Aggarwal Construction Company Vs DCIT (ITAT Amritsar)
ITAT Amritsar held that there is no violation of provisions of section 269SS of the Income Tax Act when cash payment was made at one go before sub-registrar at the time of registration of sale deed. Accordingly, penalty under section 271D deleted.
Facts- The assessee is a partnership firm engaged in the business of civil construction, colonizer (development of residential colonies), and supplier of construction materials.
In course of the colonization business, the assessee during the year under appeal, received an amount of Rs.21,00,000/-, in CASH, from different persons as consideration for sale of developed plots of land , in a lumpsum amount , under the head “ Colony Development ”. Since this amount of Rs. Twenty One Lakhs, has been received in cash by the assessee, from the buyers of the plots, penalty proceedings was initiated, for alleged violation of the provisions of section 269SS of the Act 61, and penalty of equal amount was imposed u/s 271D of the Act 61, vide order dated 27/06/2019.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- In R. Dhinagharan (HUF), it is held that this provision will not apply to the transaction that happens at the time of final payment at the time of registration of sale deed and payment is made before sub-registrar at the time of registration of property. In the present case before us, it is an admitted fact that all sale deeds were registered and cash payment was made at one go before the sub- registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances of the case and hence, penalty is not exigible in this case.
Held that when cash is being received in one lump sum, against sale of immovable property, before the Government Registration authority, the sale deed being duly registered before him under his stamp and signature, there appears to be no violation of section 269SS of the Act 61, on the part of the assessee for the year under appeal. As a result the penalty imposed u/s 271D of the Act 61, is hereby deleted.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
This appeal is filed by the assessee against the order of the Ld. CIT (A) NFAC, dated 23/10/2023, passed u/s 250 of the Act 61, sustaining the penalty u imposed by the Joint Commissioner of Income Tax, Range- 1, Bhatinda, u/s 271D, of the Act 61, dated 27/06/2019.
2. Grounds of appeal preferred by the assessee in are as follows:
“1. On the facts and circumstances of the case as well as in law, the Learned C1T(A) has erred by confirming the penalty u/s | 271D of the Act without appreciating that there is no violation of the provisions of section 269SS of the Act as the cash has been received against the sale of stock-in-trade not against sale of immovable property.
2. On the facts and circumstances of the case as well as in law, the Learned C1T(A) has erred in confirming the penalty levied u/s 271D of tire Act without appreciating that the provisions of section 269SS of the Act are not applicable with respect to cash sales of stock in trade but the provisions of section 269ST are applicable in respect of such cash sale of stock-in-trade and section 269ST of the Act has been introduced in the Act for the first time w.e.f. 01.04.2017 and accordingly applicable from the A.Y. 2017-18 onwards.
3. Without prejudice to the above, on the facts and circumstances of the case as well as in law, the learned CJT(A) has erred by confirming the penalty of Rs. 21,00,000/- u/s 271D r.w.s. 273B of the Act without appreciating that as per explanation furnished and material placed on record, there was reasonable and sufficient cause within the meaning of section 273B of the Act for non-adherence of section 269SS of the Act as the assessee was under the bonafide belief that the provisions of section 269SS are not applicable.
4. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed of.”
3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of civil construction, colonizer (development of residential colonies) , and supplier of construction materials . Regular return for the year filed by the assessee, supported by books of accounts and audited financial statements has been subjected to scrutiny in quantum assessment proceedings and the trading results as declared by the assessee relating to the specific business of colonization has been accepted without any adverse remarks.
3.1 In course of the colonization business, the assessee during the year under appeal , received an amount of Rs.21,00,000/- ( Rs.Twenty One Lakhs), in CASH, from different persons as consideration for sale of developed plots of land , in a lumpsum amount , under the head “ Colony Development ” . The total receipts under the head Colony Development – Old, Colony Development – Extension – 1, Sale of developed lands, are duly disclosed and accounted for in regular books of accounts, and has formed a part of the gross turnover, for the year under appeal, and being a contractor and developer the entire land holdings were held and reflected in the books of accounts as “ stock in trade ” ( and not as capital investment). In other words, there has been no suppression or concealment of the total receipts arising out of sale of the plots of land (held as stock in trade).
