2024 (10) TMI 238 - AT - Income Tax

Penalty u/s 271D - reasonable cause for accepting the cash on account of sale of immovable property - Interpretation of the term otherwise in Section 269SS - contention of AR that receipt of such sale consideration is not covered under the provisions of section 269SS of the Act as the scope of said section is limited to receipt of money in the nature of advance. HELD THAT - The doctrine of Ejusdem Generis is a latin maxim meaning of the same kind and nature . According to the Black s Law Dictionary, the principle of Ejusdem Generis is where general words follow an enumeration of persons or things by particular and specific words. Not only these general words are construed but also held as applying only to persons or things of the same general kind as those specifically enumerated. We are of the view that the word otherwise used under section 269SS of the Act cannot include sale consideration as the word otherwise should be read in accordance with the principle of Ejusdem Generis. The word otherwise should draw its colour from other words used in the provisions contained in section 269SS of the Act i.e., money receivable as an advance . Invoking the doctrine of Ejusdem Generis, we are of the view that the term otherwise should be interpreted in a narrow sense and it must include the words similar to money receivable, as advance . In other words, the term otherwise cannot be given a wider interpretation. The Hon ble Supreme Court in the case of Kamlesh Kumar Sharma Vs. Yogesh Kumar Gupta 1998 (2) TMI 600 - SUPREME COURT held that wherever there is term otherwise the word is to be given a restricted meaning. Further on the facts of the present case, we find there is reasonable cause as mandated under section 273B of the Act, for the failure to comply with section 269SS of the Act. Section 269SS of the Act was amended by the Finance Act, 2015, wherein the term specified sum was introduced to include amount received for transfer of immovable property as a measure to curb generation of black money. In the present case, there was no intention, whatsoever, to generate unaccounted money/black money as the assessee had recorded the receipt of entire cash in the registered sale deed and duly disclosed the same in the return of income filed. Assessee had also claimed exemption under section 54 of the Act towards construction of residential house. As pertinent to note that the claim made by the assessee under section 54 of the Act has been allowed by the AO in the assessment completed. Copy of the bank statement and the Assessment Order dated 09.12.2019 is placed on record. Therefore, it is clear that there is no unaccounted money / black money in the transaction. Moreover, we find that in this case there was no agreement to sell executed between the parties as is evident from the sale deed. Therefore, the assessee had no legal right to enforce the sale. All the payments were made through DD and cheques and cash was paid to the assessee only on the date of sale deed being executed. Hence, denial by the assessee to receive the consideration in cash would have resulted in failure of sale of the said property. Moreover, the amendment effected by Finance Act, 2015, to section 269SS of the Act, which had laid a restriction for receiving cash for transfer of immovable property would not have come to the knowledge of the assessee who is a woman having elementary education and no knowledge of tax laws. She would have not been under a belief that there was contravention of any provision of the Act. On identical facts, the following judicial pronouncements had held that there is reasonable cause as mandated under section 273B. Thus, penalty under section 271D of the Act, is not warranted and we delete the same. Decided in favour of assessee.

Summary

Issues Involved:

1. Applicability of Section 269SS of the Income Tax Act to cash transactions in immovable property sales.
2. Interpretation of the term "otherwise" in Section 269SS.
3. Applicability of penalty under Section 271D for cash transactions.
4. Consideration of "reasonable cause" under Section 273B for non-compliance with Section 269SS.
5. Appropriateness of invoking Section 269ST instead of Section 269SS.

Detailed Analysis:

1. Applicability of Section 269SS:

The primary issue was whether the cash receipt of Rs.49,10,000/- by the assessee during the sale of immovable property contravened Section 269SS of the Income Tax Act. The assessee argued that the receipt was part of the sale consideration and not an advance, thus Section 269SS, which restricts cash transactions over Rs.20,000, should not apply. The Tribunal examined the provision and noted that Section 269SS is intended to curb black money by prohibiting cash transactions in immovable property sales, but primarily targets advances, not final sale considerations.

2. Interpretation of "Otherwise":

The Tribunal applied the doctrine of Ejusdem Generis to interpret the term "otherwise" in Section 269SS. It concluded that "otherwise" should be interpreted narrowly, in line with "money receivable as an advance," rather than broadly to include sale consideration. This interpretation aligns with the Supreme Court's stance in Kamlesh Kumar Sharma Vs. Yogesh Kumar Gupta, which advocated for a restricted understanding of "otherwise" to prevent undermining the Act's objectives.

3. Penalty under Section 271D:

The Tribunal found that the penalty under Section 271D was inappropriately applied. It noted that the cash transaction in question was not an advance but part of the sale consideration, which should not fall under Section 269SS. The Tribunal referenced similar cases, such as ITO Vs. Shri. R. Dhinagharan (HUF), where penalties were not upheld for sale considerations received in cash.

4. Reasonable Cause under Section 273B:

The Tribunal considered whether there was a "reasonable cause" for the assessee's non-compliance with Section 269SS. It acknowledged the assessee's lack of awareness about the amended provisions and noted that the entire transaction was transparent, with the cash receipt disclosed in the sale deed and tax returns. The Tribunal cited several judicial precedents where ignorance of law, especially by individuals with limited knowledge of tax laws, was deemed a reasonable cause under Section 273B, thus negating the penalty.

5. Invoking Section 269ST:

The Tribunal suggested that Section 269ST, which restricts cash transactions over Rs.2,00,000, might have been more applicable than Section 269SS. It noted that Section 269ST was designed to cover cash transactions in completed sales, unlike Section 269SS, which focuses on advances. The Tribunal highlighted that the legislative intent, as clarified in the Finance Bill, 2015, was to target advances, not sale considerations, under Section 269SS.

Conclusion:

The Tribunal concluded that the penalty under Section 271D was unwarranted and should be deleted. It emphasized the proper interpretation of statutory provisions and recognized the reasonable cause for non-compliance. The appeal was allowed in favor of the assessee, with the penalty being set aside.