VIJAPURAPU SUDHA RAO,VISAKHAPATNAM vs. INCOME TAX OFFICER, WARD-3(1), VISAKHAPATNAM

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/250/2022-23/1051485663(1), dated 28/03/2023

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

1961 [the Act], dated 25/3/2022 for the AY 2017-18.

Suryanarayana Rao), is an individual. The assessee e-filed his

return of income for the AY 2017-18 on 25/07/2017 declaring

total income of Rs. 10,26,020/-. Thereafter, the return was

summarily processed by the CPC, Bengaluru and an order U/s.

143(1) of the Act was passed on 1/11/2017. Subsequently, the

assessee filed his revised return of income on 1/11/2017

declaring total income of Rs.44,81,290/- which includes capital

gains of Rs. 34,65,000/- on sale of vacant site admeasuring 231

sq yds at Yendada Village, Visakhapatnam. On receiving the

information by the Department that during the FY 2016-17

relevant to the AY 2017-18 the assessee sold an immovable

property to Mrs. Pusapati Appala Narsimha Raju for a total

consideration of Rs. 34,65,000/- out of which the assessee

received an advance of Rs. 5 lakhs on 01/12/2015 through

cheque and the remaining amount of Rs. 29,65,000/- on

04/04/2016 by cash, the Ld. AO-NFAC observed that since the

assessee received Rs. 29,65,000/- in cash, which resulted in

violation of the provisions of section 269SS of the Act and

3 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

26/08/2021 and served on the assessee. In response, the

assessee submitted his reply vide letter dated 9/9/2021.

Subsequently, penalty notice dated 23/02/2022 was issued to

the assessee and wherein it 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. In response the assessee filed his reply

on 9/9/2021. The Ld. AO-NFAC did not consider the

submissions of the assessee by holding that the assessee has

failed to explain the reasonable cause for receipt of cash of Rs.

29,65,000/- in contravention of the provisions of section 269SS

of the Act. Accordingly, the Ld. AO-NFAC imposed penalty of Rs.

29,65,000/- and passed order U/s. 271D of the Act on

25/03/2022. Aggrieved by the order of the Ld. AO-NFAC, 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-NFAC 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:

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

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

the immovable property and Rs. 5 lakhs was received by cheque

as an advance on 1/12/2015. The Ld. AR further submitted that

the assessee’s sale of property was a distress sale as the assessee

had only a registered Will in his name and his mother’s name and

being a senior citizen the assessee could not procure proper

buyers for the site. The Ld. AR also further submitted that under

these circumstances, as explained above, the assessee sold the

property at a lower price and he accepted the consideration as

paid by the buyer. The Ld. AR further submitted that the

assessee did not take any advance in cash before the

registration and immediately on receipt of the remaining sale

consideration in cash, under unavoidable circumstances, the

5 assessee deposited the same in his bank account 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-NFAC 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 viz., decision

of the ITAT, Bangalore ‘B’ Bench in the case of Sri Padmanabha

Mangalore Chowta vs. Addl/Joint CIT in ITA No. 147/Bang/2022

(AY 2017-18), dated 7/3/2023; IT(IT)A No. 585/Bang/2022,

dated 14/9/2022 in the case of Anuradha Chivukula Challa vs.

Addl. CIT and decision of the ITAT, Ahmadabad Bench in the case

of Narendra Kumar Chunilal Soni vs. JCIT in ITA No.

195/Ahd/2022, dated 17/5/2023 but 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.

6 4. We have heard both the sides and perused the material available

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

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

partly for the sale of immovable property from the buyer to the

extent of 29,65,000/-. 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

7 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

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. Further, the explanation

given by the assessee for receipt of sale consideration of Rs.

29,65,000/- constitutes a “reasonable cause” as contemplated in

8 section 273B of the Act and the assessee has accepted the cash under inevitably unavoidable circumstances as explained by the Ld. AR in his arguments and immediately on receipt of the cash, the assessee deposited the same in the bank account which contemplates the genuineness of the transaction and moreover the assessee has paid the capital gain tax thereon. Under these circumstances, we are of the considered view that the penalty levied by the Ld. AO-NFAC U/s. 271D and confirmed by Ld. CIT(A)-NFAC is unsustainable in law and accordingly the orders of the Ld. AO-NFAC and Ld. CIT(A)-NFAC are set aside and thereby we delete the penalty. It is ordered accordingly.

Pronounced in the open Court on 29 TH 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

9 आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Smt. Vijapurapu Sudha Rao L/R of 1. Vijapurapu Suryanarayana Rao, Flat No.201, D.No. 7-22-4/4, Ramana Residency, Kirlampudi Layoutm, Chinawaltair, Visakhapatnam, Andhra Pradesh – 530017. राज�व/The 2. Revenue – Income Tax Officer, Infinity Tower, Shankaramatham Road, Santhipuram, Visakhapatnam, Andhra Pradesh – 530016. 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