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TMI Blog2025 (2) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to transfer of immovable property viz., who actually receives the monies in his own independent right. We are therefore unable to countenance the Revenue's argument that even a broker, who receives from a principal and immediately pays the monies to the other principal, shall be regarded as 'recipient' of monies in relation to transfer of immovable property. We also find that there is a 'reasonable cause' as mandated u/s 273B of the Act, as 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 immoveable property, whereas the MoU pursuant to which the advances were paid, in the present case, admittedly was entered into on 03.07.2014 viz., prior to the introduction of the aforesaid amendment, we agree with the Ld. AR that this amendment would not have come to the knowledge of the assessee who is a middle man having elementary education and no knowledge of tax laws. Assessee would have not been under a belief that there was any contravention of any provision of the Act. Further, since the assessee was only the middleman and was never the recipient of the monies in real sense, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on 03.07.2014, in terms of which the assessee was engaged to liaison and negotiate the acquisition of land on his behalf. The said document also contained the terms of payment. Since these documents inter alia related to the assessee, the AO made post search enquiries from him and his statement was recorded u/s 131 of the Act on 06.06.2018. The assessee is noted to have explained that, he was a middleman who was negotiating the purchase of 2.65 acres of land for Shri M. Vedamurthy from many sellers i.e. small land owners. He further stated that, Shri M. Vedamurthy had paid aggregate sum of Rs. 7.35 crores, out of which Rs. 6.10 crores were paid in cash, which the assessee would immediately handover to the land brokers in the presence of Shri M. Vedamurthy. The assessee further explained that, since he was only the middleman and the advance was paid by Shri M. Vedamurthy through him immediately to the land brokers, these amounts were not shown in his accounts. The assessee further offered commission income of Rs. 85,00,000/- in AY 2016-17 for facilitating this transaction. The assessee is noted to have also submitted that, this particular acquisition of land by Shri M. Vedamurthy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 lacs Rs. 2.05 Crs. & Rs. 1.85 Crs. in AYs 2016-17, 2017-18 & 2018-19 respectively, in violation of Section 269SS of the Act. After considering the explanation put forth by the assessee, the Addl. CIT is noted to have not levied any penalty upon the assessee for violation of Section 269SS of the Act in AY 2016-17, as done in AYs 2017-18 & 2018-19, which are impugned before us. 7. In the orders impugned in the present appeal, the Addl. CIT is noted to have referred to the MoU dated 03.07.2014 between the assessee [first party] and Shri M. Vedamurthy [second party], husband of Dr. Maya Vedamurthy, who was searched on 02.03.2018. According to the Addl. CIT, Shri M. Vedamurthy had paid cash of Rs. 6,10,00,000/- towards purchase of the land parcel to the assessee, which the latter had also accepted in his sworn statement dated 27.06.2018. Taking note of the details of the schedule of payments given by the assessee, the Addl. CIT observed that the assessee was in receipt of cash of Rs. 2.05 crores and Rs. 1.85 crores in AYs 2017-18 & 2018-19 respectively. According to the Addl. CIT, the receipt of this sale consideration fell within the meaning of 'specified sum' as defined in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered by the assessee in this land dealing had been accepted and assessed to tax by the Revenue. The Ld. AR accordingly submitted that, the advance paid by Shri M Vedamurthy through the assessee to the land brokers for the small land owners cannot be regarded as 'advance received towards sale consideration' by the assessee, as wrongly held by the lower authorities to subject the assessee to the rigors of Section 269SS of the Act. The Ld. AR accordingly contended that the impugned penalty ought to be set aside. 10. On the other hand, the Ld. DR appearing for the Revenue supported the order of the lower authorities. He particularly relied upon the findings rendered by the Ld. CIT(A) holding that, even if the recipient was not the buyer or seller in the transaction involving transfer of immovable property, then also such recipient would be liable to the rigors of penalty u/s 269SS of the Act, in absence of any such exception being laid down the said provision. 11. We have heard both the parties and perused the material placed before us. Before adverting to the facts of the case, let us first have a look at the relevant penal provisions of Section 269SS, which is in dispute before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bank from its member; or (b) such loan is taken from a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member.] Explanation.-For the purposes of this section,- (i) "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (ii)"co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; (iii)"loan or deposit" means loan or deposit of money; (iv) "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." 12. Reading of the above provision shows that the prohibition postulated in this provision applies to a person who accepts from another person any loan or deposit or specified sum otherwise than by an account-payee cheque or account-payee bank draft. The provisions are not absolute. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the buyer and immediately handed over the same to the seller will not make him the recipient of the 'specified sum' as neither the sum of money was receivable by him nor is it an advance given to him nor is he the transferor of the immoveable property. Thus, in light of the foregoing analogy we can say that the liability on account of the violation of section 269SS cannot be fastened on the servant or the agent. Accordingly, the inference drawn by the Ld. CIT(A) that, any and all parties to a transaction of transfer of immoveable property, including brokers, would be liable to the rigors of Section 269SS of the Act, cannot be countenanced. In our considered view, only the person who is the owner of the advance or monies received in relation to transfer of immoveable property can be subjected to the rigors of Section 269SS of the Act. 14. The above view can further be verified by examining the proviso of section 271D which provides that if a person takes or accepts any loan or deposit or specified sum in contravention of section 269SS then he shall be liable to pay, by way of penalty, a sum equal to the amount of loan or deposit or specified sum so taken or accepted. If a serva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration with the land owners for and on behalf of the buyer and ensure smooth transfer of title from the sellers to the buyer. The relevant clauses of the MoU, as taken note of by us, is as follows: a) "The First Party is primarily a real estate business person who has been dealing with properties all over Tamilnadu. The First Party is well versed with the process of mediation and liaison for identifying and acquiring major extents of lands owned in different parcels by various parties and to make the said lands into a composite land. b) The Second Party is interested in purchasing a property measuring about 2 acres 65 cents in Siruseri Village, Thiruporur taluk and developing the same, since the Second Part finds it as a prospective option of investment in view of the remarkable progress of developments happening in and around the said area. c) The First Party has identified the said lands and offered the same to the Second Party and the Second Party has physically inspected the said lands with due diligence and considered all necessary factors for finalising the purchase of the said lands. The Second Party has decided to allot the scope of necessary mediation and liaiso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty at Siruseri village as per MOU dated 03.07.2014 to till date. Ans. Out of Rs. 7.35 crores, I have received an amount of Rs. 6.10 crores in cash from Shri.M.Vedamurthy. Though I used to give acknowledgement for receipt of cash, I immediately handed over the cash to the land brokers in presence of Sri.M.Vedamurthy." 19. Further, as noted from the facts discussed in the preceding paragraphs, even the Revenue had acknowledged and accepted the assessee to be a land broker and had assessed the commission income offered by him to tax in AY 2016-17. Hence, we find merit in the Ld. AR's plea that the Revenue cannot blow hot and cold at the same time i.e. tax the commission income on one hand and thereafter treat the assessee to be the owner of the purported 'specified sum' and levy penalty as well. We also note that the Revenue has not disputed the fact that, the impugned land in question was not owned by the assessee. Further, pursuant to the MoU, the assessee had attempted to obtain the land parcels for Shri M Vedamurthy but ultimately the transaction did not go through and that the monies were refunded. This fact is noted to have been stated by the assessee in his sworn statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciate that the provision would apply 'in relation to transfer of immovable property' and that is broad enough to encompass not only vanilla transaction of buy & sell of immovable property, but even extinguishment of rights in immovable property viz., where occupier or tenant is vacated therefrom, or where there is a longterm lease in the nature of 'transfer' between lessor and lessee etc., Hence, there can be several situations of transfer of immovable property which can be envisaged, apart from simple conveyance of immovable property between a buyer and seller. The provisions of Section 269SS would apply to recipient of monies in relation to transfer of immovable property viz., who actually receives the monies in his own independent right. We are therefore unable to countenance the Revenue's argument that even a broker, who receives from a principal and immediately pays the monies to the other principal, shall be regarded as 'recipient' of monies in relation to transfer of immovable property. 22. Further, on the facts of the present case, we also find that there is a 'reasonable cause' as mandated u/s 273B of the Act, as Section 269SS of the Act was amended by the Finance Act 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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