Genuine property sale and defective notice defeated penalty under the Income-tax Act.

Penalty under section 271D was unsustainable where cash formed part of a genuine, registered property sale, the consideration was fully disclosed, and no sham or unaccounted money was shown; the assessee's bona fide conduct and practical payment difficulty supported relief, so the penalty failed on merits. The proceedings also failed because the notice referred to section 271DA read with section 269ST, while the penalty was ultimately imposed under section 271D for an alleged section 269SS breach; the mismatch was a defect going to the root of jurisdiction. The penalty demand was deleted.

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Issues: (i) Whether penalty under section 271D of the Income-tax Act, 1961 was sustainable where cash formed part of the consideration of a genuine and fully disclosed sale transaction; (ii) Whether the penalty proceedings were vitiated by the mismatch between the notice referring to section 271DA read with section 269ST and the penalty ultimately imposed under section 271D for alleged contravention of section 269SS.

Issue (i): Whether penalty under section 271D of the Income-tax Act, 1961 was sustainable where cash formed part of the consideration of a genuine and fully disclosed sale transaction.

Analysis: The transaction was a completed registered sale of property, the consideration was partly received through banking channels and partly in cash, and the entire receipt was disclosed in the return of income. The record did not show that the sale was sham or that any unaccounted money was introduced. The circumstances indicated a bona fide transaction with practical difficulty in payment, and the assessee had offered the relevant income to tax.

Conclusion: Penalty under section 271D was not sustainable on merits and the issue was decided in favour of the assessee.

Issue (ii): Whether the penalty proceedings were vitiated by the mismatch between the notice referring to section 271DA read with section 269ST and the penalty ultimately imposed under section 271D for alleged contravention of section 269SS.

Analysis: The notice did not correspond to the statutory provision on which the penalty was ultimately founded. The discrepancy showed that the notice itself was not in conformity with the Income-tax Act, 1961, and the defect went to the root of the penalty proceedings.

Conclusion: The penalty proceedings were vitiated by the defective notice and this issue also was decided in favour of the assessee.

Final Conclusion: The penalty was unsustainable both on merits and for want of a valid statutory notice, resulting in deletion of the penalty demand.

Ratio Decidendi: Penalty for acceptance of cash in violation of section 269SS of the Income-tax Act, 1961 cannot be sustained where the underlying transaction is genuine, fully disclosed, and supported by reasonable cause under section 273B, and proceedings founded on an incorrect statutory notice are invalid.

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