2024 (11) TMI 1156 - AT - Income Tax

Penalty levied u/s 271D - assessee had claimed the cash was received against sale of 32 sale deeds - Scope of phrase specified sums mentioned in section 269SS cover the amount received in cash - HELD THAT - As we find that it is mentioned that AO had submitted a proposal for initiation of penalty u/s 271D for contravention of section 269SS of the Act. We fail to reconcile between the assessment order and the penalty order as to if the AO had in any way shown any indulgence during the assessment proceedings about the contravention of section 269SS of the Act. We are of the considered view that even if it is assumed that subsequent to the assessment order dated 26.11.2018 the AO had submitted a proposal for initiation of penalty u/s 271D, then, the particulars of that communication should have been part of the impugned penalty order. In any case, if after conclusion of the assessment order any proposal was forwarded by the AO that does not fulfill the mandate of law which requires that the satisfaction of violation of section 269SS and a reference for initiating penalty u/s 271D of the Act should be made and recorded by the AO in the body of the assessment order. The reliance in this regard is rightly placed by Ld. AR on the decision of Sri Raja Reddy Nalla, Warangal 2023 (5) TMI 1254 - ITAT HYDERABAD . Further, we are of the considered view that the interpretation given to words, specified sum by terming it as residuary term to encompass all other transactions done in cash beyond a specified sums is incorrect interpretation. See Shri R. Dhinagharan (HUF) 2024 (1) TMI 61 - ITAT CHENNAI wherein held sale consideration was received in cash at the time of execution of multiple sale deeds from different persons for the sale of plots and accepted as genuine in the assessment order completed on 23.05.2018 and admittedly there was no advance received by the seller. The amended provisions of Section 269SS of the Act was applied by the A.O to the facts of the present case only to the sale consideration received as 'specified sum' and on such presumption the JCIT levied penalty u/s 271D of the Act. The intention of the amendment is very clear right from the Budget speech of the Finance Minister that the said amendment is brought into the statute in Section 269SS of the Act would get attracted to sum received in cash as an advance in an immovable property transaction and not to the completed transaction namely cash received as a sale consideration at the time of execution of the registered sale deed. 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. In admitted fact that all sale deeds were registered and cash payment was made at one go before the sub- registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS - Assessee appeal allowed. Thus we consider the penalty levied to be against the provisions of law. The grounds are sustained. The impugned penalty is quashed. Assessee appeal allowed.

Issues Involved:

1. Legality of the levy of penalty under Section 271D of the Income Tax Act, 1961.
2. Applicability of Section 269SS regarding cash transactions in the sale of immovable property.
3. Interpretation of "specified sum" under Section 269SS.
4. Jurisdiction and procedural aspects of initiating penalty proceedings.

Detailed Analysis:

1. Legality of the Levy of Penalty under Section 271D:

The primary issue revolves around the legality of the penalty imposed under Section 271D of the Income Tax Act, 1961. The assessee contested the penalty levied by the Joint Commissioner of Income Tax (JCIT) for allegedly violating Section 269SS, which prohibits cash transactions above a specified limit. The assessee argued that the cash received was not an advance or loan but was received at the time of execution of sale deeds for land transactions. The JCIT, however, interpreted the cash received as falling under "specified sum" and thus subject to penalty under Section 271D. The First Appellate Authority upheld the penalty, dismissing the assessee's argument that the transactions did not involve a depositor-depositee relationship.

2. Applicability of Section 269SS Regarding Cash Transactions:

The assessee argued that Section 269SS, which restricts cash transactions, did not apply as the cash was received as sale consideration, not as an advance or loan. The JCIT and the First Appellate Authority disagreed, holding that the cash received fell within the ambit of "specified sum" under Section 269SS. The Tribunal, however, found that the assessment order did not indicate any examination of Section 269SS during the assessment proceedings, questioning the basis for the penalty.

3. Interpretation of "Specified Sum" Under Section 269SS:

A critical point of contention was the interpretation of "specified sum" under Section 269SS. The JCIT considered it a residuary term encompassing all cash transactions beyond specified sums, including the sale consideration received by the assessee. The Tribunal, however, referred to the decision of the Chennai Bench in a similar case, which clarified that "specified sum" refers to money receivable as an advance in relation to the transfer of immovable property, not the sale consideration received at the time of registration. The Tribunal found this interpretation consistent with legislative intent to curb black money through cash advances in real estate transactions.

4. Jurisdiction and Procedural Aspects of Initiating Penalty Proceedings:

The assessee also challenged the jurisdiction and procedural correctness of the penalty proceedings. It was argued that the Assessing Officer (AO) did not record satisfaction for initiating penalty proceedings in the assessment order, a requirement under the law. The Tribunal noted that the penalty order did not reconcile with the assessment order regarding any contravention of Section 269SS. The Tribunal emphasized that satisfaction and reference for penalty must be recorded by the AO in the assessment order, citing the Hyderabad Bench's decision as a precedent.

Conclusion:

The Tribunal concluded that the penalty levied was contrary to the provisions of law, primarily due to the incorrect interpretation of "specified sum" and procedural lapses in initiating penalty proceedings. The appeal was allowed, and the penalty was quashed. The judgment underscores the importance of adhering to procedural requirements and correctly interpreting statutory provisions to ensure fair tax administration.

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