SAMIAPPAGOUNDER DHARMARAJ,TIRUPUR vs. ADDL. CIT,RANGE-1, TIRUPUR, TIRUPUR

आदेश / O R D E R

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, Delhi, dated 31.10.2023 for the Assessment Year (hereinafter ‘AY’) 2017-18 confirming the penalty levied u/s.271D of the Income Tax Act, 1961 (hereinafter ‘the Act’). The assessee has challenged the impugned action of the Ld.CIT(A)/Range Head/JCIT, inter alia, on many grounds –

Therefore, the AO completed the assessment u/s.144 of the Act by accepting the income viz., assessed income Rs.4,76,901/- + Rs.5,26,386/- (LTCG) + Rs.1,00,000/- (agricultural) by assessment order dated 25.12.2019 and also initiated penalty proceedings u/s.270A of the Act.

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 3 ::

three others) regarding sale of a property situated in Dr.No.11/10-12, Rayappapuram East Street (hereinafter referred to as the immovable property), which agreement was registered as document No.115 of 2014 for a sum of Rs.3 Crores, out of which, assessee acknowledged receipt of an advance of Rs.2.5 Crs on 06.01.2014 as cash (i.e. in AY 2014-15); and the balance amount of Rs.50 lakhs was agreed to be paid within three years from the date of sale agreement (i.e. before 07.01.2017). It was pointed out to JCIT that as per condition stated in the aforesaid sale agreement was that in the event any of the buyers backed out of the agreement for any reason, then, advance paid of Rs.2.5 Crs would be forfeited; and it was also stated in the sale-agreement that possession of immovable property would be given only on payment of balance Rs.50 lakhs.

06.10.2016 at the time of sale-agreement from four buyers totaling Rs.4,20,000/- in cash on that date; and the balance was purported to be paid on 07.10.2016 when the Sale Deed was executed of Rs.28,50,000/- each (Rs.1,14,00,000/-). The assessee after narrating the above events with support of corroborative evidence viz., sale agreement/registered Sale Deed, etc., asserted that though there was in existence registered document evidencing sale of immovable property, however, there was no cash transaction during the year under consideration and the amount given in the earlier AY 2014-15 of Rs.2.50 Crs. was adjusted in the relevant year under consideration i.e. AY 2017-18; and pointed out tat there was no deposit of cash in his bank-account and therefore contended that there was no violation of Sec.269SS in the year under consideration and so pleaded for dropping penalty proceedings u/s.271D of the Act.

The Range Head/JCIT did not accept the contentions of the assessee and levied penalty u/s.271D of the Act and accordingly, imposed penalty of Rs.1,18,20,000/-.

I have carefully considered the facts of the case as well as submissions filed by the appellant. I find no force in the arguments of the Appellant. The only plea taken by the Assessee is that a sum of Rs. 2.5 crore was received by him in cash and this payment of Rs. 1.18 crore is just an adjustment against the aforesaid sum. However, no evidence has been submitted in respect of this purported

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 6 :: agreement, the forfeiture of this amount of 2.5 crore. Later, the Assessee himself denies this forfeiture. As stated by the AO, there are several contradictions in the explanations given. Accordingly, the penalty of Rs.1,18,20,000/- levied by the AO u/s.271D of the Act is hereby confirmed. The grounds of appeal

No. 1 to 5 are thus, dismissed.

7. Aggrieved by the aforesaid action of the Ld.CIT(A)/NFACC, the assessee is before us.

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 7 :: u/s.271DA], and realizing his erroneous action, he ultimately imposed penalty u/s.271D for violation of Section.269SS, which according to Ld.AR is incurable defect and goes to the root of the penalty imposed; and to buttress his case, he drew our attention to Para No.4 of the penalty order which has been reproduced (supra) from which, it is discerned that Range Head/JCIT initiated penalty proceedings u/s.271DA [though stated therein as 271D which will be dealt infra] of the Act dated 17.01.2022; and admits in his notice dated 19.07.2022 that there was a mistake of issuing earlier notices and he requested assessee to read in earlier notices wherever it is mentioned as “sec.271DA” to be read as ‘sec.271D’ of the Act. According to the Ld.AR, it can be noticed from the date of events that the JCIT realized his mistake of initiating penalty u/s.271DA only at the fag end of the penalty proceedings i.e. when there was only thirteen (13) days left to complete the penalty proceedings, then only he asked the assessee to read Sec.271D instead of sec.271DA of the Act. According to Ld AR, this action of JCIT at the last moment changing the ‘charge’ from Sec.271DA to Sec.271D of the Act was fatal and incurable defect and was in clear violation of natural justice and fragile for non-application of mind from inception.

