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Facts
The Assessing Officer initiated penalty proceedings under Section 271D of the Income Tax Act, 1961, for contravention of Section 269SS. The assessee allegedly received INR 37,62,000 in cash for the sale of immovable property. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the CIT(A) failed to adjudicate the grounds raised by the assessee and did not provide a reasonable opportunity of being heard. The order of the CIT(A) was set aside, and the case was remanded for fresh adjudication.
Key Issues
Whether the CIT(A) properly adjudicated the grounds of appeal and provided a reasonable opportunity of being heard to the assessee. Whether the penalty under Section 271D was rightly imposed for contravention of Section 269SS.
Sections Cited
271D, 269SS, 250, 273B, 269ST
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
order : 20.08.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal preferred by the Assessee is directed against the order, dated 30/05/2025, passed by the Commissioner of Income Tax (Appeals)–12, Bengaluru [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Order, dated 24/01/2022, levying penalty under Section 271D of the Act for the Assessment Year 2017-2018.
2. The Assessee has raised following grounds of appeal : ”1. Misinterpretation of the Term "Otherwise" under Section 269SS: The learned Commissioner of Income-tax (Appeals) erred in Assessment Year 2017-2018 interpreting the expression "otherwise" appearing under Section 269SS of the Income Tax Act, 1961. It is respectfully submitted that as per the judgment in Pushpalatha v. ITO (2024), the Hon'ble ITAT has correctly invoked the doctrine of ejusdem generis, wherein it was held that the term "otherwise" must be read in light of the preceding words "loan or deposit and therefore must refer to financial transactions of similar character, Le., money receivable as advance. The Assessing Officer (AO), however, has incorrectly applied Section 269SS in treating sale consideration received at the time of executing a registered sale deed as being equivalent to a loan, deposit, or "otherwise". The sale consideration is neither a loan nor a deposit, nor an advance, and hence is not covered within the ambit of Section 269SS.
2. Violation of Judicial Precedent: It is well-settled law that precedents of superior courts and coordinate benches are binding. The Hon'ble Supreme Court in Kamlesh Kumar Sharma v. Yogesh Kumar Gupta [(1998) 3 SCC 45] has categorically held that the term "otherwise" should be given a restricted interpretation in the context of ejusdem generis. By applying the precedent, the Hon. ITAT, Bangalore Bench in Pushpalatha v. ITO (2024) it was held that otherwise used in Section 269SS doesnot cover the sales consideration.
3. Erroneous Invocation of Section 269SS - Inapplicability to Sale Consideration: Subsequent Introduction of Section 269ST to Address Legislative Gap The learned Assessing Officer has erred in invoking the provisions of Section 269SS of the Income-tax Act, 1961, in respect of receipt of sale consideration for the transfer of immovable property. It is respectfully submitted that Section 269SS applies exclusively to transactions involving loans, deposits, or specified advances, and does not extend to bona fide sale consideration. The Hon'ble Tribunals and Courts have consistently held that sale consideration is not covered under Section 269SS, as such consideration does not constitute a loan or deposit. Recognizing this legislative gap, Parliament introduced Section 269ST via the Finance Act, 2017, effective from April 1, 2017, to specifically prohibit receipt of cash exceeding 2,00,000/- in a single transaction, including sale consideration. However, the assessment year under appeal is A.Y. 2017-18, pertaining to financial year 2016-17, which predates the insertion of Section 269ST. Consequently, neither Section 269ST is applicable, nor could the Assessing Officer validly invoke Section 269SS in respect of sale consideration. Accordingly, the penal action taken under Section 271D, read with Section 269SS, is legally untenable and deserves to be quashed.
2 Assessment Year 2017-2018 4. ITAT Chennai Bench Precedent Supports Assessee's View: The Chennal Bench of the ITAT, in ITO v. Shri R. Dhinagharan (HUF), on identical facts, held that receipt of sale consideration at the time of execution of sale deed cannot be brought within the ambit of Section 269SS and can only be examined under Section 269ST. This binding precedent from a coordinate bench supports the view that consideration received post-sale is not subject to Section 269SS, The non-consideration of this precedent while framing the impugned order renders the same legally untenable.
5. Existence of Reasonable Cause Section 273B The CIT(A) Erred in Confirming the Penalty Under Section 271D Without Considering the Genuine Reasonable Cause. The acceptance of cash was under exceptional and compelling circumstances due to widespread violence and civic disruption in Bangalore on the date of property registration (21.09.2016), caused by the Cauvery water dispute. Section 144 was imposed, banks were non-functional, and public transport was suspended. The buyer insisted on cash payment, and the appellant accepted it out of circumstantial compulsion. The penalty under Section 271D for violation of Section 269SS was imposed mechanically without appreciating the exceptional circumstances under which cash was received. The Appellant, a non- resident individual, was forced to accept cash due to violent protests, bank closures, and suspension of financial services in Bengaluru during the Cauvery water dispute (September 2016). Section 273B provides that no penalty shall be imposed if the assessee proves a "reasonable cause" for the violation.
6. Genuineness of Transaction Not Disputed The CIT(A) Failed to Consider that the Entire Transaction Was Duly Recorded in the Sale Deed. The entire sale consideration, including the cash component, was duly recorded in the registered sale deed. There is no allegation of unaccounted money or tax evasion. The full sale consideration (₹47,62,000/-) was duly disclosed in the registered sale deed. There was no concealment or tax evasion, and the cash transaction was compulsory due to the breakdown of banking services.
