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Facts
The appellant, an individual, filed their income tax return for AY 2017-18. During assessment, it was found that the appellant accepted Rs. 17,50,000/- in cash for the sale of residential property, which was deemed a violation of Section 269SS of the Income Tax Act. Consequently, the Jt. Commissioner of Income Tax levied a penalty of Rs. 17,50,000/- under Section 271D, which was subsequently confirmed by the CIT(A).
Held
The Tribunal held that the receipt of sale consideration in cash at the time of immovable property registration falls within the ambit of Section 269SS, particularly clause (iv) of the Explanation, which broadly defines 'specified sum' to include money received 'as advance or otherwise' in relation to property transfer. The Tribunal also affirmed the validity of the penalty proceedings, stating that initiation by the Jt. Commissioner of Income Tax was proper, irrespective of the Assessing Officer's satisfaction recorded earlier.
Key Issues
1. Whether the acceptance of cash consideration at the time of execution and registration of an immovable property sale deed violates Section 269SS of the Income Tax Act. 2. Whether penalty proceedings under Section 271D can be validly initiated by the Jt. Commissioner of Income Tax if the Assessing Officer initially recorded satisfaction.
Sections Cited
271D, 269SS, 143(3), 269T, 271E, 273
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SOUNDARARAJAN K., JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 14.06.2024 for Assessment Year (AY) 2017-18 confirming the levy of penalty u/s. 271D of Income Tax Act, 1961 (hereinafter "the Act").
Brief facts of the case are that the appellant is an individual. The return of income of AY 2017-18 was filed on 29.03.2018 Subramanyan Harikumar declaring total income of Rs. 1,42,860/-. Against the said return of income, the assessment was completed by the by the Income Tax Officer, Ward – 1 & TPS, Palakkads (hereinafter called "the AO") vide order dated 10.10.2019 passed u/s. 143(3) of the Act accepting the returned income.
During the course of assessment proceedings, the AO noticed that the appellant had violated provisions of section 269SS of the Act by accepting sale consideration of Rs. 17,50,000/- in cash against sale of residential property on 29.06.2016. Accordingly, the matter was referred to the Jt. Commissioner of Income Tax, who issued show a cause notice dated 25.10.2019, to the appellant. In response to the show cause notice, the appellant filed an explanation admitting the receipt of sale consideration towards the residential property located at Vadakkanthara Road, Palakkad and the same was registered on 29.06.2016, pleading that no advance was received on sale of the said property, therefore, provisions of section 269SS had no application. However, the JCIT had proceeded with levy of penalty of Rs. 17,50,000/- u/s. 271D of the Act vide order dated 19.01.2022 placing reliance on the provisions of clause (iv) of Explanation inserted to section 269SS of the Act.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the levy of penalty by dismissing the appeal.
The learned A.R. submits that provisions of section 269SS have no application, inasmuch as, the sale consideration was received at the time of registration of the sale deed. The transaction does not fall within the purview of section 269SS of the Act. In this connection she also placed reliance on the decision of the coordinate bench in the case Bhaskar Thattaruthodiyil in dated 25.09.2024. She further submits that the AO only recorded his satisfaction for initiation of penalty proceedings u/s. 271D of the Act and not the Jt. Commissioner of Income Tax. Therefor the penalty order is vitiated.
On the other hand, the learned Sr. DR vehemently opposed the above submissions and submitted that the penalty proceedings were initiated by the JCIT as the show cause notice was issued by him. In this connection she also placed reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Grihalakshmi Vision v. Addl. CIT [2015] 379 ITR 100. Further, she submits that there is a clear violation of provisions of section 269SS of the Act. In the absence of any reasonable cause for violation of provisions of section 269SS, the penalty is exigible, no interference in the orders of the lower authorities is called for.
