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

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

Brief facts of the case are that the assessee (Sri Vijapurapu 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.

At the outset, the Ld. Authorized Representative submitted 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 (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.

From the plain reading of the above section, it is noted that 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:

The objective of the amendment proposed in 269SS of the 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.

In the result, appeal of the assessee is allowed.