TaxTMI 
TaxTMI 
2025 (6) TMI 400
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taken on money of Rs. 1.37.73,000/- in cash during the F.Y. 2018-19 and provisions of section 269SS are clearly attracted before arriving at a conclusion that AO could not corroborate the same by bringing any material on record which proves that the amount mentioned in the diary is received during the year. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in not appreciating the facts that the assessee company does not have any reasonable and satisfactory explanation which shows that no penalty u/s 271D of the Act can be levied in this case. 4. On the facts and in the circumstances of the case and in law, the Ed. CTI (A) has erred in holding that section 269SS of the LT. Act 1961 is a deeming provision, hence not applicable in this case. 5. The appellant craves leave to add, alter modify, delete and amend any of the grounds, as per the circumstances of the case." 3. Brief facts of the case as culled out from the records are that the assessee is a limited company, engaged in the business of construction and property development since last many years. A search and seizure action u/s. 132 of the Act was conducted at the business and re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of provisions of sec. 269SS of the Act, and, therefore, no penalty is leviable. However, Ld.AO was not satisfied with these submissions and levied penalty of Rs. 1,37,73,000/- u/s. 271D r.w.s. 269SS of the Act observing as follows:- "5.4 From the above analysis it is crystal clear that 269SS of the I.T. Act is not a deeming provision and it is relevant to mention here that amount received more than 20,000/- cash mode in relation to transfer of immovable property whether or not transfer taken place the same is covered under Specified Sum as mentioned in Section 269SS. In this case, the assessee company has accepted cash more than 20,000/- in respect of sale of immovable property from customer in violation of Section 269SS of the Income Tax Act, 1961. 5.5 The extra amount received by the assessee company over and above the sale consideration in only in connection with the row house. The charges recovered from customer are incidental to the sale of immovable property such as additional amenities. The amount received by assessee in cash having direct nexus with sale consideration and the same has received in violation of Section 269SS. In this support it would be relevant to refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../additional requirements like size of the rooms, quality of tiles and sanitary wears, flooring etc. and for such additional requirements, which are not part of regular deal of sale of immovable property, the builder/developer charges extra amount and the alleged amount of Rs. 1,37,73,000/- was for the very same purpose for providing additional amenities/requirements to the customers based on their specific request. The Ld.CIT(A) was satisfied with these contentions and deleted the impugned penalty u/s. 271D of the Act observing that the assessee had not violated the provisions of sec. 269SS of the Act. 6. Aggrieved, the Revenue is in appeal before this Tribunal. 7. Ld.DR vehemently argued supporting the observations of the AO in the penalty order u/s. 271D of the Act. 8. On the other hand, learned counsel for the assessee supported the order of the Ld.CIT(A) and referred to the following written submissions:- "1. BACKGROUND 1.1 The Assessee is a company formed under the Companion Act, 1956, and is in the business of construction and property development since over 35 years. The Assessee Company is one of the oldest and renowned name in Aurangabad in the construction business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of reimbursement of the cost incurred for such additional work so undertaken on his behalf. 2.5 The management generally is not directly involved for such extra amenities. Such work is generally undertaken by the contractor at the site directly. For this purpose, a diary is maintained, which is kept in the office of the builder with an employee for ready reference. 3. THE SEARCH OPERATION 3.1 In the morning hours of 21.08.2018, a search and seizure operations were carried out against Tapadia Group at Aurangabad, which covered the Assessee. The search lasted for four consecutive days and was concluded on 24.08.2018 at 10:45 pm. 3.2 In course of the search, a diary was seized (Annexure A, Item No. 3), which included two pages in which certain details concerning 12 rowhouse purchasers were jotted down. The entries were not made by the any of the management personal, nor the diary was found within the control and possession of the management. The details were jotted down by Shri Harish Deshpande, Manager, and the diary was found in a filing cupboard near his chair. 4. THE DIARY [Pages 36 to 43] Some of the relevant aspects of these two pages are as under: 4.1 It contains ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as under: (i) Mr.Tapadia gave satisfactory explanation to various queries. (ii) No discrepancy in the accounts was noticed. No unaccounted asset in the form of cash or other assets was found. (iii) No incriminatory material was found. It was only that Mr. Tapadia was compelled to offer alleged undisclosed income with respective to two documents/loose papers, which two disclosures were purely to buy peace and to avoid litigation. (iv) As far as the present appeal is concerned, the relevant question and answer are Q & A 12. In this answer, the director surrendered Rs. 1,37,73,000/-towards provision of additional amenities. A very important aspect is that, additionally, independently, he also disclosed Rs. 1,07,85,000/-, being 30% of the total sale consideration on account of profit of 12 rowhouses, over and above the agreement values. As such, these two disclosures were independent to each other and there for distinct items of disclosure. (v) Interestingly, on the similar basis the director also surrendered 30% of total sale consideration with respect to another project of another concern [Ref: Q & A 41]. Pertinently, there is not even an allegation that there was any extr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations to the satisfaction of the assessing officer ['A.O.']