year for which the alleged transactions have been recorded.

17 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) Moreover, the notings in the diary themselves suggest that the declaration was not based on any actual payments made, because the diary itself is inconsistent with the statement given by the director. For example, in the diary at serial number 1, the figure '10' is written against the name of the row house purchaser. If one peruses he breakup of 10 on page number 2 and below, a date is mentioned. First thing to note is that there is no year mentioned with the date and the month. Thereafter, it is interesting to note that if one sees the second portion of the break up, that is figure '2' and date below, it is 22/12 that means 22nd December. It is interesting to note that the search was conducted on 21.08.2018 and the noting in diary included a future date of December and the entire amount is offered in the statement during the relevant year. This seems to be unrealistic. Further, if one considers the serial number 12 in the diary, the figure mentioned against the name which the AO treated as on money received is 11.71. Even as per the diary, there is no money received against the same by the Appellant. This amount is included in the alleged-on money received by the Appellant of Rs. 1,37,73,000/-. Therefore, the penalty u/s 271D cannot be levied merely on the basis of diary found, the Ld. AO could not corroborate the same by bringing any material on record which proves that the amount mentioned in the diary is received during the year. Even on making submission in this regard, the Ld. AO is silent on this submission in the penalty order passed. The diary which was found during the search was relating to the project 'Flora Phase I'. The Appellant Company has further explained that, in the said project has constructed row houses. The Appellant Company in the row houses provides the tiles, bathroom fittings, coloring, windows etc. The said amenities / furniture are of standard quality. However, it is the practice of the real estate industry, if any additional requirement or modification is required by the customer and if the cost of the same is higher than the amenities being provided by the builder in all the units, in that case, the additional cost of the same is recovered from the customer. Similarly, in the present case, there were some additional requirements from the customers whose names were recorded in the diary. The fact that the entries in the diary are relating to the additional amenities provided to the customers is accepted by the search party as well as the Ld. AO during penalty proceedings. Therefore, this fact is undisputed 5.5 However, the Ld. AO while passing the penalty order has stated that the extra charges recovered from the customers are in respect of additional amenities and are, therefore, incidental to the sale of immovable property. The amount received by the appellant in cash is having direct nexus with sale consideration and the same has been received in violation of Section 269SS. Further, the Ld. AO placed reliance on the Explanation to section 1941A defining the term 'consideration for transfer of any immovable property' which includes all charges of the nature of club membership fee, car parking fee, 18 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) electricity or water facility fee, maintenance fee, advance fee or any other charges or similar nature, which is incidental to transfer of the immovable property. On this basis, the Ld. AO concluded that incidental charges recovered from customer are in relation with sale of immovable property and the same covered u/s 269SS of the Act. On this basis the Ld. AO levied the penalty. 5.6 However, the appellant has submitted that Section 269SS of the Act is a deeming provision, saddling an assessee with onerous penal consequences. As per the well-known principles of interpretation of statutes, the deeming provisions are to be interpreted strictly. Therefore, the deeming provision cannot be made applicable in any circumstances other than the one for which it is brought in the statute. Further, it is also a well settled legal principle that in case of doubt regarding the applicability of provision in such a case, the benefit is to be given to the Assessee. 5.7 The Ld. AO without enquiring about the nature of additional amenities provided to the customers, concluded that the same is incidental to the sale of immovable properties and placed reliance on definition of section 1941A. Firstly, the additional amenities provided to the customers were optional and not mandatory and the same were provided only if the requirement comes from the customer. Secondly, the amenities or requirements of the customers can be accepted only when the transaction of the sale of the row house is finalized and maximum consideration / full consideration is received from the customer. Therefore, same cannot said to be incidental to the sale of immovable property. 5.8 The reliance placed by the Ld. AO on the definition u/s 1941A is not applicable in the present case because, the definition does not include additional amenities like providing tiles of choice of the customer or colour of the row house as per the choice of customer or kitchen trolleys etc. The entries in the said diary are relating to the said additional amenities. In the present case, the cash is not received towards any of the facilities as mentioned in the definition of section 1941A Therefore, the same is not applicable in the present case. 5.9 Thus, there is merit in the contention of the appellant that the necessary conditions for initiating and levying penalty u/s 271D are not fulfilled. 5.10 Accordingly, in the present case, it is held that, the AO has not been able to prove the violation of the provisions of section 269SS of the Act with corroborative evidence. Therefore, the penalty levied u/s 271D of Rs. 1,37,73,000/- is hereby deleted. Ground no. 4 raised by the appellant is, therefore, allowed.”

