No Penalty u/s 271D for Cash Receipt Under Pre-Amendment Agreement | ITAT

Case Details: Hari Krishna Leela Prasad Paladugu vs. Income-tax Officer - [2025] 181 taxmann.com 574 (Hyderabad-Trib.)

Judiciary and Counsel Details

• Ravish Sood, Judicial Member & G. Manjunatha, Accountant Member
• C. Maheshwar Reddy, C.A. for the Appellant.
• Dr Sachin Kumar, Sr. AR for the Respondent.

Facts of the Case

The assessee, an individual, agreed to sell an immovable property on 15-05-2015 and received a cash advance of Rs. 5 lakhs. The sale deed was subsequently executed on 11-04-2016, at which time the balance consideration of Rs. 15.78 lakhs was also received in cash in the presence of witnesses. The entire sale consideration was duly disclosed in the return of income for A.Y. 2017-18, and the applicable taxes were paid.

The Assessing Officer initiated penalty proceedings under section 271D on the ground that, after the amendment to section 269SS with effect from 01-06-2015, receipt of any “specified sum” in cash in relation to the transfer of immovable property was prohibited. Holding that the money received at the time of registration violated section 269SS, the Assessing Officer (AO) levied a penalty equal to the amount so received. The Commissioner (Appeals) upheld the penalty.

On further appeal, the Tribunal noted that the agreement to sell and the receipt of a substantial advance had occurred before the amendment to section 269SS. The Tribunal accepted the assessee’s contention that the cash receipts were made in accordance with the pre-existing contractual obligation and under a bona fide belief that the transaction was outside the scope of section 269SS.

ITAT Held

The Tribunal held that, since the agreement to sell was executed before the amendment and the transaction was genuine, duly disclosed, and taxed, there was reasonable cause within the meaning of section 273B. Accordingly, it was held that the Assessing Officer was not justified in levying a penalty under section 271D. The penalty levied under section 271D was deleted, and the assessee’s appeal was allowed.

List of Cases Referred to

• CIT v. Bombay Conductors & Electricals Ltd. [2008] 173 Taxman 434/[2008] 301 ITR 328 (Gujarat) (para 2)
• Asstt. Director of Inspection v. Kum. A.B. Shanthi [2002] 122 Taxman 574/[2002] 255 ITR 258 (SC) (para 2)
• National Thermal Power Co. Ltd. v. CIT [1998] 97 Taxman 358 (SC)/[1998] 229 ITR 383 (SC) (para 8)
• CIT v. Jai Laxmi Rice Mills Ambala City [2015] 64 taxmann.com 75 (SC)/[2016] 237 Taxman 375 (SC)/[2015] 379 ITR 521 (SC) (para 9)
• Srinivasa Reddy Reddappagari v. Jt. CIT [2023] 332 CTR 614 (Telangana) (para 9)
• Umakant Sharma v. JCIT [ITA Nos. 364 to 366 (Ind) OF 2022, DATED 19-7-2023 (para 9)
• Ramkumar Reddy Satty v. JCIT [IT Appeal No. 488 (Hyd.) of 2023, dated 19-3-2024] (para 10)
• ITO v. R. Dhinagharan (HUF) [IT Appeal No. 3329 (Chny.) of 2019, dated 29-12-2023] (para 10)
• Grihalakshmi Vision v. Addl. CIT [2015] 63 taxmann.com 196/[2015] 379 ITR 100 (Kerala) (para 11).