3.2 Since this amount of Rs. Twenty One Lakhs, has been received in cash by the assessee, from the buyers of the plots, penalty proceedings was initiated by the JCIT, Range – 1, Bhatinda, for alleged violation of the provisions of section 269SS of the Act 61, and penalty of equal amount was imposed u/s 271D of the Act 61, vide order dated 27/06/2019.
4. The matter was carried in appeal before the first appellate authority, and the Ld. CIT (A) NFAC, sustained the penalty by observing that the assessee has failed to demonstrate any reasonable cause for accepting the sale value in cash as per requirement of section 273B of the Act 61, and as per his considered opinion there has been violation of the provisions of section 269SS and as such the penalty imposed was sustained.
5. Now the assessee is in appeal before the Tribunal, against the sustaining of the penalty of Rs. 21 lakhs, u/s 271D, on the grounds contained in the memorandum of appeal.
6. The Ld. AR of the assessee, in course of argument before us, filed a brief synopsis and submitted that:
“That an amendment was brought to the provision of section 269SS of the Act with effect from 01.06.2015 and as per amended provisions, specified sum was included in the said section and the definition of specified sum as given in explanation to section 269SS of the Act defined that if any sum of money receivable, whether as advance or otherwise, in relation to transfer of immovable property whether or not the transfer takes place.
The newly inserted definition of specified sum in section 269SS of the Act was applicable for advance given at the time of entering into agreement for purchase/sale of property and not for actual registration done and sale consideration received at the time of registration of sale deed for purchase/sale of property.
The said contention of the assessee is also supported by the further amendment made vide finance Act 2017 with effect from 01.04.2017 by introducing the provision of section 269ST of the Act which specifically state that even in the case of purchase of immovable property if the amount is 2,00,000/- or more the penalty will be levied for equivalent amount u/s 271DA of the Act.
It proves that the provisions of specified sum introduced with effect from 01.06.2015 does not hit the assessee transaction due to the following facts:-
a) The assessee has not entered into any agreement to
b) The whole amount of cash on account of sale of immovable property held at stock in trade was received in lump sum and no advance money has been received.
It is also pertinent to mention here that as per memorandum forming part of Finance Bill, 2015 highlighting the intention of the provision of section 271D were brought as measure to curb generation of black money by way of dealing in cash in immovable property transactions. However, in the case of the assessee, all the transactions of sale of immovable property held as stock in trade of Rs. 21,00,000/- were duly recorded in the Audited books of account maintained by the assessee and there is no element of black money involved. Moreover, during the course of assessment proceedings, the AO had not doubted the genuineness of transaction of sale of immovable property under taken during the regular course of colonization business.
From the above, it is evident that the provisions of section 271D of the Act r.w.s 269SS are not applicable to the fact of the case of the assessee and accordingly penalty by the Ld. AO deserved to be deleted.
6.1 The ld. AR of the assessee further draw our attention to the judgment of ITAT Bench Chennai in the case of ITO vs. Sh. R Dhinagharan (HUF) by ITA No. 3329/chny/2019 dated 29.12.2023, and heavily relied upon the same for support of his argument, which according to the AR was an identical case.
6.2 The assessee submitted that without prejudice to the above arguments the assessee was under bonafide belief that new inserted provisions of section 269SS which becomes operative from 01.06.2015 were not applicable to the immovable property held as stock in trade and therefore, it had received the cash exceeding 20,000/- in contravention of section 269SS of the Act, whereas, he has recorded all the proceeds in the regular books of accounts maintained by it. Therefore, there exists a reasonable cause with the assessee for receiving cash in excess of Rs. 20,000/-. Further, as per the provisions of section 273B of the Act, if there exists a reasonable cause, penalty u/s 271D of the Act cannot be levied on the assessee and reliance in this regard is placed on the judgment of Apex Court in the case of Hindustan Steel Ltd. vs. State of Orissa as reported in [1972] 83 ITR 26 (SC) wherein it has been held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or guilty of conduct, contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
CIT vs. Sahara India Mutual Benefit Co. Ltd. [2023] 153 taxmann.com 405 (SC)
Section 271D, read with sections 271E and 273B, of the Income-tax Act, 1961 – Penalty – For failure to comply with provisions of section 269SS (Reasonable cause) – Assessee was a mutual benefit company doing business of mobilization of deposits from members/shareholders – Tribunal deleted penalty imposed on assessee under sections 271D and 271E after considering assessee’s business realities, difficulties in mobilizing deposits from people of small incomes, agriculturists and rural dwellers – High Court by impugned order held that revenue could not bring on record any material to show that finding of fact recorded by Tribunal as to existence of reasonable cause was perverse and thus, order of Tribunal could not be disturbed – Whether there was no reason to interfere with impugned judgment and, thus, appeal was to be dismissed – Held, yes [Paras 1 and 2] [In favour of assessee]
Sonia Verma vs. ITO as reported in [2023] 149 taxmann.com 21 (Chandigarh – Trib.)