notices from which it is discerned that the AO had initiated the penalty on 17.01.2022 which generated DIN wherein also sec.271DA of the Act, is clearly mentioned therein [DIN ITBA/PNL/F/271DA/2021- 22/1038795499(1)] and a careful reading of Para No.4 of impugned penalty order (supra) would itself reveal that the JCIT had in fact initiated penalty u/s.271DA & not u/s.271D as stated by him at Para No.4, firstly because the DIN taken note by us (supra) gives away the fact that notice initiated for imposing penalty was u/s.271DA [and not u/s.271D of the Act]. And secondly, all other notices dated 24th January, 2023 & 09th February, 2022, (except the last notice issued on 19.07.2022) the JCIT had mentioned about imposition of penalty u/s.271DA of the Act and also in the letter dated 24.01.2022, he referred to earlier notice issued on 17.01.2022 u/s.271DA of the Act. And thirdly, if the JCIT had initiated notice u/s.271D in the first place, there was no reason for him to state in notice on 19.07.2022 asking the assessee to read in other notices wherever it is stated as sec.271DA to be read as Sec.271D of the Act. In the light of above, he asserted that notice dated 17.01.2022 was invalid and therefore, penalty levied of Rs.1.18 Crs. on 31.07.2022 is bad in law and deserve to be nixed.

JCIT has stated to have initiated penalty u/s.271D, but it is noted that it is an incorrect assertion of JCIT, because, DIN mentioned therein itself

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 9 :: clearly shows that it was initiated u/s.271DA and not u/s.271D of the Act.

Moreover, in the next notice dated 24.01.2022, the JCIT refers to the earlier notice dated 07.01.2022 initiated u/s.271DA of the Act and all the notices issued by JCIT (except on 19.07.2022) have mentioned about imposition of proposed penalty u/s.271DA & not u/s.271D. Therefore, we find that JCIT has initiated penalty u/s.271DA of the Act on 07.01.2022 and not u/s.271D of the Act; and having noted so, we find that only on 18th /19th July, 2022 i.e. just before 13 days before levy of penalty, assessee was put to notice of proposed penalty s.271D of the Act, instead of u/s.271DA of the Act. It needs to be noted s.271DA of the Act, is a penalty levied for failure to comply with the provisions of Sec.269ST of the Act, whereas penalty u/s.271D of the Act, is levied for failure to comply with Sec.269SS of the Act, and both are distinct provisions; and sec.269ST was inserted only by Finance Act, 2017, w.e.f. 01.04.2017, violation of which entail penalty u/s.271DA of the Act. As noted (supra), after two years of passing the assessment order, the Range Head/JCIT had initiated the penalty u/s.271DA of the Act, in January, 2022 and only on 18th /19th July, 2022, he had corrected the mistake and put the assessee on notice for penalty to be levied under a different section i.e. sec.271D of the Act, and within 13 days, he has levied penalty, which action of the JCIT cannot be countenanced, since initiation of notice itself is bad in law and it exposes the non-application of mind by the authority

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 10 :: initiating penalty; and his impugned action was whimsical/arbitrary which violates Article-14 of the Constitution of India. Further, as submitted by the Ld.AR, the impugned notice initiating penalty u/s.271DA of the Act, could have created confusion in the assessee’s mind and disabled him from defending/explaining his case effectively. Thus, it results in the denial of right to adequate opportunity and fair hearing envisaged u/s.274 of the Act. According to us, in law, it is not permissible to presume that the assessee knows the charge, more so when proceedings are punitive.

