MAHESHWARAPPA MUNIRAMU,BANGALORE V. JOINT COMMISSIONER OF INCOME TAX, RANGE 2(2), BENGALURU, BENGALURU

ITA 757/BANG/2025

AI Insights

The case involves Maheshwarappa Muniramu, who, along with his son, sold an immovable property and received a portion of the sale consideration in cash, which led to penalty proceedings under section 271D for violation of section 269SS of the Income Tax Act, 1961. The assessee argued that the cash was received under a bona fide belief and due to ignorance of the law, as he was a senior citizen with limited education. The Assessing Officer initially accepted the returned income without additions but later imposed a penalty for the cash transaction. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal, which found merit in the assessee's arguments and directed the deletion of the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773499 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 29-03-2025
• Other Referred Cases: Dimple Yadav vs. CIT, Charan Dass Ashok Kumar vs. CIT, Auto Piston MFG. Co. (P.) Ltd. vs. CIT, P. Baskar vs. CIT, M. Janardhana Rao vs. Jt. CIT, Chamundi Granites (P.) Ltd. vs. Dy. CIT, Bhagwati Prasad Bajoria (HUF) vs. CIT, CIT vs. Panchsheel Owners Associations
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAM
• Assessee Lawyers: NAGARAJ K.H.
• Keywords: Reasonable cause; Bonafide belief; Capital Gains; Ignorance of law; TDS; Search and seizure
• Section: 143(3); 244A; 273B

Judgement Text

"ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.757/Bang/2025 Assessment Year : 2017-18 Maheshwarappa Muniramu #4261/17, 2nd Cross, 20th Main Subramanya Nagar Bengaluru 560 021 PAN NO :AEMPM8290C Vs. JCIT Range 2(2) Bangalore APPELLANT RESPONDENT Appellant by : Sri Nagaraj K. H., CA Respondent by : Sri Subramaniam, JCIT DR Date of Hearing : 30.06.2025 Date of Pronouncement : 26.09.2025 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 04.02.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1072876849(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2017-18. 2. The assessee has raised the following grounds of appeal: Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 2 of 16 Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 3 of 16 3. Brief facts of the case are that the assessee filed his return of income for the assessment year 2017-18 on 31.07.2017 declaring total income of Rs. Nil & claimed refund of TDS made u/s 194IA amounting to Rs.42,720/- along with interest u/s 244A thereon. During the financial year 2016-17 relevant for the Asst. year 2017- 18, the assessee along with his son Sri M. Sumanth had jointly sold an immovable property vide sale deed registered as document No.1401/2016-17 on 30.6.2016 for a total sale consideration of Rs.85,43,100/-, out of which Rs.20 lakhs was received in cash. The assessee owns 50% share in the said property and accordingly the assessee had received his share of sale consideration amounting to Rs.42,71,550/- only, which is inclusive of cash consideration of Rs.10,00,000/-. The buyers had also deducted tax at source @1% on the assessee’s share of sale consideration amounting to Rs.42,714/-, which had been claimed as credit in the income tax return filed by the assessee. The AO completed the assessment proceedings u/s 143(3) of the Act on 6.2.2019 by accepting the returned income without making any additions and disallowances. 3.1 Thereafter, the ld. JCIT, Range-2(2) Bangalore had initiated penalty proceedings u/s 271D of the Act and accordingly issued a show cause notice dated 10.2.2022 u/s 274 read with section 271D of the Act with the following additional remarks : “It is observed that you have received cash of Rs. 20,00,000/- vide sale agreement dated 21.04.2016 against sale of immovable property vide sale deed no. 1401/16-17 dated 30.06.2016 out of total sale consideration of Rs.85,43,100/-. Further, you have received cash as repayment of loan from Sri Harish C.R (Rs.10,00,000/-) and from Sri B.S. Vinay(Rs.10,00,000/-). Hence total amount of Rs.40,00,000/- received in cash by you which contravened the provisions of section 269SS.” Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 4 of 16 3.2 During the course of penalty proceedings, the POA holder submitted that assessee is a senior citizen aged 79 years (DOB 9.3.1943) and suffering from various ailments and is bedridden. Further, the assessee has lost his memory and is not in a fit mental state to brief his tax consultant about the facts of his case. A medical certificate by the Medical Officer, Bowring & Lady Curzon Hospital, Bangalore was also produced before the AO. The tax consultant of the assessee requested to take a humanitarian and lenient view while concluding the penalty proceedings. Further, it is submitted that the assessee owns 50% of the share in the said property and therefore the share of the assessee is Rs.10 lakhs only instead of Rs.20 lakhs as alleged to be received from sale of property. Further, it is submitted that the assessee was under the impression/bonafide belief that the assessee can accept cash on sale of immovable property. The assessee accepted the cash in bonafide belief and due to ignorance of law. It is submitted that the assessee is not well aware of the provisions of income tax. Lastly it is submitted that the penalty u/s 271D is not mandatory. If the transactions are genuine and are so proved by the persons concerned, the rigor of those sections should not be invoked. 3.3 With regard to the receipt of cash of Rs.10,00,000/- each from Shri Harish C.R. and Shri B.S. Vinay, the assessee submitted that these persons are the relatives of the assessee and the money was given for meeting some family and personal requirements. Further the assessee had also not charged any interest from these persons. Therefore, it is contended that the assessee has neither taken any loan nor any deposits from Shri B.S. Vinay and Shri Harish C.R. The AO found the explanation of the assessee partly acceptable. Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 5 of 16 3.4 However, with regard to receipt of alleged cash amounting to Rs.20,00,000/-, the ld. JCIT held that the explanation like age factor & health issues for receipt of cash on sale of property is not found convincing especially when the substantial portion of sale consideration i.e. Rs.65,43,100/- was received in cheques and DDs. The JCIT inferred that the assessee has no proper explanation to offer for receiving cash in contravention of section 269SS of the Act. Accordingly, the assessee has failed to explain and substantiate that there was a reasonable cause for receipt of Rs.20 lakhs in cash in violation of provisions of section 269SS of the Act and accordingly levied penalty of Rs.20 lakhs u/s 271D of the Act vide order dated 30.8.2022. 4. Aggrieved by the penalty order dated 30/08/2022 passed u/s 271D of the Act, the assessee preferred an appeal before the ld. CIT(A)/NFAC. 5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee as during the course of appellate proceedings, the assessee had not been able to bring on record whether the cash paid to assessee by the buyer was out of explained sources. The assessee had failed to explain the necessity of accepting the payment in cash when banking channels of transaction are available which are more safe & swift. Further, ld. CIT(A)/NFAC was of the opinion that the assessee had also not brought on record whether cash component of transaction had been duly record in the sale deed for the purpose of stamp duty valuation or otherwise. Lastly the ld. CIT(A)/NFAC held that the explanation offered by the assessee did not demonstrate the sufficient cause in the acceptance of cash as a part of consideration of the immovable property. However, the contention of the assessee that he received cash amounting to Rs. 10,00,000/- & not Rs.20,00,000/-, the ld. CIT(A)/NFAC directed Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 6 of 16 the AO to verify these facts from the record/submission from the assessee and make computation of penalty demand accordingly. 6. Aggrieved by the order of ld. CIT(A)/NFAC dated 04/02/2025, the assessee has filed the present appeal before this Tribunal. The assessee has also filed a paper book comprising 158 pages containing therein various documents/records/orders/notices /submissions in support of his case. 7. Before us, the ld. A.R. of the assessee vehemently submitted that order passed u/s 271D of the Act is illegal and bad in law as there was no satisfaction recorded in the assessment order for which the penalty proceedings u/s 271D of the Act was initiated. Further, the ld. A.R. of the assessee submitted that the assessee being an illiterate & aged 82 years was under an honest and Bonafide belief that receipt of cash from sale of land is not covered u/s 269SS of the Act as the amendment was made by the Finance Act, 2015 w.e.f. 01/06/2015. Lastly, the ld. A.R. of the assessee submitted that the penalty order passed u/s 271D of the Act is illegal and bad in law specially when no notice of demand u/s 156 of the Act was issued and served to the assessee. 