Section 269SS, read with sections 271D and 273B, of the Income-tax Act, 1961 – Deposits – Mode of taking/accepting (Land dealings) – Assessment year 2017-18 – Assessee sold her flat and received sale proceeds in cash on 5 different dates – Revenue levied penalty under section 271D for violation of provisions of section 269SS – Assessee contended various reason for proving that said transaction was bona fide and genuine and in no way was related to evasion of tax; (i) she sold her flat for arranging funds for marriage of her daughter, which was being repeatedly postponed due to lack of funds; (ii) buyer of property told assessee that he could not pay in lump sum on a single date and thus sale consideration was received in cash on 5 different dates;
(iii) assessee on account of medical infirmity of her husband travelled to Delhi to collect sale proceeds on different dates and simultaneously made purchases for wedding of daughter – Assessee also contended that she could not rely upon purchaser to make payments by cheques which might or might not be honoured, that getting amount deposited by way of RTGS/Cheque in her bank account and then travelling with cash withdrawn at Jagraon to Delhi to make purchases was considered to be unsafe/impractical and that there was a limit of cash withdrawals from ATMs – Whether, on facts, since assessee had successfully made out a case demonstrating that there was a reasonable cause for her to accept payments on specific dates, bona fide explanation offered by her was to be accepted – Held, yes – Whether, therefore, impugned penalty was liable to be quashed – Held, yes [Para 7] [In favour of assessee]
Mohanjeet Singh v. JCIT as reported in [2016] 70 taxmann.com 335 [ITAT CHANDIGARH BENCH ‘SMC]
Section 269SS, read with sections 271D and 273B, of the Income-tax Act, 1961 – Deposits – Mode of taking/accepting (Penalty) – Assessment year 2008- 09 – Assessee received cash deposits for more than Rs. 20,000 from his agriculturalist friend – Assessing Officer opined that assessee accepted cash deposits in contravention of section 269SS – Consequently, he levied penalty under section 271D – It was found that source of money was completely from explained sources – Amount in question had not been treated as cash credits under section 68 – Assessee explained that said amount was received from his friend for making investments on his behalf – Whether transaction in question was genuine and bona fide and, therefore, penalty was liable to be deleted – Held, yes [Para 7] [In favour of assessee]
CIT vs. Smt. Dimpal Yadav* as reported in [2015] 61 taxmann.com 219 [HIGH COURT OF ALLAHABAD]
Surendra Engg. Corpn. vs. JCIT as reported in [2020] 113 taxmann.com 290 (Mumbai – Trib.)
CIT vs. Maa Khodiyar Construction* as reported in [2014] 45 taxmann.com 566 [HIGH COURT OF GUJARAT].
Section 269SS, read with sections 273B and 271D, of the Income-tax Act, 1961 – Deposits – Mode of accepting/taking (Reasonable cause) – Assessment year 2006-07 – Instead of taking loan in account payee cheque or bank draft, assessee took loans in cash exceeding Rs. 20,000 from agriculturists living in remote village – Not only substantiating evidence like 7/12 extracts from land records were produced, but, also additionally, transactions were reflected in accounts of assessee and advancement of loan to assessee had been reflected in books of account of those persons from whom loan had been received – Identity of those persons had also been well established – Assessee also had given satisfactory reasons for taking such loan – Whether since genuineness of very transactions were never doubted by revenue authorities, and breach was due to reason that agriculturists were living in remote areas, default was to be treated as a mere technical or venial breach and penalty was not to be levied on assessee – Held, yes [Paras 12 & 13] [In favour of assessee]
7. Relying on all the above cited decisions of various courts and tribunals, cited above and also on the CBDT circular – 19 of 2015 dated 27/11/2015, the Ld. AR prayed that since in the instant case no advance has been taken and no agreement for sale has been executed , there has not been any violation of the provisions of section 269SS of the Act 61, because the words “ sum specified ” is applicable only to advance receivables , whether as advance or otherwise , and in the instant case, since the payments has been received in cash in lump sum from the buyer of the plots of lands ( stock in trade ), and the same has been duly registered before the registration authority , and the genuineness of transactions has never been doubted by the AO , and also considering the fact that there has not been any loss of Government revenue at any stage , the penalty imposed u/s 271D of the Act 61, is legally unjustified and may please be deleted.
