Facts of the Case

The assessee sold an immovable property and received total sale consideration of Rs. 22,65,000. Out of the total consideration:

  • Rs. 10,00,000 was received through RTGS, and
  • Rs. 12,65,000 was received in cash.

The amount received in cash was deposited into the bank account on the same date. The assessee also offered the entire sale consideration for taxation while filing the return of income and declared capital gains on sale of the asset.

The Assessing Officer observed that the assessee received a substantial amount in cash and held that there was violation of Section 269SS of the Income Tax Act, 1961. Accordingly, the Assessing Officer levied penalty under Section 271D of the Act.

The CIT(A) confirmed the penalty, against which the assessee filed an appeal before the Income Tax Appellate Tribunal.                                                      

Issues Involved

Whether cash received as part of sale consideration of immovable property can be treated as loan or deposit under Section 269SS, thereby attracting penalty under Section 271D of the Income Tax Act, 1961.

Petitioner’s Arguments (Assessee)

  • The cash amount of Rs. 12,65,000 was part of the sale consideration of property, not a loan or deposit.
  • The entire sale consideration was disclosed in the return of income, and capital gains were offered to tax.
  • The cash amount was deposited in the bank on the same date.
  • Since the transaction was a sale transaction and not a loan or deposit, penalty under Section 271D was not applicable.

Respondent’s Arguments (Department)

  • The assessee had received a substantial amount in cash, which constituted violation of Section 269SS of the Income Tax Act.
  • Accordingly, penalty under Section 271D was rightly levied by the Assessing Officer and confirmed by the CIT(A).

Court Order / Findings

  • The cash amount of Rs. 12,65,000 was received as part of the consideration on sale of land.
  • The amount was deposited in the bank on the same date.
  • The entire sale consideration had been offered to tax by the assessee.

The Tribunal further noted that penalty under Section 271D can be levied only where a person takes or accepts any loan or deposit in violation of Section 269SS.

Since the amount received by the assessee was not a loan or deposit but part of sale consideration, the provisions of Section 271D were not attracted

Important Clarification

  • Penalty under Section 271D is applicable only when there is acceptance of loan or deposit in cash in violation of Section 269SS.
  • Cash received as sale consideration of property cannot be treated as loan or deposit.
  • Therefore, penalty provisions cannot be invoked in such cases.


    Link to download the order -  https://itat.gov.in/public/files/upload/1735635028-V75Bz3-1-TO.pdf

    Disclaimer

    This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.