8. The ld. D.R. on the other hand supported the orders of the authorities below and submitted that there is clear violation of the provisions of section 269SS of the Act and therefore, the authorities below have rightly levied the penalty of Rs.20 lakhs and accordingly, the ld. D.R. prayed to dismiss the appeal of the assessee as no reasonable cause was demonstrated by the assessee in accepting the cash. 9. We have heard the rival submissions and perused the materials available on record. On going through the assessment Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 7 of 16 order passed u/s 143(3) of the Act dated 6.12.2019 for the Asst. year 2017-18, we take a note of the fact that there is no finding of the AO regarding any violation of provisions of section 269SS of the Act. The order of the assessment dated 06/12/2019 is very cryptic and only affirm that after verifying the details filed, the assessment is completed accepting the income declared. We also take a note of the fact that penalty proceedings u/s 271D of the Act were not initiated by the AO on or before the completion of the assessment proceedings. Thereafter, to the surprise of the assessee, a notice u/s 274 r.w.s. 271D of the Act was issued to the assessee on 10.2.2022 by the ld. JCIT Range-2(2) Bangalore after a gap of approx 2 years 2 months from the date of concluding the assessment. On going through the submissions made before the authorities below, we take note of the fact that the assessee along with his son Shri M. Sumanth had jointly sold an immovable property vide sale deed registered as document No.1401/2016-17 on 30.6.2016 for a total sale consideration of Rs.85,43,100/-, out of which Rs.20 lakhs was received in cash. The assessee owns 50% share in the said property and accordingly the assessee had received his share of sale consideration amounting to Rs.42,71,550/- only, which is inclusive of cash consideration of Rs.10,00,000/-. The buyers had also deducted tax at source @1% on the assessee’s share of sale consideration amounting to Rs.42,714/-, which had been claimed as credit in the income tax return filed by the assessee. The AO completed the assessment proceedings u/s 143(3) of the Act on 6.2.2019 by accepting the returned income without making any additions and disallowances. The ld. CIT(A)/NFAC had also observed in his Order that the assessee received substantial portion of sale consideration in cheques & DDs. We are of the considered opinion that there is no dispute by the either side with regard to the receipt of cash in the impugned transaction on sale of immovable property by the Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 8 of 16 assessee & therefore the genuineness of the transactions is clearly established. The contention of the assessee before both the authorities below are that the assessee is a senior citizen aged 82 years (DOB 9.3.1943) and he has studied only up to 4th Standard. Further, the assessee is a layman and did not understand the complicacy of the Income Tax Act, 1961. The assessee was under the impression/honest and Bonafide belief that the assessee can accept cash on sale of immovable property. It is submitted that the assessee is not well aware of the provisions of income tax. Thus, assessee contended that he had accepted the cash in Bonafide belief and due to ignorance of law and the assessee had no intention to disobey the law of land. We are of the considered opinion that the assessee has received his portion of share in cash amounting to Rs.10 lakhs only towards the sale consideration for transfer of immovable property. The assessee was under an honest and Bonafide belief that the receipt of cash are not covered u/s 269SS of the Act and accepted his share of sale consideration of Rs.10 lakhs in cash. This bonafide belief clearly established from the fact that the assessee had deposited the cash received on sale of immovable property into his bank account maintained with canara bank & thereafter deposited/transferred the same to the bank account opened under the capital gains account scheme. The assessee had duly disclosed the capital gains in his return of income. Moreover, the amendment effected by Finance Act, 2015, w.e.f 01/06/2015 to section 269SS of the Act, which had laid a restriction for receiving cash for transfer of immovable property would not have come to the knowledge of the assessee who is a senior citizen aged 82 years having elementary education and no knowledge of tax laws. Therefore, in our considered opinion there is a reasonable cause for contravention to section 269SS of the Act in accepting cash otherwise than account payee cheque/account payee draft. Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 9 of 16 9.1 The purpose of introduction of section 269SS of the Act was discussed in the judgement of Hon’ble Allahabad High Court in the case of Dimple Yadav reported in 379 ITR 177 (All.), wherein the Court considered the recourse of section 271D of the Act and also the provisions of section 273B of the Act to hold as under: “6. The short question that arises for consideration is, whether any penalty could be imposed under Section 271D of the Act? 7. The learned counsel for the department contended that the unsecured loan, which was more than Rs.20,000/- taken by the assessee from a political party should have been taken by a cheque or a demand draft through banking channels, which had not been done. The taking of the loan in cash, which was more than Rs.20,000/- was in gross violation of Section 269SS of the Act and, consequently, by operation of law, the penalty was rightly imposed, which had wrongly been deleted by the appellate authorities. The learned counsel contended that there was no urgency for the assessee to receive the entire amount in cash nor any dire need was shown for taking such huge amount in cash. In support of his submission, the learned counsel has placed reliance upon a decision of the Punjab and Haryana High Court, Charan Dass Ashok Kumar v. CIT [2014] 365 ITR 367/[2015] 231 Taxman 513/[2014] 52 taxmann.com 424 and Auto Piston MFG. Co. (P.) Ltd. v. CIT [2013] 355 ITR 414/218 Taxman 150 (Mag.)/38 taxmann.com 61 (Punj. & Har.) as well as the decision of the Madras High Court P. Baskarv. CIT [2012] 340 ITR 560/21 taxmann.com 78. 8. On the other hand, Sri Vijay Bahadur Singh, the learned Senior Counsel contended that the transaction of loan found place in the books of accounts of the assessee as well as by the lender, namely, the Samajwadi Party and that the assessing authority while completing the assessment order had found that the transaction of loan was genuine. The learned counsel submitted that in the absence of any finding that the transaction of loan was not genuine or it was a sham transaction to cover unaccounted money, no penalty could be imposed. In support of his submission, the learned Senior Counsel relied upon a decision of Gauhati High Court in CIT v. Bhagwati Prasad Bajoria (HUF)[2003] 263 ITR 487/133 Taxman 426, Chamundi Granites (P.) Ltd. v. Dy. CIT/Asstt. Director of Inspection v. Kum. A.B. Shanthi [2002] 255 ITR 258/122 Taxman 574 (SC)and M. Janardhana Rao v. Jt. CIT [2005] 273 ITR 50/142 Taxman 722 (SC). 9. In order to appreciate the submission of the learned counsel for the parties, it would be appropriate to refer to a few provisions which will have a bearing to the issue involved in the present case, namely, Sections 269SS, 271D and Section 273B of the Act. For facility, the said provisions are extracted hereunder: '269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 10 of 16 by account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if – (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, – (a) the Government; (b) any banking company, post office savings bank or co-operative bank; (c) any corporation established by a Central, State or Provincial Act; (d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013); (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette: Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act. Explanation. - For the purposes of this section, – (i) \"banking company\" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (ii) \"co-operative bank\" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (iii) \"loan or deposit\" means loan or deposit of money; (iv) \"specified sum\" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer takes place. 271D.(1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 11 of 16 way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 273B. Notwithstanding anything contained in the provisions of clause (b) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271H, section 271-I, clause (c) or clause (d) of sub- section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA, or section 272B or sub-section (1) or sub-section (1A) of section 272BB or clause (b) of subsection (1) of section or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.' 10. The object of introducing Section 269SS of the Act was to ensure that a tax payer was not allowed to give false explanation for his unaccounted money or if the tax payer made some false entries, he would not escape by giving false explanation for the same. It was found that during the search and seizure, unaccounted money was found and the tax payer usually gave an explanation that he had borrowed or received deposits from his relatives or friends and, consequently, it became easy for the so called lender to manipulate his record to suit the plea of the tax payer. In order to curb this menace, Section 269SS of the Act was introduced to do away with the menace of making false entries in the account books and later give an explanation for the same. Section 269SS of the Act consequently, required that no person shall take or accept any loan or deposit, if it exceeds more than Rs. 20,000/- in cash. 11. Section 271D of the Act provided that a person who takes or accepts any loan or deposit in contravention of the provision of Section 269SS of the Act, he would be liable to pay by way of penalty a sum equal to the amount of the loan or deposit so taken or accepted. 