It is settled position of law that penal laws must be construed strictly, that is according to the language used in the statute. Sec.274 of the Act clearly mandates that assessee must have reasonable opportunity of hearing before the authority passes an order imposing penalty. In other words, notice cannot be treated as mere formality. It in fact requires strict compliance and therefore, all actions following the defective notice are vitiated and consequently penalty levied is unsustainable in law and for that we relies on ratio of the judgments (infra) though in the context of penalty levied u/s.271(1)(c) of the Act including that of the Hon’ble jurisdictional High Court: i) Mohd. Farhan A. Shaikh v. ACIT reported in (2021) 434 ITR 1 (Bom) (FB) ii) CIT v. Sam-son Pondichery [2017] 392 ITR 4 (Bom) TXA No. 1154 of 2014 dated January 5, 2017; iii) CIT (Pr.) v. Goa Coastal Resorts and Recreation P. Ltd. [2020] 16 ITR-OL 111 (Bom) Tax Appeal No.24 of 2019 dated November 11, 2019; iv) Pr. CIT v. New Era Sova Mine [2021] 433 ITR 249 (Bom) Tax Appeal Nos. 70 of 2019 dated June 18, 2019; and v) Pr. CIT v. Goa Dourado Promotions Pvt. Ltd. [2021] 433 ITR 268 (Bom) Tax Appeal No. 18 of 2019 dated November 26, 2019 and the hon'ble Supreme Court in case of Dilip N. Shroff v. Jaint CIT [2007] 291 ITR 519 (SC) on the issue of non-application of mind.

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 11 :: vi) Babbuji Jacob v. ITO [2021] 430 ITR 259 (Mad) vii) CIT D. Anita Kumaran (Smt.) [2018] 11 ITR-OL 221 (Mad) (para 36) viii) CIT v. Atul Mohan Bindal [2009] 317 ITR 1 (SC) (para 36) ix) CIT D. Gem Granites (Karnataka) [2014] 42 taxmann.com 493 (para 29) x) CIT v. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn) (para 14) xi) CIT v. Original Kerala Jewellers (T. C. A. No. 717 of 2018 dated 18- 12-2018) (para 14) xii) CIT v. Paripushpam (S. I.) [2001] 249 ITR 550 (Mad) (para 38) xiii) CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) (paras 3, 36) xiv) CIT D. SSA Emerald Meadows [2016] 73 taxmann.com 241 (Karn) (para 14) xv) Madhusudhanan (K. P.) ข. CIT [2001] 251 ITR 99 (SC) (para 29) xvi) Mak Data (P.) Ltd. v. CIT [2013] 358 ITR 593 (SC) (paras 28, 29) xvii) National Textiles v. CIT [2001] 249 ITR 125 (Guj) (para 37) xviii) Sundaram Finance Ltd. v. Asst. CIT [2018] 403 ITR 407 (Mad) (para 16)

11. Moreover, we note from the totality of the facts of this case, that it is not a fit case for levy of penalty, because, assessee’s assertion/explanation that in the year under consideration (AY 2017-18) there was neither cash transaction nor cash deposits [in his bank-account as admitted by AO] in respect of sale of immovable property has not been addressed by the JCIT; and assessee’s assertion that cash was transacted in earlier years upon sale agreement for the same property on 06.01.2014 (AY 2014-15), has not been found false by the JCIT. And the Ld.AR pointed out that in AY 2014-15, Sec.269SS of the Act (violation for which JCIT levied penalty u/s.271D of the Act) did not had the term/expression ‘any specified sum’ which was inserted only in Finance Act, 2015 w.e.f. 01.06.2015, therefore no penalty could have been taken in the year in which assessee took advance of Rs 2.50 crores. And it was pointed out that assessee’s stand throughout the assessment/penalty proceedings were that in the year under consideration, the assessee had adjusted the amount received in AY 2014-15; therefore no penalty was (AY 2017-18) Shri Samiappagounder Dharmaraj :: 12 ::

warranted; and in the relevant year assessee has only adjusted the amount taken in AY 2014-15 and showed as taking advance of Rs.4.20 lakhs on 6.10.2016; and that the balance consideration of Rs.1.14 Crs. was shown as given on next day when the sale was executed/registered to four relatives of Shri R.Shaktivel who was party in the agreement of sale in AY 2014-15 as noted (supra). Moreover, it was pointed out by the Ld.AR that the entire sale consideration was reflected in the Sale Deed as noted by the JCIT. Thus, according to him, there is no dispute about the identity of four buyers, and the amount of sale consideration albeit in cash was also not in dispute. Therefore, according to the Ld.AR, Rs.1.14 Crs. given as sale consideration while executing the sale, penalty ought not to have been levied; and for such a preposition relies on the decision of the Tribunal in the case of ITO v. R. Dhinagharan (HUF) [in for AY 2016-17 order dated 29.12.2023], wherein, the Tribunal in similar case deleted the penalty imposed u/s.271D of the Act, held as under:

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 13 ::

8. The CIT(A) after going through the facts of the case and familiar circumstances, deleted the penalty by observing in para 5 as under:

“5.1 The only grievance of the appellant is the levy of penalty under section 271D imposed by the JCIT, Kancheepuram Range 7, vide order dated 12.06.2019 of sum of Rs. 3,03,46,301/-. The JCIT in his order has stated that in the appellant’s case sale consideration of immovable property in the form of plots of land was received in cash in excess of Rs. 20,000/- thereby contravening the provisions of section 269SS of the IT Act. The JCIT also mentioned that in the Finance Act, 2015 the scope of section 269SS was extended to include cash receipts in immovable property transactions. He also held that the appellant fulfilled none of the exceptions provided in the section 269SS. In appellate proceedings before me, it was submitted that these amendments take effect from 01.06.2015. The learned AR who appeared on behalf of the appellant also stated that the scope of section 269SS of the IT Act was amended to curb the generation of black money by dealings made in cash in immovable property transactions. It was also submitted that the appellant has dully disclosed the entire sale transactions in plots in his Profit and Loss Account and therefore the issue of generation of unaccounted income does not arise.

5.2 I have considered the detailed submissions of the appellant as well as the order of the JCIT, Kancheepuram Range and the case laws relied upon. At the outset, it must be mentioned that the legislative intent behind the amendment to section 2698S which included cash dealings. in immovable' property transactions should be understood in the correctperspective.lt is a well-known fact that money changes hands 'in property transactions and this fact cannot be denied. This money is outside the books and is not subject to income tax therefore the term "BLACK MONEY' is applied to such kinds of transactions. In the appellant's context, the question that needs to be asked is whether, simply because the appellant has received the money in cash, does it make the transaction "_BLACK"or unaccounted? I have gone through the Trading, Profit and Loss Account of the appellant for the year ended 31.03.2016. It is noted that the appellant has disclosed the entire amount of Rs. 3, 03, 46,301/- received on account of sale of plots in the Trading, Profit and Loss Account.

5.3 In the light of this fact it is clearly evident that the sale of plots for which money has been received in cash has been fully disclosed in the IT return of the appellant. Therefore, I am of the view that levy of penalty under section 269 SS is not correct. The imposition of penalty has been done in a mechanical manner without taking into consideration the legislative intent behind the· amendment of the section 269SS of the IT Act.

5.4 Secondly, the appellant has taken the issue of "reasonable cause" u/s 273B of the IT Act by highlighting the issue of "bona fide" belief coupled with the genuineness of transactions. Reliance was placed on the case of Saini Medical Stores decided by Hon'ble Punjab and Haryana High Court and reported in 277 ITR 420 (2005) where this judicial premise has been pronounced. The gist of the High Court decision is mentioned in the 4para on Page 5 of this order where bona fide belief and genuineness of the transactions form the bed rock of "reasonable cause" u/s 273B of the Act. It may also be noted that the persons, who have invested in the lands, are people of meagre means, who are living in a small villages in Kancheepuram district. Appellant submitted the list of such persons and it is noted that the payments are ranging between Rs. 2,97,000/- to Rs. 6,04,800/-. I have gone through the list submitted, comprising 82 persons, the plot number, area, and (AY 2017-18) Shri Samiappagounder Dharmaraj :: 14 :: amounts against each name. The sums invested by the persons involved are not very large amounts. Hence looking into the entire background of the facts of this case the "reasonable cause" propounded section 273 B of the Income Tax Act is found to be applicable to the appellant. It is also important to mention that there is no loss to the revenue since appellant has disclosed the entire sales amount in the return of income. The appellant has relied upon the following case laws.”