Subramanyan Harikumar 8. We have heard the rival contentions of both the parties and perused the material available on record. Admittedly, in the present case the appellant had received sale consideration on sale of residential property located at Vadakkanthara Road, Palakkad in cash at the time of registration of the sale deed. It is the case of the Jt. Commissioner of Income Tax that receipt of sale of consideration of the property in cash falls within the ambit and scope of provisions of clause (iv) of Explanation inserted to section 269SS of the Act. The said provisions of clause (iv) of the Explanation to section 269SS reads as under: -
“Mode of taking or accepting certain loans, deposits and specified sum. 269SS. …………………………………. (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.” In the present case, admittedly, the sale consideration against sale of immovable property was received in cash at the time of execution and registration of sale deed. The Parliament has enacted the provisions of section 269SS in order to curb the device of unaccounted income brought to the books of account in the form of loans and deposits from third parties. The provisions of section 269SS bars a person from taking or accepting deposits otherwise than by an account payee bank draft, if the aggregate of such loan or deposit exceeds Rs. 20,000/-. These provisions were brought into Subramanyan Harikumar the statute by Finance, 1984 w.e.f. 01.04.1984. The provisions of section 269SS are subsequently amended by enlarging the scope of section 269SS by insertion of clause (iv) to Explanation to section 269SS and amendment of clause (a) of section 269SS in order to curb generation of black money by dealing in cash in immovable property transactions. The CBDT has elaborated the amendment vide circular No. 19 of 2015 dated 27.11.2015 as follows: -
“54. Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances – 54.1 Provisions contained in section 269-SS of the Income-tax Act, before amendment by the Act, provided that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions were provided in the section. 54.2 Similarly, the provisions contained in section 269T of the Income-tax Act, before amendment by the Act, provided that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more. 54.3 In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269-SS of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, relation to transfer of an immovable property (specified sum) otherwise than by an account payer cheque or account payee bank draft or by electronic clearing system Subramanyan Harikumar through a bank account, if for amount of such loan or deposit or such specified sum is twenty thousand rupees or more. 54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. 54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of sections 269-SS and 269T, respectively, have also been made. 54.6 Applicability: – These amendments have taken effect from 1-6-2015.”
As a result of the amended provisions of section 269SS, no person shall take or accept from other persons loans or deposits or any specified sum if the aggregate of the amount of such loan, deposit or specified sum exceeds Rs. 20,000/- otherwise by an account payee cheque or account payee bank draft or otherwise of any electronic clearing system through a bank account or through such electronic mode as may be specified. Violation of these provisions of section 269SS attracts penalty u/s. 271D of the Act in the absence of any reasonable cause as specified u/s. 273 of the Act. Therefore, in the present case the appellant had not received the consideration in advance. Therefore the question that requires to be Subramanyan Harikumar determined by us is whether the transaction of receipt of sale consideration in cash at the time of execution and registration of sale deed falls within the ambit and scope of provisions of clause (iv) of Explanation inserted to section 269SS of the Act. In other words, the issue is based on the interpretation of the words “or otherwise” found in clause (iv) of Explanation to section 269SS of the Act. No doubt, these words are not restrictive but inclusive. In the context of clause (iv) to Explanation to section 269SS is to fix the event or action with reference to transfer of immovable property. Therefore, the words “or otherwise” have to be read with the words “in relation to the transfer of immovable property”. Therefore, the receipt of sale consideration in cash against sale of immovable property falls within the ambit and scope of clause (iv) of Explanation to Section 269SS of the Act and, therefore, there is clear violation of provisions of section 269SS of the Act. Therefore, the appellant had violated provisions of section 269SS of the Act and liable to pay penalty subject to proving the existence of reasonable cause to the satisfaction of the Jt. Commissioner of Income Tax. In the present assessee the appellant had not took the plea of reasonable cause for non-levy of penalty. The only plea took by the learned counsel for the assessee is that there is no violation of provisions of section 269SS, as according to him the receipt of sale consideration in cash does not fall within the ambit of advance so as to attract clause (iv) of Explanation to section 269SS of the Act. She also placed reliance
In our considered opinion the decision of the coordinate bench have failed to interpret the words “or otherwise” found in clause (iv) of the Explanation inserted to section 269SS of the Act. Thus, the decision of the coordinate bench is a per incuriam and does not constitute binding precedent. As regards the contention of the appellant that satisfaction to initiate penalty proceedings were recorded by the AO but the penalty proceedings were initiated by the Jt. Commissioner of Income Tax, therefore, the penalty proceedings are bad in law cannot be accepted in view of decision of the Hon'ble Kerala High Court in the case of Grihalakshmi Vision (supra) wherein it was held as under: -
“10. Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the Subramanyan Harikumar issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply” Thus, we do not find any merit in the appeal filed by the assessee. Grounds of appeal are dismissed.
In the result, appeal filed by the assessee stands dismissed.
Order pronounced in the open court on 20th March, 2025.