12. Section 271D of the Act caused undue hardship to the tax payers where they took a loan or deposit in cash exceeding Rs. 20,000/- even where there was a genuine or bona fide transaction. The legislature accordingly, introduced Section 273B of the Act, which provided that if there was a genuine and bona fide transaction and the tax payer could not get a loan or deposit by an account payee cheque or demand transaction for some bona fide reason, the authority vested with the power to impose penalty had a discretion not to levy the penalty. 13. In Chamundi Granites (P.) Ltd. (supra) the Supreme Court considered the provision of Section 271D and 273B of the Act and held:— \"It is important to note that another provision, namely section 273B was also incorporated which provides that notwithstanding anything contained in the Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 12 of 16 provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision is he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account-payee cheque or account-payee demand draft, then the penalty may not be levied. Therefore, undue hardship is very much mitigated by the inclusion of section 273B in the Act. If there was a genuine and bona fide transaction and if for any reason the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reasons, the authority vested with the power to impose penalty has got discretionary power.\" 14. In Bhagwati Prasad Bajoria's (HUF) (supra) the Gauhati High Court held: \"..... The transaction of loan has found place in the books of account of the assessee as well as the lender of the loan. None of the authorities have reached the conclusion that the transaction of the loan was not genuine and it was a sham transaction to cover up the unaccounted money. It appears to us that the assessee felt need of money and thus he approached the money-lender for advancement of the money, the transaction is reflected in the promissory notes executed by the assessee in favour of the lender. When there is an immediate need of money the person cannot get such money from the nationalised bank to satisfy the immediate requirement. .....\" 15. In the instant case, we find that the Tribunal has given a categorical finding that the assessee had established a reasonable cause for failure to comply with the provision of Section 269SS of the Act. The Tribunal further found that the loan given by the Samajwadi Party was a genuine loan, which was reflected in the books of accounts on account of the Samajwadi Party as well as in the books of account of the assessee and that the cash given by the party was deposited in the bank of the assessee and, thereafter, used for the purpose of converting the nazul land into free hold. The Tribunal found that the genuineness of the transaction was also not disputed by the Assessing Officer. 16. In the light of the aforesaid, we find that even though the assessee had taken a loan in cash, nonetheless, the loan transaction was a genuine transaction and was routed through the bank account of the assessee which clearly shows the bona fides of the assessee. The cash given by the lender was not unaccounted money but was duly reflected in their books of account. The Assessing Officer also accepted the explanation and found the transaction to be genuine. The contention of the learned counsel for the appellant that since there was no urgency, the assessee could have taken the loan through cheque and should have processed the matter through regular banking channels is immaterial, inasmuch as the genuineness of the transaction has not been disputed by the Assessing Officer. Further, we find that the cash was deposited in the bank account of the assessee and the money was thereafter, routed through the banking channel for payment to the government for converting the land into free hold property. Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 13 of 16 17. In the light of the aforesaid, we are of the view that reasonable cause had been shown by the assessee and the provisions of Section 273B of the Act was applicable. The appellate authorities were justified in holding that no penalty could be imposed since a reasonable cause was shown by the assessee.” 