Aggrieved, the Revenue is in appeal before the Tribunal.

9. Before us, the Ld. CIT-DR submitted that during the course of assessment, it came to the notice of the A.O that the assessee HUF, is engaged in real estate business. It had sold plots of land to various parties for a consideration of Rs.3,03,46,301/- during the previous year 2015-16 relevant to the assessment year 2016-17. The whole consideration was received in cash at the time of registration of sale dded only. In view of the violation of provisions of Sec.269SS of the Act in relation to acceptance of specified sum of money in relation to transfer of immovable properties penalty u/s.271D of the Act was levied by the JCIT, Kancheepuram Range. The Ld. CIT-DR further stated that during the proceedings u/s.271D of the Act, the assessee had only one defence i.e., he has not taken any loan/deposit in contravention of provisions of Sec.269SS of the Act during the year. A request was made to drop the proceedings u/s.271D of the Act. During the course of appellate proceedings, it is seen that the CIT(A) has adjudicated the issue, taking into consideration reasonable cause, which is not acceptable in the facts and law of the case under dispute. The CIT(A) has given rationale of his decision in favour of the assessee in para 5 of the order. The CIT(A) seems to have accepted the following arguments of the assessee:

(i) Scope of Sec.269SS was amended in order to curb the generation of black money by dealings made in cash in immovable property transactions. The learned CIT(A) accepted the submission of the assessee with a finding, 'since the appellant has fully disclosed the entire sale transactions in his profit and loss account, the issue of generation of unaccounted income does not arise.

(ii) The imposition of penalty has been drawn in a mechanical manner without taking into consideration the legislative intent behind the amendment of the section.

(iii) The CIT(A) has opined that the assessee could establish a reasonable cause for violation of Sec.269SS. He has observed that the persons who have invested in lands are people of meagre means, living in small villages in Kancheepuram district.

(iv) The learned CIT(A) has gone through the list of 82 persons, the plot number, area and the amounts involving in such transactions.

(v) There has not been any loss to the revenue since the appellant has disclosed the entire sales amount in the return of income.

9.1 The Ld. CIT-DR stated that the decision taken by the CIT(A) is not acceptable for the following reasons:

(i) From plain reading of Sec.269SS, penalty is imposable for violation of Sec.269SS either for accepting cash over Rs.20,000/- in the form of loan or (AY 2017-18) Shri Samiappagounder Dharmaraj :: 15 :: deposit or for receiving cash in excess of Rs.20,000/- in respect of sale of immovable property(ies.). The only exemption given vis-a-vis this penal provision is in terms of proviso 2 to Sec.269SS. The said proviso takes transaction involving loan or deposit or specified sum between persons having agricultural income outside the ambit of this penalty. The case under dispute does not fall under these categories.

(ii) The CIT(A) has mentioned about no loss of revenue as a ground for his decision. However, loss of revenue can never be a ground for consideration of this penalty u/s.271D.

9.2 The Ld. CIT-DR stated that the reliance of the following case laws by the CIT(A) are also appear to be misplaced.

(i) In the case of CIT Vs Saini Medical Store, the Hon'ble Punjab & Haryana High Court considered the genuineness of the transaction while giving verdict in favour of the assessee. It may be stated that while considering the issue of genuineness of the transaction, the Hon'ble jurisdictional High Court in the case of Vasan Healthcare P Ltd. reported in 103 taxmann.com 26 referred to the ruling of the Apex Court in Kum. A.B. Shanthi reported in 255 ITR 258 (SC). In the said ruling, the Hon'ble Apex Court held that if there was a genuine and bonafide transaction and if for any reason the taxpayer could not get a loan or deposit by account payee cheque or demand draft for some bonafide reasons, the authority vested with the power to impose penalty has got discretionary power. Therefore, the taxpayer has to show that he could get loan or deposit by account payee cheque or DD and the reason given by the tax payer should be genuine and bonafide. The appellant assessee has not demonstrated any such reason before the CIT(A), nor has the learned CIT(A) required it to furnish such vital evidence for establishing reasonable cause.

