Section 269SS Not Attracted to One-Time Cash Sale Consideration: ITAT Chandigarh Clarifies the Law
The rigours of section 269SS of the Income-tax Act, 1961, which prohibits acceptance of certain sums in cash beyond the prescribed limit, have once again come under judicial scrutiny.
In a significant and reassuring ruling, the Chandigarh Bench (SMC) of the Income Tax Appellate Tribunal, in Income Tax Appellate Tribunal – Chandigarh Bench, has held that one-time cash receipt of sale consideration at the time of execution and registration of a sale deed does not attract section 269SS, and consequently, no penalty under section 271D can be levied.
This ruling came in the case of Surjit Kaur vs ITO for Assessment Year 2017-18, where a penalty of ₹7.41 lakh was imposed solely on the ground that the assessee received the entire sale consideration of a plot in cash.
Facts of the Case
The assessee had sold a plot of land and received the entire consideration in cash at one time, contemporaneously with the execution and registration of the sale deed. Importantly, no advance money was received prior to the execution of the sale deed.
Despite this, the Assessing Officer levied penalty under section 271D, alleging violation of section 269SS, treating the cash receipt as a prohibited transaction.
What is noteworthy is that:
No assessment order was framed,
The transaction resulted in capital loss, and
There was no allegation of unaccounted income or tax evasion.
Yet, the penalty was imposed mechanically.
Understanding Section 269SS – What Is Actually Prohibited?
Section 269SS prohibits acceptance of:
Loan,
Deposit, or
Specified sum (advance or otherwise, in relation to transfer of immovable property)
in cash exceeding ₹20,000.
The legislative intent behind this provision is to curb circulation of black money through unaccounted loans, deposits, and property advances, not to penalise genuine completed sale transactions.
Tribunal’s Key Findings
The ITAT made the following crucial observations:
No Loan or Deposit Involved
The transaction was a completed sale, not a loan or deposit.
No “Specified Sum” Received
The assessee did not receive any advance in relation to the transfer. The entire amount was paid in one go at the time of registration, which is final sale consideration, not an advance.
Meaning of “Advance or Otherwise”
The Tribunal clarified that the expression “advance or otherwise” used in section 269SS qualifies the word “specified sum” and cannot be stretched to cover completed sale consideration. The word “otherwise” does not expand the scope to include final sale proceeds.
Reliance on Judicial Precedent
The Tribunal relied upon the earlier decision of the Chennai Bench of the ITAT in ITO v. R. Dhinagharan (HUF), wherein it was categorically held that cash received as full consideration at the time of sale deed execution does not fall within the ambit of section 269SS.
This view aligns with the consistent judicial approach that penalty provisions must be construed strictly, and no penalty can be imposed by extending the meaning of statutory language beyond its clear scope.
CBDT Circular Supports the Assessee
The Tribunal also placed reliance on CBDT Circular No. 19/2015 dated 27.11.2015, which clarified that the term “specified sum” refers to advance money received in relation to immovable property, and not to completed sale consideration.
This circular, being beneficial in nature, is binding on the tax authorities and reinforces the assessee’s stand.
Penalty Under Section 271D Set Aside
In light of the above reasoning, the Tribunal concluded that:
There was no violation of section 269SS,
The very foundation for levy of penalty failed, and
Penalty under section 271D was unsustainable in law.
Accordingly, the penalty of ₹7.41 lakh was deleted, and the appeal of the assessee was allowed.
Practical Takeaway for Taxpayers
This ruling offers significant relief and clarity, particularly in cases involving old property transactions where cash payments were customary. While accepting cash in property transactions is generally discouraged and may invite scrutiny under other provisions, section 269SS cannot be mechanically invoked for one-time cash sale consideration paid at registration, in the absence of advance or loan elements.
However, taxpayers must remember that each case turns on its facts, and proper documentation remains crucial.
In conclusion, the ITAT Chandigarh has rightly drawn a clear line between advances covered by section 269SS and final sale consideration, preventing over-zealous penal action and reaffirming the principle that penalty provisions cannot be applied by implication or inference.
The copy of the order is as under:
