Penalty under section 271D not applicable for cash payment during property registration before Sub-Registrar

ITAT Hyderabad held that penalty under section 271D was not leviable where assessee received cash payment of Rs.9,38,000 during property registration before Sub-Registrar. The transaction occurred shortly after amendment came into force, assessee lacked proper legal advice regarding cash receipt restrictions, and suffered loss in the transaction. ITAT ruled that section 269SS provisions apply only to advance payments, not final payments made during registration. Following precedent from ITAT Chennai, the Tribunal found no violation of section 269SS and allowed assessee's appeal against penalty imposition.

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Issues:
Violation of provisions under section 269SS of the Income Tax Act, 1961 regarding acceptance of specified sum of money in relation to transfer of immovable property.

Detailed Analysis:
The judgment involves an appeal by the assessee against a penalty imposed under section 271D of the Income Tax Act, 1961 for receiving the entire sale consideration in cash while selling a property. The assessee contended that the cash was received at the time of registration due to a pressing medical need, and not as an advance. The Commissioner of Income Tax (Appeals) dismissed the appeal, upholding the penalty. The assessee argued that the amendment to section 269SS, effective from 01/06/2015, does not apply to the transaction as the sale took place on 3/7/2015, shortly after the amendment. The assessee also highlighted the introduction of section 269ST and section 271DA by the Finance Act, 2017, which covers purchase of property exceeding two lakhs. The Assessing Officer did not deny the production of the registered sale deed as evidence.

The Department, represented by the learned DR, supported the lower authorities' orders, claiming that even the sale consideration received at the time of registration falls under the provisions of section 269SS. However, it was acknowledged that the cash transaction occurred in the presence of the Sub-Registrar. The Tribunal considered the circumstances, noting that the amendment came into force a month before the sale, and the assessee was not properly advised on the prohibition of receiving cash. The Tribunal also referred to the definition of "specified sum" under explanation (iv) to section 269SS, which was further discussed in a previous case by a Co-ordinate Bench of the Tribunal.

The Co-ordinate Bench's decision emphasized that the provision of "specified sum" under section 269SS applies to advance receivable, not final payments made at the time of registration. The Tribunal, following this precedent, concluded that the cash received by the assessee was not an advance but the final payment made in front of the Sub-Registrar at the time of registration. Therefore, there was no violation of section 269SS, and the penalty under section 271D was deemed not applicable. The Tribunal allowed the appeal raised by the assessee, ruling in favor of the assessee and dismissing the appeal of the Revenue.

In conclusion, the Tribunal allowed the appeal of the assessee, stating that there was no violation of section 269SS in the given facts and circumstances, and therefore, the penalty under section 271D was not leviable. The judgment was pronounced on 5th July 2024.

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