. Admittedly, there was full and proper compliance by the Assessee to all notices and requirements of the A.O., which is evident from the fact that the provisions of section 144 were not invoked, which would have been the case had there been any non-compliance. 7.2 The A.O. passed assessment order on 04.06.2021 u/s 143 (3) of the Act, accepting the returned income, except for making a petty disallowance of Rs. 72,665/- out of the depreciation claimed. (Refer: Pages 32 to 35) 7.3 Very significantly, the books of accounts and the book result have not been rejected. This is very crucial because, as pointed out at para 6.1 above, the surrender in the form of extra amenities was distinct than the surrender towards extra profit from the project. 7.4 Some of the salient features of the assessment order are as under: (i) The return so filed and the income so offered therein were accepted as proper fair and reasonable and without any reservation. (ii) Admittedly, there was no other 'undisclosed income'. No other incriminating material or asset was found in course of the entire search operations lasting ove....
X X X X Extracts X X X X
X X X X Extracts X X X X
....menities start after the maximum amount of the consideration is made. The amenities were different for different customers, depending upon the requirement of the customers. (vii) Without prejudice, even the diary shows that the entire sum of Rs. 137 lacs were not received. paid. In fact, amount of Rs. 70.01 lacs was not received at all by the Assessee. (viii) Without prejudice, the levy of penalty u/s 271D is discretionary. The customers insisted upon accepting cash payment towards providing of the additional amenities. In terms of the provisions of section 273B, the Assessee had reasonable cause for accepting the cash from its customers. 8.2 Pertinently, the A.O. has not disputed any of the above basic facts. 8.3 The AO levied the penalty u/s. 271D by principally relying on the amendment made in section 194 IA vide the Finance (No. 2) Act, 2019, wherein in the definition of the term 'consideration for transfer of any immovable property' is defined to include "all charges of the nature of club membership, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not by all. Such additional work is only qua a particular customer, undertaken strictly as per his/her personal choice. It is not a part of the flat/ rowhouse agreed to be transferred by the builder and the consideration agreed to be paid by the buyer. Such work is totally independent to the main agreement to transfer the flat; neither such work is a part of the agreement /negotiation at the time of entering into the agreement nor it is envisaged at that stage. It has no direct nexus with the sale consideration. 7. Even in the Assessee's case, only 12 customers, who were desirous of having such additional work, approached the site supervisor directly since these are not part of the agreement to sell the unit and, consequently, the management generally is not involved/concerned vis a vis the agreement to provide the unit. It is important to note that the management generally is not directly involved for such extra amenities. Such work is generally undertaken by the contractor at the site directly. 8. The management was not directly or indirectly involved in providing such additional amenities to the 12 customers. However, since the work is undertaken by the same site supervi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... protracted litigation he was offering amount of Rs 1,37,73,000/- as additional income in the hands of the appellant company for AY 2019-20. Total disclosure of Rs. 3,02,02,990/- including the amount of Rs 1,37,73,000/- was made in the hands of the appellant company for the year under consideration. The AO accepted the additional income offered by the appellant including of Rs. 1,37,73,000/- on account of additional money received from the customers According to the AO, the appellant had taken an amount more than two lakh rupees from persons otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through bank account in violation of the provisions u/s 269SS of the Act. Therefore, matter was referred to Addl. CIT who initiated the penalty u/s 271D equal to the sum of cash received 5.3 During the course of appellate proceedings, the appellant submitted that the diary found during the search was relating to the project 'Flora Phase-1'. In this project, the appellant has constructed row houses. In this project, some of the customers had raised additional requirement or modification. It is the general practice in real estat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,37,73,000/- as cash received for providing additional amenities to the customers. Just to avoid the litigation and not to distract the focus from the business the appellant declared the said amount as income. In the present case, it was only under peculiar circumstances that the appellant had surrendered the amount as income just to buy peace and avoid litigation. The diary does not specify the year for which the alleged transactions have been recorded. Moreover, the notings in the diary themselves suggest that the declaration was not based on any actual payments made, because the diary