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Judgment
PER SUDHIR KUMAR JM:
The assessee preferred the appeal, challenging the order dated 29-12-2025 passed by the National Faceless Appeal Centre Delhi (in short Ld. NFAC). The Assessing Officer vide his order dated 26-12-2023 levied the penalty under section 271D of the Income Tax Act, 1961(In short “the Act”).
The assessee raised the following grounds in appeal:
1.Penalty order passed by the Assessing Authority u/s 271-D and subsequent Appeal order passed by the First Appellate Authority is illegal and against the facts of the case.
2.Ld. Assessing Authority grossly erred in law in imposing penalty on the cash receipts prior to 01-06-2015. Section 269SS was amended w.e.f.01-06-2015 to induct restrictions on cash payments against sales of immovable property.
3.The Assessee was having reasonable cause u/s 273-B for receiving cash from the purchaser of the property in question. The purchaser of the property was not very much familiar to the seller and to accept further cheques or any mode through bank was risky and may cause loss to the sellers. The property sold was very small and total amount of consideration was only Rs.7,50,000/-, so part payment was accepted in cash. Your good self is requested to delete the huge penalty of Rs.2,75,000/-.
The assessee has moved the application to admit the additional ground raised by the assessee Heard. The application is allowed and the additional ground is admitted for adjudication.
The additional ground raised by assessee as under:
4.That in the case of sales of Residential Property involved partly cash payments during the financial year 2016-17 covers section 269St not the Section 269SS of the I.T. Act, 1961. But Section 269ST came into effect from 01-04-2017 hence not applicable in this case. Section 269SS of the I. T. Act is not applicable when final payment is received for registration of sales of residential property.
The brief facts of the case are that the information has received from the DIT(I&CI) New Delhi that Sh. Vipin Khandelwal has sold the property bearing no. B-874, Mahawar Nagar K.M. Pur, New Delhi on 11-09-2016 vide sale deed no.3074. The property was sold for a consideration of Rs.7,50,000/- and out of which the first party Rajender Kumar and Sh. Vipin Khandelwal received cash of Rs.5,50,000/-. The Assessing officer has sent the proposal to initiate the penalty proceedings u/s 271 D of the Act for violating the section 269SS of the Act. Accordingly, show cause notice was issued to the assessee. The Assessing Officer after considering the submission submitted by the assessee levied the penalty of Rs.2,75,000/- under section 271D of the Act for the violation of provisions of section 269SS of the Act which is equal to 100% of specified sum received by the assessee as sale consideration in cash for transfer of property.
Being aggrieved with the order of the AO, the assessee filed the appeal before the Ld. NFAC, who vide his order dated 29-12-2025 dismissed the appeal of the assessee. The Ld. NFAC has observed in his order as under:
2.2Therefore, assessee has controverted provisions of section 269SS and is liable for penalty u/s 271D. The meaning of section 271D is very clear. If a person takes or accepts any loan or deposit in contravention of the provisions for section 269SS, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. Once it is established that there is a violation of section 269SS, the penalty is mandatory and so is the amount of penalty.
2.3In view of the above facts and legal provisions it is clear that the provision of section 269SS of the Income Tax Act, 1961 have been violated by the assessee by accepting sale consideration of Rs.2,75,000/- in cash, being specified sum u/s 269SS and accordingly assessee is liable for penalty u/s 271D of the Income Tax Act, 1961. Therefore, I am satisfied that it is a fit case for levy of penalty under section 271D of the Income Tax Act, 1961. Accordingly, penalty of Rs.2,75,000/- is imposed u/s 271D for violation of provisions of section 269SS which is equal to 100% of amount of specified sum received by the assessee
The penalty levied of Rs.2,75,000/- u/s 271D of the Income Tax Act, 1961 is confirmed.
Aggrieved the order of the Ld. NFAC, the assessee is in appeal before the tribunal.
The Ld. AR of the assessee submitted that the penalty against the cash receipt of consideration for the sale of property can be levied under section 269ST not the section 269SS of the Act. He also submitted that penalty can be imposed under section 271DA of the Act not the 271D of the Act. Reliance is placed the Judgment of the Hon’ble Supreme Court in the case of Rbanms Educational Institution vs. B. Guna Shekar AIR 2025 page 2065 in the this case The Hon’ble Supreme Court held as under:
18.1.Further, through the averments made in the plaint and in the agreement, the respondents/plaintiffs have claimed to have paid huge sum towards consideration by cash. It is pertinent to recall that Section 269ST of the Income Tax Act, was introduced to curb black money by digitalising 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:
Budget Speech:
“VII. DIGITAL ECONOMY
111.Promotion of a digital economy is an integral part of Government’s strategy to clean the system and weed out corruption and black money. It has a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. This, in turn, is expected to energise private investment in the country through lower cost of credit.