19 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 11. From going through the above findings of the Ld.CIT(A) and also on perusal of the record, we notice that during the course of search carried-out u/s. 132 of the Act at the premises of the assessee on 21/08/2018, certain loose papers/ documents were seized along with a small diary maintained with the Accountant containing certain entries. Based on the contents of the diary, the amount was arrived by the Revenue authorities, which was total of some entries amounting to Rs.1,37,73,000/-. When the assessee was confronted during the course of search proceedings about the alleged sum, it was specifically stated that this amount has been received towards provisions of additional amenities in one of the projects undertaken by the assessee and received from respective customers. It was also stated that the expenses has already been accounted for in the regular books of accounts. Further, the assessee offered an amount of Rs. 2,45,58,000/- as undisclosed income which compressed of 30% of the sale consideration of row houses totaling to Rs. 3,59,50,000/- and Rs. 1,37,73,000/- as additional amount received.

13.1 “Mode of taking or accepting certain loans, deposits and specified sum. 269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise 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 mode as may be prescribed, if,— (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment 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) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: 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 or specified sum taken or accepted by,— (a) the Government; (b) any banking company, post office savings bank or co- operative bank; (c) any corporation established by a Central, State or Provincial Act; 21 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) (d) any Government company as defined in clause (45)of section 2 of the Companies Act, 2013 (18 of 2013); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: 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 or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act: 90[Provided also that the provisions of this section shall have effect, as if for the words "twenty thousand rupees", the words "two lakh rupees" 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 primary co-operative agricultural and rural development bank from its member; or (b) such loan is taken from a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member.] Explanation.—For the purposes of this section,— (i) "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; [(ii) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;] (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

13.2 Penalty for failure to comply with the provisions of section 269SS. 271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, 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.

22 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner: [Provided that any penalty under sub-section (1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer.] 13.3 Payment on transfer of certain immovable property other than agricultural land. 194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon. (2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both, less than fifty lakh rupees: [Provided that where there is more than one transferor or transferee in respect of any immovable property, then the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.] (3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section. Explanation.—For the purposes of this section,— (a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2; (aa) "consideration for transfer of any immovable property" shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property; (b) "immovable property" means any land (other than agricultural land) or any building or part of a building; (c) "stamp duty value" shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.

23 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 14. We note that the seized diary based on which the amount of Rs. 1,37,73,000/- has been arrived by the search team, the Ld.CIT(A) has made a detailed discussion in para 5.4 of the impugned order wherein the Ld.CIT(A) has observed that the notings in the diary themselves suggests that the declaration was not based on any actual amounts received because the entries in diary are itself inconsistent with the statement given by the Director. In short, the Ld.CIT(A) has rightly observed that the penalty u/s. 271D of the Act could not have been levied merely on the diary found because the Ld.AO could not corroborate the same by bringing any material on record which proves that the amount mentioned in the diary is received during the year. But all set and done, the assessee in the statement recorded u/s. 132(4) has accepted that a sum of Rs. 1,37,73,000/- has been received in cash towards provision of additional amenities in the project from the respective customers. So we need to examine what additional amenities have been provided by the assessee and whether the consideration received in lieu of such additional amenities is forming part of the sale consideration for transfer of immovable property.

28 ITA.No.1375/PUN./2024 (Tapadiya Construction Ltd.) 17 In the result, appeal of the Revenue is dismissed.

Order pronounced in the open Court on 03.06.2025.