ITAT Hyderabad Rules: No Section 271D Penalty for Cash Received as Final Sale Consideration at Time of Registration
In a significant ruling that provides relief to property sellers, the Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has clarified the scope of penalty provisions regarding cash transactions in real estate. In the case of Kesireddy Ravinder Reddy Vs ITO, the Tribunal held that cash accepted as a part of the sale consideration at the exact time of executing a registered sale deed does not attract penalty under Section 271D of the Income Tax Act 1961. The ruling distinguishes between "advances" and "final consideration," emphasizing that the legislative intent behind the amended Section 269SS was to curb black money generated through cash advances, not completed transactions recorded before a Sub-Registrar.
Factual Matrix of the Case
The dispute arose from the assessment year 2017-18 involving two related assessees, with the lead case being that of Mr. Kesireddy Ravinder Reddy. The facts, as presented, are as follows:
- The assessees, acting as co-owners (holding a 50% share each), transferred an immovable property via a sale deed dated July 29, 2016.
- The total sale consideration recorded was Rs. 45.21 lakh.
- Out of this total amount, a sum of Rs. 15.65 lakh was received in cash. Consequently, each co-owner received Rs. 7.82 lakh in cash.
- The return of income was filed on November 4, 2017, declaring income and claiming deductions under Chapter-VIA.
- The return was initially processed under Section 143(1). Subsequently, the Joint Commissioner of Income Tax (JCIT) initiated penalty proceedings, alleging a violation of Section 269SS.
- The JCIT treated the cash receipt as a "specified sum" and levied a penalty under Section 271D amounting to Rs. 7,82,500 (equivalent to the cash received) for each assessee.
The assessees appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the penalty. Aggrieved by this confirmation, the assessees moved the Tribunal.