9.2 Though the judgment cited (supra) was given before the introduction of amendment, wherein property transaction in cash was included, but the basic premise of section 269SS of the Act remains the same i.e. to deter the use of unaccounted money and allow relief as per provisions of section 273B of the Act considering reasonable cause. On a similar footing, the Hon’ble Gujarat High Court in CIT Vs. Panchsheel Owners Associations (2017) 395 ITR 380 (Guj) (HC), held that “genuineness of the transaction had not been disputed and there is reasonable cause”. The Hon’ble Supreme Court in the case of Chamundi Granites (Pvt.) ltd. (2002) (122 taxman 574) (SC) while considering hardship caused by section 269SS of the Act as appended to the provisions of section 273B of the Act and held that “section 273B of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D of the Act, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan and otherwise than by account payee cheque, or account payee demand draft, then the penalty may not be levied”. 9.3 The test to be provided for reasonable cause u/s 273B of the Act by Hon’ble Supreme Court (255 ITR 258) for section 271D r.w.s. 269SS of the Act which are as under: a) Reasonable cause to take a loan otherwise than by account payee cheque or draft and b) Transaction is Bonafide. Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 14 of 16 9.4 If assessee does not fulfill both of these tests of reasonable cause, assessee fails to substantiate with evidences, Bonafide not of taking/accepting the sales consideration in cash and he was unable to procure the sales consideration by account payee cheque or account payee demand draft. 9.5 Section 273B starts with a non obstante clause and provides that notwithstanding anything contained in several provisions enumerated therein including section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. A clause beginning with 'notwithstanding anything' is sometimes appended to a section in the beginning with a view to give the enacting part of the section in case of conflict, an over-riding effect over the provision or Act mentioned in the non obstante clause - Orient Paper & Industries Ltd. v. State of Orissa AIR 1991 SC 672. A non obstante clause may be used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante clause, or to override it in specified circumstances - T.R. Thandur v. Union of India AlR 1996 SC 1643. The true effect of the non obstante clause is that in spite of the provision or the Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstanteclause will not be an impediment for the operation of the enactment - Smt. Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi ÅIR 1996 SC 1963. Therefore, in order to bring in application of section 27ID of the Act in the backdrop of section 273B, absence of reasonable cause, existence of which has to be established by the assessee, is the sine qua non. 9.6. Levy of penalty under section 271D is not automatic. Before levying penalty, that concerned officer is required to find out that Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 15 of 16 even if there was any failure referred to in the concerned provision, the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. 'Reasonable cause' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow. 9.7 In the instant case, sale of property and consequent receipt of sale consideration in cash are not disputed by the either side. The genuineness of the transaction is also accepted by the AO in the Assessment proceedings. The assessee after receiving the cash amounting to Rs.10,00,000/- on sale of property immediately deposited the cash of Rs.10,00,000/- into his bank Account and transfer the same into the capital gain account scheme. The assessee accepted the cash only on an honest & Bonafide belief and due to ignorance of law and therefore the assessee had no intention to disobey the law of land. 9.8 Keeping all facts and relevant case laws (supra) into consideration, in our considered opinion, there is a reasonable Printed from counselvise.com ITA No.757/Bang/2025 Maheshwarappa Muniramu, Bangalore Page 16 of 16 cause for contravention to section 269SS of the Act in accepting cash otherwise than account payee cheque/account payee draft in the case of the assessee and further the genuineness of the transactions is also accepted by the AO. We find the claim of the assessee is Bonafide and within the meaning of provisions of section 273B of the Act and accordingly we direct the AO to delete the penalty levied u/s 271D of the Act amounting to Rs.20,00,000/-. 10. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 26th Sept, 2025 Sd/- (Prashant Maharishi) Vice President Sd/- (Keshav Dubey) Judicial Member Bangalore, Dated 26th Sept, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. Printed from counselvise.com "