Penalty under Section 271D upheld for violating Section 269SS; penalty proceedings valid within limitation period

The ITAT Cochin upheld the penalty under section 271D for violation of section 269SS, ruling that penalty proceedings were initiated and concluded within the prescribed limitation period. The Tribunal rejected the contention that the assessment order initiation was invalid, relying on the jurisdictional HC precedent. It was held that cash sale consideration disclosed during search operations, which was significantly higher than the declared amount, fell within the ambit of section 269SS. The assessee's failure to disclose actual capital gains and reasonable cause led to confirmation of the penalty. The appeal was dismissed, affirming the penalty levy under sections 271D read with 274.

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ISSUES:

Whether penalty proceedings under section 271D are barred by limitation when initiated by the Joint Commissioner of Income Tax (JCIT) after a reference by the Assessing Officer (AO).Whether initiation of penalty proceedings without recording satisfaction by the AO in the assessment order renders such proceedings invalid.Whether receipt of sale consideration in cash at the time of execution and registration of sale deed falls within the ambit of "specified sum" under clause (iv) of Explanation to section 269SS as amended effective from 01/06/2015.Whether acceptance of cash consideration for sale of immovable property after amendment of section 269SS constitutes violation attracting penalty under section 271D.Whether the assessee had reasonable cause for accepting cash consideration in violation of section 269SS, thereby justifying waiver or reduction of penalty.

RULINGS / HOLDINGS:

The penalty proceedings initiated by the JCIT within six months from the date of initiation are not barred by limitation, and initiation by the AO without jurisdiction is inconsequential; the competent authority for penalty under section 271D is the JCIT. The initiation date is the date of notice issued by the JCIT.Absence of recording of satisfaction by the AO in the assessment order does not invalidate penalty proceedings under section 271D when initiated by the JCIT, as the AO is incompetent to initiate such proceedings; the statement in the assessment order regarding initiation of penalty proceedings is "inconsequential".Receipt of sale consideration in cash at the time of execution and registration of the sale deed falls within the meaning of "specified sum" under clause (iv) of Explanation to section 269SS, which includes "any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property".The assessee violated the provisions of section 269SS by accepting cash consideration exceeding Rs. 20,000/- after the amendment effective 01/06/2015, thereby attracting penalty under section 271D.The plea that the major portion of sale consideration was received prior to the amendment and that the balance cash receipt was post facto acceptance does not constitute reasonable cause; concealment of actual sale consideration and failure to disclose capital gains indicate "contemptuous conduct" and no reasonable cause exists to waive penalty.

RATIONALE:

The Court applied the statutory framework of sections 269SS and 271D of the Income Tax Act, 1961, as amended by the Finance Act, 2015, which prohibits acceptance of loans, deposits, or specified sums of Rs. 20,000 or more otherwise than by account payee cheque or bank draft, specifically including sums related to immovable property transactions.The Court relied on binding precedent from the Jurisdictional High Court holding that only the JCIT is competent to initiate penalty proceedings under section 271D, and that initiation by AO is without jurisdiction and thus invalid; the limitation period runs from initiation by the JCIT.The Court distinguished the Supreme Court decision on recording satisfaction in assessment orders, clarifying that it does not address initiation authority or limitation issues relevant here.The Court interpreted the phrase "or otherwise" in clause (iv) of Explanation to section 269SS as inclusive and not restrictive, thereby encompassing cash received at sale deed registration, not limited to advances.The Court applied principles from prior High Court decisions emphasizing the legislative intent to curb black money generation through cash dealings in immovable property transactions and upheld penalty imposition absent reasonable cause, rejecting general or vague explanations unsupported by evidence.The Court noted that concealment of actual sale consideration and non-filing of accurate returns demonstrate "contemptuous conduct," negating claims of reasonable cause under section 273B.

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