2025 (9) TMI 354 - AT - Income Tax

Penalty under s.271D for alleged breach of s.269SS deleted where cash receipt not conclusively proved

ITAT DELHI - AT held that penalty under s.271D for alleged breach of s.269SS cannot be sustained because receipt of Rs.26,50,000 in cash by the assessee ... Levy of penalty u/s. 271D - violation of provisions of section 269SS being cash payment made - cash payment for property bearing third floor of the house and one shop at ground floor HELD THAT:- Assessee denied having received cash of Rs. 26,50,000/- and the JCIT has not examined either Shri Suraj Bhan Gupta, the purchaser or the builder, Shri Arun Mittal and Ajay Gupta. In the peculiar facts of this present case, we are of the view that it is not conclusively proved that the assessee has received the above-mentioned cash. Even otherwise, as per the practice in housing industries, the builders normally do construction work of the old houses after demolishing the same and retain one portion or so. This has been conclusively proved by the collaboration agreement entered by late Shri Nanak Chand, the assessee and the builder Shri Arun Mittal and Ajay Gupta. Assessee received cash has not been conclusively proved, so the penalty u/s. 271D of the Act for violation of provisions of section 269SS of the Act cannot be levied. Hence, we delete the penalty and allow the appeal of the assessee. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal should condone a 47-day delay in filing the appeal given the assessee's infirmity and subsequent death, where the departmental representative raised no substantive objection to the factual basis for delay. 2. Whether penalty under section 271D can be sustained where the penalty is predicated on alleged cash receipts in contravention of section 269SS, but (a) a collaboration agreement shows transfer/retention arrangements between the owner and builder, (b) construction and allotment by the builder are admitted, and (c) the assessee denies receipt of the recorded cash consideration and the Revenue has not examined the alleged payors or purchasers. 3. Whether, on the facts, the Revenue discharged the burden of proving that cash payment was in fact received by the assessee so as to attract penalty under section 271D for violation of section 269SS. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal Legal framework: The Tribunal may condone delay in filing appeal where sufficient cause is shown; facts and circumstances of incapacity, illness and death of an appellant or principal are relevant considerations. Precedent Treatment: No specific judicial precedents were cited in the judgment; the Tribunal applied established discretionary principles governing condonation of delay. Interpretation and reasoning: The Tribunal accepted the undisputed factual account that the assessee was elderly (about 80 years) with infirmities and subsequently died on 16.10.2023; the departmental representative did not controvert these facts. Given absence of opposition and the nature of the incapacity, the Tribunal exercised discretion to condone the 47-day delay. Ratio vs. Obiter: Ratio - The Tribunal's condonation is a binding application of discretionary standards to the facts; it is operative only as applied to these factual circumstances. Obiter - None relevant beyond applying established discretion. Conclusion: Delay of 47 days in filing the appeal was condoned. Issue 2 - Applicability and sustainment of penalty under section 271D for alleged contravention of section 269SS Legal framework: Section 269SS prohibits acceptance of specified cash payments in excess of statutory limits for certain transactions; section 271D provides penalty for contravention of section 269SS. For imposition of penalty under section 271D, the Revenue must establish that the assessee accepted cash in contravention of section 269SS. Precedent Treatment: The Tribunal did not rely on or distinguish any precedents; analysis proceeded from statutory requirements and evidentiary standards. Interpretation and reasoning: The Tribunal examined the documentary and factual matrix: (i) a collaboration agreement dated 31.01.2015 existed between the assessee and the builder which contemplated demolition and reconstruction with specified allotments to the builder (including the third floor and a shop) in lieu of construction, (ii) construction was carried out by the builder who retained the builder's allotted portions, and (iii) the sale deeds recorded cash consideration of Rs. 26,50,000 but the assessee (an illiterate person) denied receipt of any cash and had lodged complaints with police - facts demonstrating bona fides though the police complaints had no direct evidentiary bearing on penalty. Critically, the Revenue did not examine essential third parties (the alleged purchasers and the builders) to establish that cash was in fact paid to the assessee or received by him. The Tribunal observed industry practice wherein builders undertaking reconstruction retain portions as per collaboration agreements and then register transfers in favour of purchasers; in those circumstances, the mere recitation of cash consideration in sale deeds, without independent proof of receipt, is insufficient to sustain a penalty under section 271D. Ratio vs. Obiter: Ratio - Where a collaboration agreement and corroborative evidence show that allotment/transfer to a builder was in lieu of construction, and where the Revenue fails to adduce direct evidence proving actual cash receipt by the assessee (e.g., examination of alleged payors/purchasers or bank/cash trail), penalty under section 271D cannot be sustained merely on recorded consideration in sale deeds. Obiter - Observations about customary practices in the housing industry and the assessee's illiteracy are contextual factors supporting factual conclusions but are not generalized legal propositions. Conclusion: The Revenue failed to conclusively prove that the assessee received the recorded cash consideration in contravention of section 269SS; therefore penalty under section 271D was deleted and the appeal allowed. Issue 3 - Burden and standard of proof for imposition of penalty under sections 269SS/271D Legal framework: The statutory scheme places on the Revenue the onus to prove violation of section 269SS before imposing penalty under section 271D; proof must be convincing and not speculative. Precedent Treatment: No case law was applied or overruled; the Tribunal relied on evidentiary principles implicit in penalty proceedings. Interpretation and reasoning: The Tribunal emphasized that the mere recital of cash consideration in sale deeds does not substitute for affirmative proof of cash receipt by the assessee. Where alternate documentary evidence (collaboration agreement) explains the transaction as allotment/transfer in lieu of construction, and where the Revenue omits to examine available witnesses/parties who could demonstrate payment, the statutory threshold for penalty is not met. The assessee's complaint to police was considered as relevant to his bona fides, though not determinative; absence of direct testimonial or documentary evidence of cash receipt was fatal to the penalty case. Ratio vs. Obiter: Ratio - For penalties under section 271D predicated on section 269SS violations, the Revenue must adduce conclusive evidence of actual cash receipt by the assessee; absence of such proof requires deletion of penalty. Obiter - The Tribunal's reliance on the assessee's illiteracy and industry practice serves to explain facts but is not an independent legal requirement. Conclusion: The statutory burden of proof on the Revenue was not discharged; penalty could not be imposed. Cross-references and interplay between issues Issues 2 and 3 are interlinked: the determination that the Revenue did not conclusively prove cash receipt (Issue 3) is the decisive factual and legal basis for concluding that penalty under section 271D is unsustainable (Issue 2). Issue 1 (condonation of delay) is procedural and was resolved in favour of allowing the substantive appeal to be heard on merits.