No Penalty u/s 271D for cash received before registrar for sale of property – ITAT

No Penalty u/s 271D for cash received before registrar for sale of property – ITAT 

In a recent judgment, ITAT Chennai has deleted income tax penalty us/ 271D holding that section 269SS would apply only to advance receivable and the provisions would not apply to transaction that has happened at the time of final payment towards the sale of property and at the time of registration of sale deed when the payment was made before sub-registrar.

ABCAUS Case Law Citation:
ABCAUS 4112 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in confirming penalty u/s 271D of the Income Tax Act, 1961 (the Act) levied by the Assessing Officer (AO).

The penalty had been levied on the finding that the assessee along with other three joint owners had sold certain property and out of the total sale consideration part amount was received in cash.

The AO, invoking the provisions of Section 269SS, show-caused the assessee for levy of penalty u/s 271D. and not satisfied with the reply of the assessee, levied proportionate penalty u/s 271D of the Act. The CIT(A) confirmed the same.

Against the order of the CIT(A), the assessee was in further appeal before ITAT and relied upon the decisions of the Tribunal in support of his case that no penalty was leviable on the facts and circumstances of the case.

The Tribunal observed that in a case relied upon by the assessee, a house property was sold for sale consideration of Rs. 50 lacs out of which substantial sale consideration had been received in Cheques whereas a small sale consideration of Rs. 5 Lacs had been received in cash. The Bench deleted the penalty u/s 271D observing that the sale transaction for the sale consideration including the cash portion was duly evidenced by the registered agreement / deed. The Bench opined that the provisions of Section 269SS are mainly to curb generation of black money by way of dealings in cash in immovable property transactions which was absence in the said case.

Further, the Tribunal observed that in another case, the Bench had observed that the 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, clearly 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 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.

Accordingly, applying the ratio of the abovesaid two decisions, the Tribunal delete the impugned penalty.

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