itself is inconsistent with the statement given by the director. For example, in the diary at serial number 1, the figure '10' is written against the name of the row house purchaser. If one peruses he breakup of 10 on page number 2 and below, a date is mentioned. First thing to note is that there is no year mentioned with the date and the month. Thereafter, it is interesting to note that if one sees the second portion of the break up, that is figure '2' and date below, it is 22/12 that means 22nd December. It is interesting to note that the search was conducted on 21.08.2018 and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich includes all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges or similar nature, which is incidental to transfer of the immovable property. On this basis, the Ld. AO concluded that incidental charges recovered from customer are in relation with sale of immovable property and the same covered u/s 269SS of the Act. On this basis the Ld. AO levied the penalty. 5.6 However, the appellant has submitted that Section 269SS of the Act is a deeming provision, saddling an assessee with onerous penal consequences. As per the well-known principles of interpretation of statutes, the deeming provisions are to be interpreted strictly. Therefore, the deeming provision cannot be made applicable in any circumstances other than the one for which it is brought in the statute. Further, it is also a well settled legal principle that incase of doubt regarding the applicability of provision in such a case, the benefit is to be given to the Assessee. 5.7 The Ld. AO without enquiring about the nature of additional amenities provided to the customers, concluded that the same is incidental to the sale of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as already been accounted for in the regular books of accounts. Further, the assessee offered an amount of Rs. 2,45,58,000/- as undisclosed income which compressed of 30% of the sale consideration of row houses totaling to Rs. 3,59,50,000/- and Rs. 1,37,73,000/- as additional amount received. 12. Now, in the instant appeal, we are only concerned with the sum of Rs. 1,37,73,000/- which the Ld.AO has observed that assessee has received the said sum in cash against the transfer of immovable properties and thus invoked the provisions of sec. 269SS and imposed penalty u/s. 271D of the Act. Further, in the penalty order, the Ld.AO has also referred to sec. 194-IA of the Act stating that the alleged sum even if has been received for additional amenities, the same form part of the consideration for transfer of any immovable property as defined in explanation to sec.194-IA of the Act. 13. Before proceeding further, we would first like to go through the relevant provisions i.e. sections 269SS, 271D & 194-IA of the Act:- 13.1 "Mode of taking or accepting certain loans, deposits and specified sum. 269SS. No person shall take or accept from any other person (herein referred to as the depo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al development bank by its member.] Explanation.-For the purposes of this section,- (i) "banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; [(ii) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;] (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. 13.2 Penalty for failure to comply with the provisions of section 269SS. 271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led discussion in para 5.4 of the impugned order wherein the Ld.CIT(A) has observed that the notings in the diary themselves suggests that the declaration was not based on any actual amounts received because the entries in diary are itself inconsistent with the statement given by the Director. In short, the Ld.CIT(A) has rightly observed that the penalty u/s. 271D of the Act could not have been levied merely on the diary found because the Ld.AO could not corroborate the same by bringing any material on record which proves that the amount mentioned in the diary is received during the year. But all set and done, the assessee in the statement recorded u/s. 132(4) has accepted that a sum of Rs. 1,37,73,000/- has been received in cash towards provision of additional amenities in the project from the respective customers. So we need to examine what additional amenities have been provided by the assessee and whether the consideration received in lieu of such additional amenities is forming part of the sale consideration for transfer of immovable property. 15. We observe that a sum of Rs. 1,37,73,000/- accepted and stated by the assessee to have been received for providing additional amen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r and above the agreed sale consideration of row house for additional work relating to interior and other finishing work as per the choice of the customer and the total consideration for transfer of the immovable property in the form of row houses has been received through banking channel, there is no violation of sec. 269SS of the Act and, therefore, assessee cannot be visited by the penalty u/s. 271D of the Act. 16. Even though, we have held that there is no violation of sec. 269SS of the Act, and no penalty is leviable u/s. 271D of the Act, still for academic purpose, we will also deal with the observation of the Ld.AO making reference to sec. 194-IA of the Act, which is in relation to deduction tax at source @ 1% of the agreed consideration or the stamp duty value of such property whichever is higher. The Ld.AO has referred to the definition of "consideration for transfer of any immovable property" provided in sec. 194-IA of the Act which includes all charges in the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar in nature which are incidental to transfer of immovable property. Ld.A....