India is now on the cusp of a massive digital revolution. …..
Promoting Digital Economy
162.The Special Investigation Team (SIT) set up by the Government for black money has suggested that no transaction above Rs.3 lakh 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 271DA 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.
When a suit is filed claiming Rs.75,00,000/- paid by cash, not only does is create a suspicion on the transaction, but also displays, a violation of law. Though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:
(A)Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any, (B) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law, (C) Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action, (D) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs. 2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions.
In light of the above discussion, we are of the firm view that the plaint ought to have been rejected under Order VII Rule 11(a) and (d) CPC. Hence, the orders passed by the High Court as well as the trial Court rejecting the application filed by the appellant, cannot be sustained in law and deserve to be set aside. CONCLUSION
In fine,
This appeal is allowed.
The impugned judgment of the High Court dated 02.06.2022 and the order of the trial Court dated 11.06.2021 are set aside.
As a sequel, the application filed under Order VII Rule 11(a) and (d) CPC is allowed.
The plaint in O.S. No. 25968 of 2018 pending on the file of XIII Additional City Civil and Sessions Judge, Mayohall Unit, Bengaluru, is rejected.
The directions given by us in paragraph 18.1 of this judgment shall be intimated by the Registrars of the High Courts, the Chief Secretaries of the States/Union Territories and the Principal Chief Commissioner of Income Tax Department to the District Judiciary, the officials of the registration department and the jurisdictional officers under the Income Tax Department respectively, so as to facilitate the conduct of periodical audit.
The parties shall bear their respective costs throughout the proceedings.
Miscellaneous Application(s), if any, shall stand disposed of.
The Registrar (Judicial) is directed to circulate a copy of this Judgment to the Registrar General of all the High Courts, the Chief Secretaries of all the States / Union Territories, and the Principal Chief Commissioner of Income Tax Department, enabling them to communicate the directions issued by this Court for strict compliance.
Ld. DR submitted that the assessee has received the consideration in cash for the sale of the property in the violation of the section 269SS of the Act. He further submitted that the penalty was rightly levied. He relied the orders of the lower authorities.
We have heard the parties and gone through the material available on record. The specified sum has been defined in 269SS explanation (iv) of the Act which is under “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 take place.
The additional ground raised by assessee has no force because if the cash has been received by the assessee in relation to transfer of immovable property that is punishable under section 269SSof the Ac not the section 269ST of the Act as stated by the Ld. AR of the assessee. Additional ground raised by the assessee is decided against the assessee.
It is stated by the Ld. AR that the penalty is levied for the A.Y. 2017-18 while the sum specified was received for the A.Y.2016-17 relevant to Financial Year 2015-16. In the order the Assessing officer observed that the provision of section 269SS of the Act were amended with effect from 01-06-2015 to provide that no person shall accept from any person any loan or deposit or any sum of money whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more. According to Assessing Officer the assessee was received the cash of Rs.2,50,000/- with joint owner after 01-06-2015 to 11-08-2015 but the Assessing Officer levied the penalty of the total cash which was also received before the amend of the Act. The Assessing Officer may impose the penalty of Rs.1,25,000/- (50% of Rs.2,50,000/-) under section 269SS of the Act. This fact is also not considered by the Ld. CIT(A) that the assessee did not receive the total cash amount after the amendment of the Act. It is also evident to the order of the Assessing Officer that the cash was received by the assessee for the A.Y. 2016-17 between the 11-03-2015 to 11-08-2015 and the sale deed was executed on 05-09-2016 and in financial year 01-04-2016 to 31-03-2017 relevant A.Y. 2017-18 the assessee has not received and cash for consideration and the penalty cannot be imposed for the A.Y.2017-18. The penalty for the A.Y. 2017-18 is levied by the Assessing Officer is bad in law and liable to be deleted. We, therefore, set aside the order of the Ld. NFAC and direct the Assessing Officer to delete the penalty so levied. Grounds raised by the assessee are allowed.
In the result the appeal of the assessee is allowed.