Cash Transaction for Property Registration: ITAT deletes Section 269SS Income Tax Penalty against Women with Elementary Knowledge [Read Order]

The Bangalore bench of Income Tax Appellate Authority ( ITAT ) deleted the penalty imposed on the assessee, who is a woman with elementary knowledge.

The assessee, Pushpalatha had filed her Income Tax Returns ( ITR ) for Assessment Year ( AY ) 2017-18, declaring her total income as  Rs.3,92,783/-  on 11.02.2018. The assessee had sold her property on 15-06-2016. She had received a cash payment of Rs. 49,10,000/-from the Rs. 90 lakh sale amount. While filing her ITR for the AY 2017-2018, the assessee had disclosed about the capital gains arising from the sale of the above-mentioned property.

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With regard to the investment made from the sale proceeds of the property,  the assessee claimed exemption under Section 54 of the Act in their income return. The assessee’s case was selected for scrutiny, and she received a notification under Section 143(2) of the Income Tax Act, 1961. During the assessment proceedings, the Assessment Officer ( AO ) was of the opinion that accepting cash on account of the sale of immovable property was in contravention of the provision of Section 269SS of the Income Tax statute.

Although an explanation was provided by the assessee, AO held that held that there is no “reasonable cause” for accepting the cash on account of the sale of immovable property and imposed a penalty under section 271D of the Income Tax Act for a sum of  Rs. 49,10,000/.

The assessee who was aggrieved by the above order, filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)].

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The penalty imposed by AO was upheld by CIT(A) and held that the assessee herself had accepted the fact that she had violated the provisions of Section 269SS of the Income Tax Act, out of ignorance of the law, and it does not qualify as "reasonable cause" under Section 273B of the Income Tax Act.

Aggrieved by the above order, the assessee filed an appeal before the ITAT.

The Authorised Representative ( AR ) appearing for the assessee contended that in the above case, the provisions of Section 269SS of the Income Tax Act will not have any application as there was no agreement for sale and the amount of Rs.49,10,000/- has been received as part of the sale consideration while executing the sale deed.

The bench was of the opinion that the term “otherwise" in Section 269SS of the Income Tax Act does not include "sale consideration" according to the concept of Ejusdem Generis. The bench was of the view that the word “otherwise” cannot be given a wider interpretation. The bench mentioned the case of Kamlesh Kumar Sharma v. Yogesh Kumar Gupta,  in which the Supreme Court held that wherever there is the term "otherwise,” the word is to be given a restricted meaning.

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The bench held that the assessee did not intend to generate unaccounted or black money, as they reported the receipt of all cash in the registered sale deed and stated it in their ITR. The bench accepted the contention of the AR that there was no agreement to sell executed between the parties, and it was evident from the sale deed.

The ITAT bench, consisting of George George K and Waseem Ahmed, held that the assessee, being a woman with elementary education and little knowledge of tax regulations, would not have been aware of the amendment effected by the Finance Act, 2015, to Section 269SS of the Income Tax Act, which had laid a restriction for receiving cash for transfer of immovable property.

The bench thus held that the penalty under Section 271D of the Act, was not warranted and deleted the same.

To Read the full text of the Order CLICK HERE

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