Violation of Principles of Natural Justice The AO issued notices only on the ITBA portal, but the Appellant, being a non-regular filer and non-resident, was unaware of the e- proceedings. Natural justice was violated as the Appellant had no opportunity to explain before the penalty was imposed.
The Penalty is Disproportionate and Harsh The penalty of ₹37,62,000/- (equal to the cash received) is excessive and violates the principle of proportionality. The transaction was not for tax evasion but due to extraordinary circumstances.
Force Majeure-Like Situation The CIT(A) ignored the force Majeure like situation. The appellant had no intention to circumvent the law or conceal income. The transaction 3 Assessment Year 2017-2018 was transparent and duly documented. The Cauvery protests led to a complete breakdown of banking services, making cash transactions unavoidable. The Appellant had no malafide intent and acted under compulsion.
Penalty Proceedings Barred by Limitation The penalty order was passed without recording satisfaction in the assessment order, rendering it void-ab-initio, In CIT v. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC), it was held that penalty under Section 271D cannot be levied in the absence of satisfaction recorded in the assessment order.”
When the appeal was taken up for hearing, none present on behalf of the Assessee. On perusal of record we find that the Assessee had filed paper-book containing submissions. We have heard learned Departmental Representative, perused the material on record and taken into consideration the submission/documents forming part of the paper-book filed by the Assessee.
The facts as emerging from the record are that information was received from Joint Director of Income Tax (Intelligence and Criminal Investigation), Bengaluru that the Assessee had received an amount of INR 47,62,000/- on account of sale of immovable property out of which INR 37,62,000/- was received as cash during the previous year relevant to the Assessment Year 2017-18. On the basis of aforesaid information, penalty proceedings under Section 271D of the Act were initiated in the case of Assessee for contravention of the provisions contained in Section 269SS of the Act. During the aforesaid penalty proceedings, the Assessee was asked to furnish reply/explanation. Since, no response was received from the Assessee, the Assessing Officer concluded that the Assessee had nothing to say in the matter and proceeded to pass Penalty Order, dated 24/01/2022, levying penalty of INR 37,62,000/- under section 271D of the Act. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) which was dismissed vide Order, dated 30/05/2025. Now, the Assessee has preferred the present appeal before he Tribunal on the 4 Assessment Year 2017-2018 grounds reproduced in paragraph 2 above.
In the present appeal, the Assessee has raised multiple grounds challenging the levy of penalty under Section 271D of the Act on merits and has also challenged the validity of the impugned order passed by the CIT(A). By way of Ground No.7, the Assessee has raised contended that reasonable opportunity of being heard was not granted to the Assessee by the Learned CIT(A).
5.1. On perusal of the impugned order, we find that in Paragraph No.3, the Learned CIT(A) has recorded that the appeal was posted for hearing on various dates. However, it appears that the appeal fixed for hearing on 02/05/2025. As per the impugned order, the ‘Date of Hearing(s)’ has been stated as under:
Appeal No. NFAC/2016-17/10096397 Status/Deductor Category xx xx Residential Status xx xx Nature of Business xx xx x Section under which the order appealed xx xx x against was passed Date of order under which the order xx xx appealed against was passed Income/Loss assessed (in Rs.) xx xx Tax/Penalty/Fin/ interest Demanded (in xx xx Rs.) Date of hearing(s) 02-May-25 Present for the appellant xx xx Present for the Department xx xx 5.2. Further, we note that the Learned CIT(A) has, in Paragraph No.3 of the impugned order, recorded that the Assessee had filed detailed submissions. However, the findings containing of Paragraph 5 of the said order are silent in this regard and do not deal with any of the 5 Assessment Year 2017-2018 submissions made by the Assessee before the CIT(A)/NFAC.
5.3. We also note that in Paragraphs 4 of the impugned order, the Learned CIT(A) has reproduced the Grounds raised by the Assessee in appeal challenging the Penalty Order, dated 24/01/2022. However, on perusal of the findings returned by the Learned CIT(A) in paragraph Nos.5 & 5.1, we find that the contentions raised by the Assessee in the aforesaid grounds have not been adjudicated upon. The learned CIT(A) has decided the issue on merits without taking into consideration the legal contentions raised by the Assessee in the grounds raised.
5.4. In view of Paragraphs 5 to 5.3. above, we hold that the impugned Order, dated 02/05/2025, passed by the CIT(A) cannot be sustained and is, therefore, set aside with the directions to the CIT(A) to adjudicate the grounds raised by the Assessee in appeal before the CIT(A) afresh, after grating the Assessee a reasonable opportunity of being heard as per law. The Assessee has directed to cooperate in the appellate proceedings before the CIT(A) and file all the relevant submissions/documents/details on which the Assessee wishes to place reliance before the CIT(A) on receiving notice of hearing. It is clarified that in case the Assessee fails to enter appearance before the CIT(A) or fails to file relevant documents/details/submission, the CIT(A) would be at liberty to adjudicate the grounds raised by the Assessee in appeal before CIT(A) on the basis of material on record. Thus, Ground No.7 raised by the Assessee is allowed. Since we have restored the issues back to the file of the Assessing Officer, all the other grounds raised by the Assessee are dismissed as having been rendered infructuous. Before parting we would like to observe that by way of Ground No5 raised in the present appeal, the Assessee has also pleaded that the Assessee had a reasonable cause. However, we find that the aforesaid ground was not raised in appeal before the CIT(A). Since we has restored all the issues raised back to the file of 6. Assessment Year 2017-2018 the CIT(A), the Assessee would be at liberty to raise the contentions before the CIT(A).
In terms of Paragraph 5.4 above, the appeal preferred by the Assessee is treated as allowed for statistical purposes.