8. The Ld. DR, relied on the order of the Ld. CIT (A), and argued that it is immaterial as to whether the plots of lands are held as capital assets or as stock in trade by the assessee in his books of accounts, because the plot of land sold is immovable property, and is covered by explanation (iv) to section 269SS of the Act 61 and in this case the assessee has accepted a “specified sum” of Rs twenty- one lakhs, and he prays for sustaining the penalty.
9. We have heard the rival counsels and considered the materials on record and the judgments relied upon by the assessee, referred to in above paragraphs. The factual aspect of the matter as admitted by the assessee and revenue , is that plots of land, which was held as stock in trade by the assessee , has been sold to buyers by execution of registered sale deeds, and payments received in one lump sum before the Government registration authorities, and there is no dispute regarding the disclosure of the sale proceeds in the books of accounts and return of income , which has formed a part of the total turnover , and admittedly there has not been any loss of Government revenue.
9.1 As per submission of the assessee , the assessee acted under the bonafide belief that provisions of section 269SS which is operative w.e.f. 01/06/2015, was not applicable to the immovable property held as stock in trade , because viewed from the angle of the assessee the developed plots of lands are his business stock which is meant to be traded in the open market at a price which is acceptable to him depending upon his business needs, and the sale price accepted in cash has been duly recorded in books, disclosed in his return and considered for the purpose of taxation , and there has been no deliberate defiance of any law and he has not been dishonest , or has not acted in conscious disregard of any legal obligation and in the instant case , even if there has been a breach of law , the same has flowed from a bonafide belief , that cash payments in the instant case was legally acceptable, and on this argument the assessee relied on the judgment of the Hon’ble Apex court in the case of “ Hindustan Steel Ltd vs State of Orissa (1972) 83 ITR 26 ( SC ).
9.2 At this stage we also refer to the decision of the ITAT Chennai Bench , ( relied upon by the assessee ) , in the case of R. Dhinagharan ( HUF ) ITA No 3329/ CHNY/ 2019 dated 29/12/2023 , where the Hon’ble Bench, in an almost identical set of facts , has discussed the Memorandum explaining the intention of amendment by Finance Bill 2015 , including the definition of “ sum specified ”as per explanation to section 269SS of the Act 61.
10. Relevant portion of the said observation is reproduced below for ready reference:
“In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS of the Income- tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property (specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.
54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an :- advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.
54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made. 54.6
Applicability: These amendments have taken effect from 1st day of June, 2015.
From the above provisions, Memorandum explaining the intention of amendment by Finance Bill, 2015 including the definition of ‘sum specified’ brought in the Explanation to Section 269SS of the Act, it is clear that the intention for bringing this provision was to curb the generation of black money in real estate prohibiting acceptance or repayment of advance in cash of Rs.20,000/- or more for any transaction in immovable property. This was explained by Hon’ble Finance Minister while placing the Finance Bill, 2015 in her budget speech highlighting the intention of the amendment that the amendment in Explanation to Section 269SS i.e., ‘sum specified’ means only applicable for advance receivable, whether as advance or otherwise means advance can be in any manner.
Hence, this provision will not apply to the transaction that happens at the time of final payment at the time of registration of sale deed and payment is made before sub-registrar at the time of registration of property. In the present case before us, it is an admitted fact that all sale deeds were registered and cash payment was made at one go before the sub- registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances of the case and hence, penalty is not exigible in this case.”
11. Respectfully, following the observation of the Chennai Bench, in the case of R. Dhinagharan (HUF) (supra), we are also of the opinion that when cash is being received in one lump sum, against sale of immovable property, before the Government Registration authority, the sale deed being duly registered before him under his stamp and signature, there appears to be no violation of section 269SS of the Act 61, on the part of the assessee for the year under appeal.
12. As a result the penalty imposed u/s 271D of the Act 61, is hereby deleted.
13. In the result, the appeal of the assessee ITA 370/Asr/2023, is allowed.
Order pronounced in the open court on 20.09.2024