(ii)The CIT(A) has also relied on the case of Hindustan Steel Limited Vs State of Orissa reported in 83 ITR 26 (1972). At the outset, it may be stated that the above citation is concerned with provisions of Orissa Sales Tax. Further, in the said ruling, the Hon'ble Supreme Court had noted the following:

"Under the Act penalty may be imposed for failure to register as a dealer: s.9(1) read with s.25(J)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out statutory obligation is the result of a quasi criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the beach flows form a bonafide belief that the offender is not liable to act in the manner prescribed by the statute".

It may be mentioned that the quasi-criminal angle is not present in Sec.271D of the Act. In fact, Sec.271DD providing for imprisonment for a maximum of two years for violation of provisions of Sec.269SS

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 16 :: has been omitted w.e.f.1.4.1989. Therefore, this ruling of the Hon'ble Supreme Court in the context of a different taxing statute, which is not a central act, is not applicable in the current case.

(iii) In the case of Coastal Tea Pvt. Ltd., the Hon'ble ITAT, Vishakhapatnam has given a ruling in favour of the assessee in specific facts of the case while the transaction was between sister concern of Directors closely related to the assessee, apart from the fact that the transaction was genuine. The closeness of relation between the parties has not been related in this case and is ostensively not present in this case of transaction between seller and purchaser. Therefore, this case law is not applicable in this current case.

(iv) On the other hand, reliance can be made on the jurisdictional decision of High Court of Madras in Vasan Healthcare Ltd. cited in 411 ITR 499. SLP against the said ruling has been rejected by the Hon'ble Supreme Court. Reliance is also made on the ruling in the case of Mahek Singh Vs CIT reported in 37 Taxman.com 390 (Allahabad).

(v)It is also seen that the learned CIT(A) has admitted new evidence in the form of details of 82 persons involving in the sale transaction with the assessee. The CIT(A) has admitted new evidences in violation of Rule 46 of the IT Act, 1962, and the matter has not been sent back to the Assessing Officer for his comments.

10. On the other hand, the Ld. counsel for the assessee argued that the amendment brought out under the provisions of section 269SS of the Act w.e.f 01.06.2015 which include the ‘specified sum’ and the definition of ‘specified sum’ as given in Explanation to Section 269SS of the Act defines that it means any sum of money receivable, whether as advance or otherwise, in relation to transfer of immovable property, whether or not the transfer takes place, he explained that this means that this is applicable for advance given at the time of entering into agreement for purchase of property and purchase/sale of property and not for actually registration done and sale consideration received at time of registration of sale deed for purchase/sale of property. The Ld. counsel for the assessee stated that this specific amendment was brought in w.e.f. 01.06.2015 for curbing the generation of black money. He explained that the ‘specified transaction’ means, the advance paid or inter remittance payments made and any payments made at one go at the time of registration of sale deed. The Ld. counsel stated that further a provision was brought in by the legislature in the statute vide Finance Act, 2017 w.e.f 01.04.2017 by introducing the provision of section 269ST, wherein even the purchase of property if the amount is two lakhs or more will be covered and penalty will be levied of an equivalent to the amount u/s. 271DA of the Act, which was also simultaneously introduced by the Finance Act, 2017 w.e.f 01.04.2017. Hence, according to Ld. counsel, this provision of ‘specified sum’ introduced w.e.f 01.06.2015 does not hit the assessee’s transaction, because on facts the assessee has not entered into any agreement for sale rather, he only directly registered the documents with the Sub Registrar and accepted cash at the time of registration of sale deed for sale of plots. For this, he produced few of documents for verification which was not denied i.e., neither by the A.O nor by CIT(A) and even now by Ld. CIT-DR.

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 17 :: and hence, the CIT(A) should not have deleted the penalty. He requested that the order of JCIT may be affirmed.

12. We have heard the rival contentions, and gone through the facts and circumstances of the case. We find that the Revenue has challenged the correctness of the decision rendered by the CIT(A) vide order dated 30.09.2019 in deleting the penalty levied u/s 271D of the Act vide penalty order dated 12.06.2019. The CIT(A) had deleted the penalty on two counts namely on the non-applicability of the provisions of Section 269SS of the Act to the facts of the present case and on the ground of reasonable cause within the scope of Section 273B of the Act. We noted that the provisions of Section 269SS of the Act was amended w.e.f. 01.06.2015 to include the ‘specified sum’ within its ambit and the said term was defined in Explanation to the said Section which is reproduced as under: • “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.

