MIDHUN KRISHNAN,THIRUVANANTHAPURAM vs. ITO WARD 1(2), THIRUVANANTHAPURAM
Facts
The assessee sold land for Rs. 31.23 lakhs, receiving Rs. 22.23 lakhs in cash unexpectedly from the buyer at the time of registration. He immediately deposited the cash in his bank account on the same day, disclosed the full sale consideration in his return of income, and invested the proceeds in a residential house. A penalty was imposed under Section 271D of the Income Tax Act for violating Section 269SS.
Held
The Tribunal held that the assessee had a 'reasonable cause' under Section 273B for accepting the cash due to commercial compulsion, immediate bank deposit, and full disclosure, which demonstrated no intention to evade tax. Consequently, the penalty imposed under Section 271D was deleted.
Key Issues
Whether the penalty under Section 271D for accepting cash exceeding the prescribed limit was justified, or if the assessee had a 'reasonable cause' under Section 273B for accepting the cash due to circumstances beyond his control.
Sections Cited
271D, 143(3), 269SS, 54, 273B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN
Before: HON’BLE SHRI INTURI RAMA RAO & SHRI HON’BLE MANU KUMAR GIRI
आयकर अपीलीय अ�धकरण �ायपीठ, कोचीन IN THE INCOME TAX APPELLATE TRIBUNAL, COCHIN माननीय इंटूरी रामा राव, लेखा सद� एवं माननीय �ी मनु कुमार �ग�र, �ा�यक सद� के सम� BEFORE HON’BLE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI HON’BLE MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./ ITA No.730/Coch/2025 �नधा�रण वष� /Assessment Year: 2017-18 Midhun Krishnan, The Income Tax Officer, TC 26/1520, Sakthi Nivas, Vs. Ward-1(2), Rishimangalam, Trivandrum. Vanchiyoou, Trivandrum – 695 035. PAN: BBEPK 8886L (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri KMV Pandalai, Advocate ��यथ� क� ओर से /Respondent by : Smt. Leena Lal, Snr AR सुनवाई क� तार�ख/Date of Hearing : 04.11.2025 घोषणा क� तार�ख /Date of Pronouncement : 28.11.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member):
The captioned appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeal)/NFAC, Delhi [‘CIT(A)’ in short] dated 16.09.2025 for Assessment Year 2017-18
ITA No. 730/Coch/2025 Midhun Krishnan :- 2 -: confirming imposition of penalty u/s.271D of the Income tax Act, 1961
(‘Act’ in short).
Brief facts are that the assessee filed his return of income for AY
2017-18 declaring total income of Rs.2,79,580. Assessment was
completed u/s 143(3) on 19.12.2019 accepting the returned income.
During assessment, the Assessing Officer noted cash deposits of
Rs.22,23,000 on 27.10.2016, stated to be part of sale consideration of
land. Based on this, a penalty notice u/s 271D was issued alleging
violation of section 269SS.
The assessee explained that he sold two plots in the same
locality. First plot sold for Rs.28 lakhs through banking channels.
Second plot sold for Rs.31.23 lakhs. Out of this, Rs.9 lakhs was
transferred by bank, and the balance amount was brought by the
purchaser in cash at the time of registration. The assessee submitted
that the buyer unexpectedly brought the remaining amount in cash at
the time of completing the registration formalities. The assessee had
no bargaining power and was under pressure to complete the
transaction as registration was already scheduled and both parties
were present. He immediately deposited the entire cash into his bank
ITA No. 730/Coch/2025 Midhun Krishnan :- 3 -: on the same day. The full sale consideration (including cash)
was properly disclosed in the return of income. The entire sales
proceeds were invested in construction of a residential house (claimed
u/s 54).
The assessee has taken a ‘reasonable Cause’. The
circumstances show that the assessee had no prior intention of
accepting cash. The buyer brought cash suddenly on the date of
registration, leaving the assessee with no real option to postpone or
refuse completion. The assessee did not utilise the cash personally or
keep it unaccounted, instead he deposited it in his bank the same day,
evidencing bona fides. The assessee disclosed the entire transaction
in the return of income, removing any possibility of tax evasion. These
facts establish reasonable cause within the meaning of section 273B.
Judicial precedents consistently hold that where the identity of the
payer, genuineness of the transaction, and source of funds are
accepted, and there is no intention to evade tax, penalty u/s 271D
should not be imposed. Section 271D is not meant to punish technical
or venial breaches but only serious violations with mala fide intent
(Hindustan Steel Ltd. 83 ITR 26 SC). The Hon’ble Bombay High Court
ITA No. 730/Coch/2025 Midhun Krishnan :- 4 -: in the cases of Ajitnath Hitech Builders 416 ITR 316 and Triumph
International Finance, INCOME TAX APPEAL NO.5746 OF 2010
dated 12.06.2012 has held that where genuineness of transaction was
never questioned and acceptance of cash was due to commercial or
practical compulsion, courts have deleted penalties. The facts of the
assessee’s case fit squarely within these principles.
After considering the submissions of both parties, documents,
and circumstances, the transaction is genuine and fully recorded in
books. The assessee had no intention to contravene section 269SS.
Further, in the absence of any finding recorded in the assessment
order or in the penalty order to the effect that the deposit was not a
bonafide transaction and was made with a view to evade tax. The cash
was accepted only due to compulsion created by the buyer at the time
of registration. Immediate bank deposit and full disclosure reinforce the
assessee’s bona fide conduct. These facts constitute a reasonable
cause u/s 273B, therefore penalty u/s 271D cannot be levied.
In view of the above findings, it is hereby held that the assessee
has established reasonable cause for acceptance of cash, and
ITA No. 730/Coch/2025 Midhun Krishnan :- 5 -: therefore, the penalty imposed under section 271D of the Income Tax Act, 1961 is deleted
In the result, appeal filed by the assessee is allowed.
Order pronounced on 28th day of November, 2025 at Cochin.
Sd/- Sd/- (इंटूरी रामा राव) (मनु कुमार �ग�र) (Inturi Rama Rao) (Manu Kumar Giri) लेखा सद�य /Accountant Member �ा�यक सद� / Judicial Member Cochin, �दनांक/Dated: 28th November, 2025. EDN/- आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त/CIT, 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF
