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Judgment
This assessee’s appeal for Assessment Year 2023-24 arises against the Commissioner o f Income Tax(Appeals)-27’s order dated 14.11.2025, passe d order No. 10036/2022-23, involving proceedings u/s 271D of the Income Tax Act, 1961; hereinafter referred to as, “the Act” .
Heard both the parties at length. Case file perused.
Coming to the sole substantive issue between the parties herein, we note that the learned CIT(A) as confirmed the Assessing Officer’s findings levying section 271D penalty of Rs. 75 lakhs in order dated 24.09.2024; reading as under:
cash. And another property situated at Global Foyer, Sec-43, Gurugram belonging to the appellant, was sold to M/s Raj Lakshmi Enterprises Pvt. Ltd. For an aggregate consideration of Rs.3,84,97,500/- where Rs. 50 Lakh was allegedly paid in cash.
4.4Further the AO found some whatsapp chats and on the basis of stray statement recorded by employees, held that the appellant had received a sum of Rs.75,00,000/- in cash against sale of above mentioned properties. Accordingly the AO added a sum of Rs. 75,00,000/- u/s 48 of the Act on account of Long Term Capital Gain to the total income of the appellant. Accordingly, the AO initiated the penalty proceedings and imposed the penalty of Rs. 75,00,000/- u/s 271D of the IT Act, 1961 for the year under consideration.
Appellant Decision
5.Ground No. 1&2: The appellant has submitted that Considering the facts and circumstances of the case, the impugned penalty order passed by the Learned Assessing Officer (Ld. AO) under Section 271D of the Act, imposing a penalty of Rs 75,00,000, is fundamentally flawed and liable to be set aside. The Ld. AO has erred both in law and on facts by initiating and concluding penalty proceedings without satisfying the jurisdictional prerequisites mandated under the Act. The absence of proper jurisdiction vitiates the entire penalty proceedings, rendering the order null and void in the eyes of the law.
5.1This contention of the appellant has been perused yet not found acceptable as the Ld AO has due jurisdiction as per the provisions of the Act. Further the appellant has failed to specify which jurisdictional condition has not been satisfied. I am of the considered opinion that appellant is merely raising these contention to avoid the penalty without any supporting details and evidences. Mere claims without supporting evidences are hollow averments which cannot be accepted. Accordingly, this ground of appeal is hereby dismissed.
6.Ground No. 3, 4 & 5 : These grounds of appeal are inter-related and have been raised against the impugned penalty order imposing penalty of Rs. 75,00,000/- for the alleged violations of provisions of section 269SS of the Act.
6.1The appellant submitted that the computation of alleged money (in cash) by the Learned A.O. lacks a rational basis and has been determined arbitrarily without substantiating the transactions in which the appellant purportedly received such amounts or identifying the parties involved. The penalty proceedings solely relied on third-party digital data (snapshot of WhatsApp chats) and statements of an employee of Globus Spirits Limited named Sh. Rajesh Kumar, without any conclusive finding or independent verification of the actual cash payer (ie. Mrs. Garima Lalwani). Further, based on assumptions and presumptions drawn from digital records and statements from an employee, without any corroborative documentary evidence, cannot hold legal validity. Furthermore, the alleged payers have not been examined or cross-examined, which is based purely on conjecture and surmise rather than substantive proof.
6.2A search and seizure action u/s 132 of the I.T. Act was conducted on the premises of the appellant on 30.01.2023. Assessment proceedings under section 143(3) of the Act were initiated by issuing notice u/s 143(2) and 142(1) of the Income Tax Act and the appellant submitted replies. During the year under consideration the appellant derived income from salary, house property and capital gains.
6.3During the post-search investigation, the AO noted that an immovable property situated at Unit No. DG A-09-21 & A-09-22, 9th Floor Digital Greens, Sector-61, Gurgaon, Haryana, belonging to Mrs. Madhavi Swarup and the appellant, was sold to Mrs. Garima Lalwani for an aggregate consideration of Rs. 2.55 Cr, with Rs. 2.05 Cr paid through cheque and Rs. 50 Lakh was paid in cash. And another property situated at Global Foyer, Sec-43, Gurugram belonging to the appellant, was sold to M/s Raj Lakshmi Enterprises Pvt. Ltd. For an aggregate consideration of Rs.3,84,97,500/- where Rs. 50 Lakh was received in cash. Further the Ld. AO on the basis of some vague whatsapp chats and on the basis of stray statement recorded by employees, held that the appellant had received a sum of Rs.75,00,000/-in cash against sale of above mentioned property. Accordingly the Ld. AO added a sum of Rs. 75,00,000/- u/s 48 of the Act on account of Long Term Capital Gain to the total income of the appellant.
6.4The appellant during the instant proceedings has submitted that the addition made solely on the basis of an assessee's agreement, without legal backing under the Act, is unsustainable and must be deleted.
6.5This contention of the appellant has been perused yet found to be devoid of any merit because addition to the income of the appellant has not been merely made on account of surrender of income by the appellant. During the search proceedings various incriminating evidences were found and seized which suggested that income chargeable to tax has escaped assessment. For the sake of the principle of natural justice the appellant was given various opportunities to explain the said escaped income with documentary evidences. In absence of any reply and documentary evidences to counter the additions proposed by the Ld AO, the appellant accepted that the instant income had escaped assessment and offered the same for taxation.
6.6Further, the appellant has submitted that it is evident that the Ld AO has largely considered only the WhatsApp chat. However, such information or material is not said to be incriminating in nature and the Whatsapp chat is not considered to be conclusive evidence to establish the receipt of Rs.75,00,000/- in cash for sale consideration towards the sale of the above-mentioned property.
6.7The abovementioned contention of the appellant has been considered. On perusal of the assessment records it is noted that during the search proceedings it was found that an immovable property situated at Unit No DG A-09-21 & A-09-22 9th Floor Digital Greens, Sector-61 Gurgaon, Haryana belonging to Mrs Madhvi Swaroop and the appellant was sold to Garima Lalwani for an aggregate consideration of Rs.2.55Cr, wherein 2.05Cr was paid through Cheque and rest amount Rs.50Lacs was paid in cash. And another property situated at Global Foyer, Sec-43 Gurugram belonging to the appellant was sold to M/s Raj Lakshmi Enterprises Pvt. Ltd. For an aggregate consideration of Rs.3,84,97,500/- where Rs. 50 Lakh was received in cash. This element of cash corroborated from the whats app chat between Shri Rajesh Kumar and Ajay Kumar Swarup. Further, the Cheque amount was corroborated with the copy of Sale deed of the said properties. Further, this fact was also corroborated with the statement u/s131(1A) of the Act of Shri Rajesh Kumar who also admitted that cash of Rs.50,00,000/- on each property was received on sale. Further it is pertinent to mention that appellant also during the assessment proceedings accepted that it had received the cash component.
6.8All the above discussed facts clearly establish the fact that the addition is not merely made on the basis of the what's app chat. Ld AO had enough evidences and findings in possession of itself to establish the fact that the appellant had received cash amounting to Rs.75,00,000/- in lieu of sale of properties which was not offered for taxation. Hence, the instant contention of the appellant is hereby rejected being devoid of any merit.
6.9With regard to levying of penalty u/s 271D it is pertinent to mention here that The Finance Act 2017 introduced Section 269SS to restrict cash transactions exceeding two lakh rupees and Section 271D to impose penalties for violations. The legislative intent was to curb black money and promote digital transactions. It is pertinent to recall that Section 269SS of the Act, was introduced to curb black money by digitalizing the transactions above Rs. 2,00,000/- and contemplating equal amount of penalty under Section 271DA of the Act. As per the said provisions, action is to be taken on the recipient. However, there is also an onus on the plaintiffs to disclose their source for such huge cash. The Central Government thought it fit to cap the cash transactions and move forwards towards digital economy to curb the dark economy which has a drastic effect on the economy of the country. It will be useful to refer to the Budget Speech during the introduction of the Finance Bill, 2017 and the extract of the memo presented with the Finance Bill, 2017, which lay down the object:
"The Special Investigation Team (SIT) set up by the Government for black money has suggested that no transaction above Rs.3 lakhs should be permitted in cash. The Government has decided to accept this proposal. Suitable amendment to the Income-tax Act is proposed in the Finance Bill for enforcing this decision."
Extract from Memo of Finance Bill, 2017
"Restriction on cash transactions
In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating are source crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.
In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more, — (a)in aggregate from a person in a day; (b)in respect of a single transaction; or (c)in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office, savings bank or co-operative bank. Further, it is proposed that such other persons or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.
It is also proposed to insert new section 271D in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.
It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees. These amendments will take effect from 1st April 2017." However, when the Bill was passed, the permissible limit was capped under Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs."
Penalty for failure to comply with the provisions of section 269SS.
271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.
(2)Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner:
6.10In the instant case, the appellant, by accepting cash (of more than 2 lakhs in a single transaction) from its various parties, had (a) flouted the provisions of section 269SS of the Act and (b) defeated the entire purpose of the legislative behind inserting such provisions. But appellant had failed to do so therefore as per the provisions of the Section 269SS, action is to be taken on the recipient. As it is the duty of the recipient i.e. appellant company, not to accept any amount equal to or more than Rs. 2,00,000/- in cash from various parties.
6.11There is proviso in the section 271D that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention. Burden is on assessee to prove reasonable cause—Burden is not discharged—Levy of penalty under section 271D is held to be justified. "Dismissing the appeal the Court held that none of the facts contended or proved by the assessee would constitute a valid explanation or reasonable cause coming within the purview of Section 273B. The mere proof that the loans were repaid through cheques drawn in the name of the lenders or that there was no attempt to induct black money into the business, itself could not be considered as a reasonable cause or as a compelling circumstance under which the mandate of Section 269SS could be violated. It could not be termed as a reasonable cause contemplated under Section 273B to condone the violation. Accordingly, the order imposing the penalty was confirmed. - [ Listin Stephen v. DCIT (2019) 418 ITR 524 (Ker.)]."