The Budget Speech of the Hon'ble Finance Minister while placing the Finance Bill, 2015 highlighting the intention of the amendment relevant for decision making in the present appeal is captured below:

3. A. Measures to curb black money

3.1 With a view to curbing the generation of black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property. It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions.

The Memorandum forming part of Finance Bill, 201.5 highlighting the intention of the amendment is captured below:

B. MEASURES TO CURB BLACK MONEY

Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances.

The existing provisions contained in section 269SS of the Income-tax Act provide 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 have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide 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.

In order to curb generation of black money by way of dealings in cash in immovable property transactions it is proposed to amend section 269SS, of the Income-tax Act so as to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 18 :: account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.

It is also proposed to amend section 269T of the Income-tax Act so as 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.

It is further proposed to make consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively. These amendments will take effect from 1st day of June, 2015.

The Notes on Clauses forming part of Finance Bill, 2015 highlighting the intention of the amendment is captured below:

Clause 66 of the Bill seeks to substitute section 269SS of the Income-tax Act relating to mode of taking or accepting certain loans and deposits. The existing provision contained in section 269SS provides 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.

It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, 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 or specified sum is twenty thousand rupees or more.

It is also proposed to define "specified sum" as any sum of money receivable, whether as advance or otherwise in relation to transfer of an immovable property whether or not the transfer materialises.

These amendments will take effect from 1st June, 2015.

12.1 In the present case, the sale consideration was received in cash at the time of execution of multiple sale deeds from different persons for the sale of plots and accepted as genuine in the assessment order completed on 23.05.2018 and admittedly there was no advance received by the seller. The amended provisions of Section 269SS of the Act was applied by the A.O to the facts of the present case only to the sale consideration received as ‘specified sum’ and on such presumption the JCIT levied penalty u/s 271D of the Act. The intention of the amendment is very clear right from the Budget speech of the Finance Minister that the said amendment is brought into the statute in Section 269SS of the Act would get attracted to sum received in cash as an advance in an immovable property transaction and not to the completed transaction namely cash received as a sale consideration at the time of execution of the registered sale deed. In fact, the statute brought in another amendment in Section 269ST of the Act from the assessment year 2017-18 with a view to cover all situations of cash transaction Rs. 2 Lakhs or over other than the situation captured in Section 269SS of the Act. This provision has been explained with (AY 2017-18) Shri Samiappagounder Dharmaraj :: 19 :: more clarity by the CBDT Circular No.19 of 2015, dated 27.11.2015 and the relevant circular reads as under:-

Departmental Circular No.19 of 2015, dated 27-11-2015:-

54.1 Provisions contained in section 269SS 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 269SS of the Incometax 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, in relation to transfer of an immovable property(specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the 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 section 269SS and 269T, respectively, have also been made.

54.6 Applicability: These amendments have taken effect from 1st day of June, 2015.

From the above provisions, Memorandum explaining the intention of amendment by Finance Bill, 2015 including the definition of ‘sum specified’ brought in the Explanation to Section 269SS of the Act, it is clear that the intention for brining this provision was to curb the generation of black money in real estate prohibiting acceptance or repayment of advance in cash of Rs.20,000/- or more for any transaction in immovable property. This was explained by Hon’ble Finance Minister while placing the Finance Bill, 2015 in her budget speech highlighting the intention of the amendment that the amendment in Explanation to Section 269SS i.e., ‘sum specified’ means only applicable for advance receivable, whether as advance or otherwise means

(AY 2017-18) Shri Samiappagounder Dharmaraj :: 20 :: advance can be in any manner. Hence, this provision will not apply to the transaction that happens at the time of final payment at the time of registration of sale deed and payment is made before sub-registrar at the time of registration of property. In the present case before us, it is an admitted fact that all sale deeds were registered and cash payment was made at one go before the subregistrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances of the case and hence, penalty is not exigible in this case. Hence, we confirm the order of CIT(A) deleting the penalty but on entirely different ground i.e., on jurisdictional issue only. Accordingly, the appeal of the Revenue is dismissed.

13. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced on the 29th day of May, 2024, in Chennai.