SHAIK JAFAR,KURNOOL vs. ITO., WARD-2, KURNOOL

The brief facts of the case are that the assessee is an individual filed its return of income for the A.Y 2017-18 declaring total income of Rs.3,60,000/-. During the course of assessement proceedings, the Assessing Officer noticed that the assessee has ITA 484 of 2024 Shaik Jafar Kurnool not admitted Long-Term Capital Gain at Rs.3,93,769/-. The working of Long-Term Capital Gain is verified and the Assessing Officer completed the assessment after making addition of Rs.3,93,769/-. Thereafter, notice u/s 274 r.w.s. 271D of the I.T. Act, 1961 dated 31.3.2021 was issued and called upon the assessee to explain as to why the penalty u/s 269SS of the I.T. Act, 1961 for accepting the sale consideration in cash amounting to Rs.16,20,000/- cannot be levied. The assessee neither appeared nor filed any details. Therefore, the Assessing Officer passed an order imposing penalty u/s 271D of the Act for Rs.16,20,000/- towards consideration received in cash, in contravention of section 269SS of the I.T. Act, 1961.

Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT (A). Before the learned CIT (A), the assessee submitted that the consideration received in cash for sale of property cannot be treated as specified sum referred to u/s 269SS of the I.T. Act, 1961. The learned CIT (A) after considering the relevant submission of the assessee and after taken note of certain judicial precedents, rejected the explanation furnished by the assessee and upheld the penalty levied by the Assessing Officer u/s 271D of the I.T. Act, 1961 for contravention of the provisions of section 269SS of the I.T. Act, 1961.

Aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee submitted that the Assessing Officer erred in levying penalty without recording satisfaction as required under law and in this regard, he relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Jayalakshmi Rice Mills (P) Ltd (2015) 64 Taxmann.75. The learned Counsel for the assessee further submitted that the penalty u/s 271D is not applicable where consideration received in cash for sale of property and in this regard, he relied upon the decision of the ITAT Hyderabad Bench in the case of Katasani Thirupal Reddy in ITA No.372/Hyd/2023.

The learned DR, on the other hand, supporting the order of the learned CIT (A) submitted that the law does not provide for satisfaction from the Assessing Officer during the course of assessement proceedings, because the authority imposing the penalty u/s 271D is different from the Assessing Officer who completes the assessment.. The learned DR further submitted that the consideration received in cash for transfer of property is falls under the ambit of ‘specified sum’ referred to u/s 269SS of the I.T. Act, 1961 and for any violation, the penalty u/s 271D can be levied. The Assessing Officer after considering the relevant facts has rightly levied the penalty for accepting the sale

ITA 484 of 2024 Shaik Jafar Kurnool consideration in cash in contravention of provisions of section 269SS of the I.T. Act, 1961.

We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. The Assessing Officer levied the penalty u/s 271D of the I.T. Act, 1961 for violation referred to u/s 269SS of the Act in respect of sale consideration received in cash for transfer of immovable property. The Assessing Officer invoked clause (iv) of section 269SS of the Act, which deals with ‘specified sum’ and as per the said explanation, the ‘specified sum’ is any sum of money receivable whether as advance or otherwise in relation to transfer of immovable property, whether or not the transfer takes place. The memorandum explaining the amendment to Finance Bill 2015 for insertion of clause (iv) explained the intention of bringing the said provision to section 269SS of the I.T. Act, 1961. As per said explanation, in order to curb cash transaction in immovable property transaction, an explanation has been inserted to section 269SS by way of clause (iv) which deals with the specified sum. Further, the specified sum has been extended to include any sum of money receivable whether as advance or otherwise. Going by the intention of the Legislature to expand the scope of 269SS of the I.T. Act, 1961 to cash transaction in immovable property, in our considered opinion, it does not intend to cover the consideration received for transfer of property at the time of registration, but only limited to advances received in relation to ITA 484 of 2024 Shaik Jafar Kurnool any transaction of immovable properties. Therefore, at any stretch of imagination the definition of ‘specified sum’ cannot be extended to a consideration received in cash at the time of registration of the property as per registered sale deed and offered to tax. Therefore, in our view this is against the spirit of intention of the legislature and this view is further supported by the decision of the Coordinate Bench of the Hyderabad Tribunal in the case of Katasani Thirupal Reddy vs. Income Tax Officer in dated 5/7/2024 where the Tribunal by following the decision of the Coordinate Bench of ITAT Chennai in the case of Income Tax Officer vs. Shri. R. Dhinagharan (HUF), ITA No. 3329/Chny/2019, dated 28/12/2023 held as under: 6.“We have gone through the record in the light of the submissions made on either side. Case of the assessee is that in the transaction in question he received the sale consideration of Rs. 21.42 Lacs in cash in view of the pressing need of health care of his mother and since the amendment has come into force only a month earlier, he was not properly advised as to the bar of receiving cash under the amendment act. Admittedly the sale took place on 3/7/2015 whereas the amendment in question has come into force w.e.f. 1/6/2015. Assessee suffered loss in this transaction and such a position is not disputed by the Department. In the circumstances, the assessee not receiving proper advice as to the non-desirability of receiving the sale consideration in cash and his explanation cannot be brushed aside.

In this view of the matter and considering the facts and circumstances of the case and also by following the decision of the Coordinate Bench of the Hyderabad Tribunal in the case of Katasani Thirupal Reddy vs. Income Tax Officer (Supra), we direct the Assessing Officer to delete the penalty levied u/s 271D of the I.T. Act, 1961.

In the result, appeal filed by the assessee is allowed.