AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 532
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....9. 2. At the outset, the assessee has filed petition for condonation of delay of '262' days along with affidavit, perusal of which reveals that since there were glitches in the computer, assessee didn't receive the impugned order confirming the penalty, which led to delay in filing of the appeals. Therefore, the assessee pleads for leniency. After going through the contents of the affidavit and petition for condonation of delay, we find that the assessee doesn't stand to gain by not filing the appeals. The action of the assessee can't be termed to be deliberate and therefore, we condone the delay of 262 days in filing of both the appeals and proceed to adjudicate the grounds of appeals raised by the assessee. 3. Before adverting to the grounds raised in these appeals, it is first relevant to set out the background facts in context. The brief facts relating to the case are that, the assessee, an aggregator of lands, is engaged in the real estate business. A search u/s. 132 of the Act was carried out in the premise of Dr. Maya Vedamurthy on 02.03.2018 which resulted in discovery of certain loose sheets containing Memorandum of Understanding (MoU) between the assessee and Shri M....
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....i M. Vedamurthy (spouse of Dr.Maya Vedamurthy) in AYs 2016-17, 201718 & 2018-19 respectively, towards purchase of immovable property at Siruseri Village, Tiruporur Taluk, which according to the AO, was in violation of provisions of Sec.269SS of the Act. He accordingly, initiated penalty proceedings u/s 271D of the Act. 5. The assessee is noted to have taken a stand across all the assessment years that he was a land aggregator who worked for commission and that he had received aggregate commission of Rs. 85 lakhs for facilitating the impugned transaction, which he had offered to tax as his undisclosed income in AY 2016-17, and that, the cash of Rs. 6,10,00,000/- was not received by him from Mr. M Vedamurthy in his own proprietary capacity but, was disbursed immediately to the facilitators/brokers for acquiring large pieces of land in the presence of Shri M. Vedamurthy. 6. It was brought to our notice that, post completion of assessment for AYs 2016-17, 2017-18 & 2018-19 on 27.12.2019, the Addl. CIT issued notice u/s. 274 r.w.s.271D of the Act dated 12.03.2021 asking the assessee to show cause as to why an order imposing penalty u/s. 271D of the Act should not be made for recei....
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....ed that, the impugned order was barred by limitation as the impugned proceedings u/s 271D of the Act was initiated after a lapse of four years. The assessee has further contended that even the date on which the impugned orders were passed were barred by limitation. The assessee further urged that, even on merits, the provisions of Section 269SS did not apply to the impugned issue and therefore pleaded that the penalty be set aside. The main argument of the assessee was that, he was only the broker / middleman and not the 'seller' in the transaction who had received the advance in his own right and therefore he could not be subjected to penalty in terms of Section 269SS of the Act. Referring to the MOU as well as the sworn statement, the Ld. AR for the assessee argued that, it was not in dispute that the assessee was the agent of Shri M Vedamurthy and was assisting him in acquiring land of 2.65 acres. The cash paid by Shri M Vedamurthy was immediately handed over to the land brokers through whom the land was being purchased and that the assessee never received any advance in his own right. Further, the contention that the assessee was only a land broker was evidenced by the fact tha....
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....osit or specified sum taken or accepted by,- (a) the Government; (b) any banking company, post office savings bank or co-operative bank; (c) any corporation established by a Central, State or Provincial Act; (d) any Government company65 as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act: Provided also that the provisions of this section shall have effect, as if for the words "twenty thousand rupees", the words "two lakh rupees" had been substituted in the case of any deposit or loan where,-- (a) ....
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.... have been defined in Clause (iv) of the Explanation to Section 269SS, to mean any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immoveable property, whether or not the transfer ultimately takes place. It is well understood that, in a 'transfer' of a capital asset by way of immoveable property, there are two parties involved, viz. buyer and seller. Accordingly, in relation to the transfer of an immoveable property, any advance or deposit or earnest money etc., would be received by the seller from the buyer. The specified sum as defined in Clause (iv) of the Explanation to Section 269SS of the Act is meant to act as a deterrent for the sellers to transfer their immoveable property in cash. In such a scenario, if the seller receives monies in cash for transferring his immoveable property, then the entire monies would essentially have to be paid by way of penalty u/s 269SS r.w.s.271D of the Act, to the Government. The term 'specified sum' is therefore applicable in the context of the 'seller' of the property. The broker or agent, who is facilitating the transfer of immoveable property, cannot be said to be the recipient of the 'specified sum' ....
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....pal. Accordingly, the liability of the agent has to be limited and it cannot be held liable for any act done on behalf of the Principal. Hence, in light of the discussions made in the foregoing, we are of the considered view that an agent in a transaction of transfer of immoveable property between a buyer and seller, cannot be held liable for penal consequence u/s 269SS of the Act for receiving, for and on behalf, and handing over the money to his Principal. 17. In light of the above therefore, we now revert back to the facts of the present case to ascertain as to whether the assessee in the present case could be said to be recipient of the 'specified sum' in his own right or was he only an agent, as contended by his Ld. AR before us. On perusal of the terms of the MoU dated 03.07.2014, it is noted that the recital makes it clear that the assessee mediates and liaisons for identifying and acquiring different parcels of land from various parties and make the said land into a composite land. Shri M Vedamurthy, the second party to the agreement, had therefore allotted only the scope of necessary mediation and liaison to acquire the said land from the concerned owners to the first p....
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....iaise for smooth transfer of the title and ownership of the property to and in favour of the Second Party or their nominees by complying with the applicable legal provisions and procedures." 18. It is further noted that, the above MoU was confronted to the assessee and his statement or note was recorded u/s 131 of the Act, on 06.06.2018. On perusal of the statement, we find that the assessee had clearly stated that he was a land aggregator and was acting as the middleman between Shri M Vedamurthy and many sellers, for which he had entered into an MoU with his Principal, i.e. Shri M Vedamurthy. The assessee is also noted to have stated that he would hand over the cash to the land brokers in presence of his Principal, Shri M Vedamurthy, and give him acknowledgement for the receipt of cash. The relevant questions and the answers given by him, is noted as under: "Q10. Please state what is the purpose of above Memorandum of Understanding entered between yourself and Sri.M.Vedamurthy? Ans. Madam, I have entered into Memorandum of Understanding with Sri.M.Vedamurthy towards purchase of 2 acres and 65 cents land property at Siruseri village, Thiruporur Talk at the rate....
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....hus find merit in the assessee's contention that he was never in receipt of the 'specified sum' in as much as he was not transferring any immoveable property to the buyer. 20. It is noted that the lower authorities had factually erred in holding that, the assessee was in 'receipt' of part 'sale consideration' and therefore, irrespective of whether the transfer ultimately took place or not, since he was in receipt of the 'specified sum', he is liable to be penalized u/s 269SS r.w.s. 271D of the Act. As noted above, there was no 'sale consideration' involved in true sense, as no transfer ever took place. Having regard to the facts as already narrated in the preceding paragraphs, the sums impugned in this appeal were paid by Shri M Vedamurthy by way of 'advance'. Although it is indeed true that the provisions of Section 269SS would still apply in case of an 'advance', whether or not the transfer took place, but as held above, it would apply in the hands of the 'recipient' of the monies in real sense i.e. the person who would be transferring the immoveable property. As noted above, the assessee was not the 'recipient' but only the agent or facilitator through whom the payment was ma....