Assessee had received loan/deposit through non-banking mode, in contravention of section 269SS but could not provide reasonable cause for such contravention, Tribunal was not justified in deleting penalty. "On perusal of book entries of assessee firm, Assessing Officer noted that assessee had received loans/deposits to extent of Rs. 46 lakh through non-banking channel in contravention of section 269SS and consequently levied penalty under section 271D. Assessee submitted that said entries arose out of normal day to day business transactions and, they were not in nature of loan or deposit so as to attract provision of section 269SS. Once any amount received by assessee had been shown in its books of account, it partakes nature of deposit. Since assessee could not prove that it had a reasonable cause which had occasioned above contravention to get any advantage under section 273B, Tribunal was not justified in deleting penalty. In view of the aforesaid facts and circumstances, the breach of section 269SS is apparent making the respondent-assessee liable for penalty under section 271D. [In favour of revenue] (Related Assessment year: 1994-95) - [CIT, Kanpur v. Sunil Sugar Co. (2017) 85 taxmann.com-254 : TS-353-HC-2017 (All.)]".
Further, with respect to give opportunity for cross examination, it is pertinent to mention that statement of Sh. Rajesh Kumar has been recorded under oath u/s 132(4) of the Act wherein he had explained the content of the seized material and admitted that the appellant has accepted part consideration in cash. The appellant denied to have any transactions and to have paid any cash and stated that no cross examination was provided with Sh Rajesh Kumar. Right to cross-examine flows from the principles of Natural Justice that evidence may not be read against a party until the same has not been subjected to cross- examination or at least an opportunity has not been given for cross examination. Thus, the provisions of section 138 of Indian Evidence Act are not only a technical rule but it is a rule of essential justice.
As a general rule, the right of cross-examination should be given to the appellant to uphold the principle of natural justice under the Income Tax proceedings. However, it is also a settled position of law that the technical rules of Indian Evidence Act are not applicable to Income-tax proceedings. Further, according to Section 56 of the Indian Evidence Act, 1872, the facts of which the Court will take judicial notice need not be proved. Simply put, any judicially noticeable fact does not require to be proven before the Court. This position, therefore, is required to be understood in the light of the facts of the case. In this case, a search and seizure action had taken place which unearthed several incriminating documents. Based on these documents, a statement on oath was recorded under section 132(4) of the Act. It is settled position of law that the statement recorded during the Search & Seizure action u/s 132(4) has substantial evidentiary value. Therefore, the evidence so gathered is judicially noticeable. Accordingly, as per section 56 of the India Evidence Act, there is no legal requirement for providing further opportunities to the appellant. Accordingly, the contention of the appellant is legally untenable.
Further, requirement of opportunities for cross-examination is to ascertain the real facts. Then it goes back to ascertain who has the primary onus to establish or bring out the facts, especially in proceedings relating to Search and Seizure action. Further, in a Search and Seizure case, Section 132(4A) of the Act creates a presumption that all the books of accounts, documents and valuables found during the search belongs to person found in possession or control of such items and the contents thereof are true and properly stamped. Basically, it provides the presumptions of ownership of books of accounts, documents, assets found during the course of Search. Accordingly, in respect of the details found out/ascertained during the Search in the case of the appellant, the presumption is against the appellant. In brief, under Section 132(4A), presumption, albeit rebuttable, is that, the books of account and other documents belong to the person searched, the contents are true and accurate, the signatures and attestations on documents are genuine. Accordingly, as per section 132(4A) of the Act, the burden is on the appellant on whose case the Search action has taken place to establish that the presumptions are untrue. However, apparently, the appellant has not discharged the onus. Accordingly, the Department is not due to provide the cross
The Revenue vehemently submits in this factual backdrop that it stands very well proved that the assessee had indeed received the corresponding on-money component herein amounting to Rs. 75lakhs going by the relevant seized material found during the course of search.
The assessee, on the other hand, takes us to the relevant findings in the above extracted lower appellate discussion that all what the learned lower authorities have referred in the statement u/s 131(1)A of the Act wherein Shri Rajesh Kumar admitted the impugned on-money payment as forming part of the property transaction. We sought to know as to whether there is any specific material found/seized from the assessee herself or against her to the very effect or not. There is no such indication forthcoming in the department’s favour which could support the on-money allegations against the assessee in the Assessing Officer order as well as in the lower appellate discussion. So far as such a statement admitting on-money payment is concerned, we quote the CBDT’s landmark circular issued wayback on 10.01.2003 that such an admission even made during search/survey does not carry any significance. We thus conclude in this factual backdrop that the impugned penalty of Rs. 75 lakhs u/s 271D of the Act levied in the assessee’s hands based on a mere admission is not sustainable in law. The same is directed to be deleted in very terms.
All other remaining pleadings between the parties stand rendered academic.
This assessee’s appeal is allowed.