EDA SRIKANTH REDDY,GUNTUR vs. INCOME TAX OFFICER, WARD-2(1), GUNTUR

PER S. BALAKRISHNAN, Accountant Member :

This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1047676212(1), dated 28/11/2023

2 arising out of the order passed U/s. 271D of the Income Tax Act,

1961 [the Act], dated 30/08/2022 for the AY 2016-17.

The assessee e-filed his original return of income for the AY

2016-17 on 10/03/2017 declaring total income of Rs.

28,95,400/-. Thereafter, the return was summarily processed by

the CPC, Bangaluru and an order U/s. 143(1) of the Act dated

11/04/2017 was passed. As per the information available with

the Department that during the AY 2016-17 the assessee sold an

immovable property along with two others for a total

consideration of Rs.52,32,000/- out of which the assessee’s

share was Rs. 14,20,000/- and received the same by cash, the

Ld. AO observed that since the assessee received Rs. 14,20,000/-

in cash, which resulted in violation of the provisions of section

269SS of the Act and therefore initiated the penalty proceedings

U/s. 271D of the Act and issued a notice U/s. 274 r.w.s 271D of

the Act dated 01/02/2022 and served on the assessee wherein

the assessee was asked to explain as to why the penalty U/s.

271D should not be imposed in the case of the assessee

considering the non-compliance of the provisions of section

269SS of the Act. Thereafter, the case was taken up by NFAC for

3 completion of proceedings. However, since there is a change in

the incumbent, one more opportunity was afforded to the

assessee vide letter dated 4/8/2022 requiring the assessee to

submit his explanation on or before 12/8/2022. In response, the

assessee filed his reply. Finally, a show cause notice dated

24/8/2022 was issued to the assessee and the assessee

submitted his response on 26/8/2022 contending the levy of

penalty. The Ld. AO did not consider the submissions of the

assessee by holding that the assessee was failed explain the

reasonable cause for receipt of cash of Rs. 14,20,000/- in

contravention of the provisions of section 269SS of the Act.

Accordingly, the Ld. AO imposed penalty of Rs. 14,20,000/- and

passed order U/s. 271D of the Act on 30/08/2022. Aggrieved by

the order of the Ld. AO, the assessee filed an appeal before the

Ld. CIT(A)-NFAC. On appeal, the Ld. CIT(A)-NFAC dismissed the

appeal of the assessee and upheld the penalty levied by the

Ld.AO U/s. 271D of the Act. Aggrieved by the order of the Ld.

CIT(A)-NFAC, the assessee is in appeal before us by raising the

following grounds of appeal:

“1. The order of the Ld.CIT(A) is contrary to the facts and also the law applicable to the facts of the case.

4 2. The Ld. CIT(A) ought to have held that that the penalty proceedings initiated in the case of appellant are barred by limitation and ought to have quashed the penalty order as void-ab-initio.

that the assessee did not receive any cash in advance for sale of

the immovable property till the registration of the sale deed. The

Ld. AR further submitted that the assessee’s sale of property was

evidenced by the sale deed and a copy of the same is submitted

before the Hon’ble Bench. The Ld. AR further submitted that the

assessee while filing the return of income has disclosed the

transaction in respect of sale of immovable property and paid the

tax on capital gains. The Ld. AR further also submitted that the

intention of the Legislature in bringing the amendment to the

provisions of section 269SS is to curb the generation of black

money or unaccounted money ie., to penalize the tax evaders for

not disclosing the transactions in their returns of income,

whereas in the instant case the assessee has disclosed the

5 transaction in his return of income and paid the taxes under the

bonafide belief that the cash may be accepted on sale of property

under certain circumstances as in the case of the assessee. The

Ld. AR also further submitted that under these circumstances, as

explained above, the assessee sold the property and disclosed the

same in his return of income which clearly shows the

genuineness of the transaction and also paid taxes thereon.

Therefore, the Ld. AR pleaded that the penalty levied by the Ld.

AO and confirmed by the Ld. CIT(A)-NFAC is not sustainable in

law and hence the same may be deleted. The Ld. AR relied on

various case laws however, heavily relied on the decision of this

Bench in the case of ACIT vs. Kanchumarthi Venkata Sita Ramachandra Rao in ITA Nos. 245 & 246/Viz/2020, dated 30/08/2022.

Per contra, the Ld. Departmental Representative heavily relied on

the orders of the Ld. Revenue Authorities and argued in support of their

decision.

on record as well as the orders of the Ld. Revenue Authorities. The core

issue involved in the grounds raised by the assessee is with

respect to validity of levy of penalty U/s. 271D on account of

6 receipt of cash in relation to transfer of immovable property by

the assessee attracting the provisions of section 269SS of the

Act. The admitted facts are that the assessee has received cash

of Rs. 14,20,000/- as his portion out of the total sale

consideration of Rs. 52,32,000/- for the sale of immovable

property from the buyer. Section 269SS of the Act as amended

by Finance Act, 2015 wef 1/6/2015 stipulates that no person

shall take or accept from any other person, any loan or deposit or

any specified sum, otherwise than by an account payee cheque or

account payee bank draft or use of electronic clearing system

through a bank account. The “specified sum” has been defined in

the section 269SS of the Act as follows:

“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.”

any person is barred from receiving from any amount otherwise

by cheque or through banking channels in relation to transfer of

the immovable property. Section 269SS of the Act prohibits

receipt of any amount by way of cash in relation to the transfer of

any immovable property. The Memorandum explaining the

7 provisions of Finance Bill 2015 with respect to amendment

proposed w.e.f 1/6/2015 in section 269SS is reproduced below:

“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 account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.”

Act is to curb generation of black money. In the instant case the

fact is that cash received by the assessee has been deposited by

the assessee into the bank account, hence does not attract the

provisions of section 269SS of the Act since there is no

suppression of cash receipts by the assessee. The assessee has

also offered the capital gains to tax which is evident from his

return of income. Under these circumstances, we are of the

considered view that the penalty levied by the Ld. AO U/s. 271D

and confirmed by Ld. CIT(A)-NFAC is unsustainable in law and

accordingly the orders of the Ld. AO and Ld. CIT(A)-NFAC are set

8 aside and thereby we delete the penalty. It is ordered accordingly.

Pronounced in the open Court on 29th November, 2023.

Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER Dated : 29.11.2023 OKK - SPS

आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Eda Srikanth Reddy, 1-206, Reddy Palem 1. (Post), Guntur, Andhra Pradesh – 522509. राज�व/The Revenue – Income Tax Officer, Ward-2(1), O/o. ITO, 2. Lakshmipuram Main Road, Guntur, Andhra Pradesh – 522006. 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam