Section 271D Penalty for Assessee with Majority Check Payments in Property Sale is deleted by ITAT
Fact and issue of the case
Aggrieved by confirmation of penalty u/s 271D for Rs.5 Lacs for Assessment Year (AY) 2018-19, the assessee is in further appeal before us. The impugned order has been passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] on 26-09-2022 in the matter of impugned penalty levied by Ld. Assessing Officer [AO] u/s. 271D of the Act vide order dated 22-02-2022. In the penalty order, the penalty has been levied on the finding that the assessee has received Rs.5 Lacs in cash on sale of immovable property of Rs.50 Lacs which was held to be in contravention of Section 269SS of the Act. The Ld. CIT(A) confirmed the penalty against which the assessee is in further appeal before us.
The registry has noted a delay of 34 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of an affidavit filed by the assessee. Though Ld. DR opposed condonation of delay, however, considering the period of delay, the delay is condoned and we proceed to dispose-off the appeal on merits.
The undisputed facts are that the assessee sold certain property for Rs.50 Lacs. The consideration of Rs.45 Lacs was received by cheque whereas the balance consideration of Rs.5 Lacs was received in cash. Noticing the violation of the provisions of Sec.269SS, Ld. AO invoked penalty provisions of Sec.271D. The extant provisions provide for levy of penalty equal to the amount of loan or deposit or specified sum so taken or accepted. Accordingly, impugned penalty of Rs.5 Lacs was levied by Ld. AO.
Upon further appeal, Ld. CIT(A) confirmed the penalty observing as under: –
The matter has been carefully considered. All the grounds of appeal pertain to single action of the AO in levying penalty u/s 271D and therefore clubbed together for the sake of convenience. The facts are admitted and not disputed. The assessee sold a property through a sale deed registered on 6thJuly, 2017 to one Mr. G. Ravikumar. The aggregate consideration of Rs. 50 lakhs is received by her as follows. Rs. 5,00,000 in cash, Rs. 39,50,000 through cheque No.036140 which is housing loan disbursed by LIC Housing Finance Ltd, and balance of Rs.5,50,000 has been received on 06.07.2017 through cheque No.372402 drawn on Corporation Bank, Salem Town Branch. The schedule of the agreement clearly indicates that the property transferred is land and building constructed thereon. With this clear background, the submissions of the assessee have been examined. Section 269SS as amended w.e.f. 01-06-2015 bars a person from accepting any specified sum otherwise than by an account payee cheque or draft or use of electronic clearing system through a bank account. The “specified sum” has been defined in Explanation (iv) to mean any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property. The contention of the assessee is that the intention of this section is to tackle black money and as she has declared the entire sale consideration of Rs. 50 lakhs as her income, there is no black money in this transaction. To my mind, this contention of the assessee is very simplistic. One has to examine the intention of the Legislature only through Explanatory Notes to the Finance Act, 2015 and not through one’s imagination. The Explanatory Notes to Finance Act 2015 amending sec 269SS states as under:
Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances.
Provisions contained in section 269SS of the Income-tax Act, before amendment by the Act, provided that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions were provided in the section.
Similarly, provisions contained in section 269T of the Income-tax Act, before amendment by the Act provided that any loan or deposit shall not be repaid otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account by the persons specified in the section, if the amount of such loan or deposit is twenty thousand rupees or more.
In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS of the Incometax 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.
It can be seen that the intention of Parliament in amending the section is a very wide intention of curbing generation of black money by way of dealings in cash in immovable property transactions. It is evident from the section as well as Explanatory Notes to the Finance Act, 2015 reproduced above that what has been barred is dealing in cash and that too for immovable property transactions. Dealing in cash does not distinguish between black money or disclosed transactions. To my mind, the intention of Parliament is omnibus bar of cash transactions in immovable property. This being so, the argument of the assessee is not tenable in the light of explicit provisions of section, made even explicitly wider by the Explanatory Notes to Finance Act 2015.
The second part of the argument is that section 269SS applies to immovable property and as the assessee is a contractor, she has transferred land as well as constructed building. The assessee has argued that part of the consideration is towards the constructed building and therefore falls outside the definition of immovable property. This argument of the assessee is also not tenable for the simple reason that “immovable property” has a wider definition to include not only land but builds appurtenant thereto. Even otherwise a reference to the intention of the Legislature would indicate that there is a bar on dealing in cash in immovable property transactions and therefore it is immaterial whether the assessee has purchased or sold such immovable property. What isconsequence is that in any transaction whether accounted or not thereshould be no cash dealings. The last argument of the assessee that the sum of 5 lakhs has been received on various dates and not as lump sum is also negated as there is an omnibus bar in dealing in cash for property transactions without any threshold limit.Lastly it is seen that the assessee has made out no reasonable cause u/s.273B. In the circumstances and basedon the discussions above, the levy of penalty of Rs.5 lakhs is upheld and all ground are dismissed. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication
Observation of the court
The first argument of Ld. AR is that the expression used in Sec.269SS is 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. The Ld. AR submitted that applying the rule of Ejusdem generis to the expression advance or otherwise, the phrase otherwise would not cover sale consideration and such sale transactions are excluded from the purview of Sec.269SS. However, we are unable to accept this argument. The Explanatory Notes to the Finance Act, 2015, enlarging the scope of Sec.269SS, clearly provide that 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. Very clearly, the intention of the amendment is to include sale consideration also arising out of immovable property within the ambit of Sec.269SS. This argument raised by Ld. AR stand rejected. 6. Another argument of Ld. AR is that the digital signatures on the penalty order could not be verified. However, Ld. Sr. DR produced copy of penalty order wherein digital signatures have clearly been affixed on the penalty order. The Ld. Sr. DR submitted that there is no further requirement that the digital signatures should be verified by the web browser. We concur with the plea of Ld. Sr. DR since the only requirement is that the order should be signed digitally and nothing more. This argument also stands rejected.
Proceeding further, from the facts, it emerges that the assessee has sold property for sale consideration of Rs.50 lacs out of which substantial sale consideration to the extent of Rs.45 Lacs has been received in Cheques whereas only a small sale consideration of Rs.5 Lacs has been received in cash. The sale transaction is duly evidenced by the registered agreement / deed. Considering the fact that the provisions of Sec.269SS are mainly to curb generation of black money by way of dealings in cash in immovable property transactions which is absence in the present case, we would hold that it is not a fit case for levy of impugned penalty. Therefore, we delete the same.
The appeal stand allowed in terms of our above order.
Order pronounced on 26th July,2023
In the result, appeal of the assessee is allowed and ruled in favour of the assessee