UTTARAKHAND ENTERPRISES LTD.,DEHRADUN V. JCIT, DEHRADUN

ITA 90/DDN/2023

AI Insights

The case revolves around a penalty imposed on Uttarakhand Enterprises Ltd. by the Joint Commissioner of Income Tax (JCIT) for allegedly violating section 269SS of the Income Tax Act, 1961, which prohibits accepting loans or deposits of Rs. 20,000 or more in cash. The company had sold land to 32 different buyers and received cash, which the JCIT considered a violation of section 269SS, leading to a penalty under section 271D. The company contested the penalty, arguing that the cash received was not in the nature of a loan or deposit but a sale consideration, and thus, section 269SS did not apply. The Tribunal agreed with the company's interpretation, referencing decisions from other ITAT benches and the Finance Minister's budget speech, which clarified that the amendment to section 269SS was intended to curb black money in real estate by prohibiting cash advances, not cash received as sale consideration.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 23522 (ITAT-DEHRADUN)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-10-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 17-11-2023
• Other Referred Cases: Sri Raja Reddy Nalla, Warangal vs. Addl.CIT, ITO, Kanchipuram vs. Shri R. Dhinagharan (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL SINGH
• Assessee Lawyers: MAHESH B. CHIBBER
• Keywords: Reasonable cause; Capital Gains
• Section: 68; 271D; 273B; 271E; 271B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH : DEHRADUN BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.90/DDN/2023 Assessment Year: 2016-17 Uttarakhand Enterprises Ltd., 10, Balbeer Road, Dehradun, Uttarakhand – 248 001. PAN: AAACT7267Q Vs JCIT, Range-1, 13A, Subhash Road, Dehradun, (Appellant) (Respondent) Assessee by : Shri Mahesh B. Chibber, Advocate Revenue by : Shri Amar Pal Singh, JCIT, DR Date of Hearing : 24.10.2024 Date of Pronouncement : .11.2024 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Assessee against the order dated 21.09.2023 of the Commissioner of Income Tax (Appeals), NFAC, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.CIT(A), Dehradun/10160/2019-20 arising out of the appeal before it against the penalty order dated 24/05/2019 levied u/s 271D of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Joint commissioner of Income Tax (hereinafter referred to as the Ld. JCIT). ITA No.90/DDN/2023 2 2. The controversy involved in the present appeal is the legality of levy of penalty u/s 271D of the Act. The assessee company had claimed to be engaged in the business of buying, selling, importing or exporting or otherwise carrying on different sort of businesses. In the return of income filed, the assessee has shown revenue at nil as no operational activities were carried out during the year. However, the company had sold land to 32 different persons and had declared long-term capital gain of Rs.1,84,69,469/- and had shown cash in hand of rs.1,22,96,274/-. The case of the assessee was selected for scrutiny for the reason of verification of cash in hand and as the assessee had claimed the cash was received against sale of 32 sale deeds, there was high cash in hand. The AO had accepted the return of income of the capital gains of Rs.1,84,69,469/-. Subsequently, the Ld. JCIT, vide order dated 24.05.2019, issued a notice on 06.12.2018 observing that all the sale deeds have been executed after 01.06.2015 and lands have been sold to 32 different buyers receiving a cash amount of Rs.1,28,47,000/- which is in violation of section 269SS of the Act and for which penalty u/s 271B should be levied. The assessee had given a reply that the provisions of section 269SS of the Act are not applicable as the money received was not by way of advance, but, at the time of execution of sale deeds. However, the ld. JCIT was not satisfied and considered the provisions of section 269SS of the Act applicable on the premise that the phrase “specified sums” mentioned in section 269SS cover the amount received in cash. The ld. ITA No.90/DDN/2023 3 JCIT was of the view that ‘specified sum’ means any sum receivable. The ld. CIT(A) has sustained the penalty and we consider it appropriate to reproduce the relevant part of the adjudication:- “Ground No.1:- the appellant has contended that it did not violate the provisions of section 269SS of the Act since no advance or loan or deposits were received from the buyers of the lands. As per facts of the case the Ld. AO had observed that the assessee had sold lands to 32 different buyers and received cash totaling Rs.1,28,47,000/-. Consequently, in view of the violation of the provisions of section 269SS of the Act the Ld. JCIT imposed an equivalent penalty u/s 271D of the Act on the appellant. The appellant has submitted that there must be acceptance of loan, deposit or other specified sum and the other person should act as depositor whereas in his case of sale transactions, the depositor is missing. Further, the sale transaction cannot be stated to be between a depositor and a depositee and that a buyer cannot be a depositor in any manner. Having perused the penalty order of Ld. JCIT and the contentions of the appellant, it would be pertinent to mention that undoubtedly section 269SS broadly deals with acceptance or deposit of loans. Section 269SS of the Act is again reproduced as below: - 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 by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed ], if,- 1. The amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum or 2. 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 3. The amount or the aggregate amount referred to in clause (a) together with the amount of the aggregate amount referred to in clause (b), is twenty thousand rupees or more. ITA No.90/DDN/2023 4 However, it is seen that other than advancing and accepting of loans there is a residuary term used in this section which encompasses all other transactions done in cash beyond the specified sums. This term is indicated as \"Specified Sum\". Hence, any other cash transactions other than those pertaining to loans or advances shall fall within this category which shall include the cash receipts of the appellant from its buyers. Hence, the contention that the appellant did not receive any loan or deposit from the buyer of the land is not correct and is liable to be rejected. The appellant has produced the wrong interpretation of the section including the interpretation of the definition of \"Specified Sum\". The application of section 269SS of the Act to the facts of the case of the appellant by the AO and imposition of consequent penalty u/s 271D of the Act is within the precincts of the then relevant provisions of Income Tax Act. In view of above, the ground No. 1 of appeal is hereby dismissed. Ground No.2: the appellant is taken the ground that the cash transactions of the sale of more than Rs.2,00,000/- are to be brought to tax as per new section 269ST introduced w.e.f. 01.04.2017. It is pertinent to mention from the facts of the case of the appellant pertain to assessment year 2016-17 corresponding to F.Y. 2015-16. Hence, section 269ST was not in existence at the material time. Further, it lends more credence to the action of the AO to initiate penalty for violation of section 269SS of the Act which was the relevant Section during the A.Y. 2016-17. Hence, the AO was correct to bracket the appellants cash transaction u/s 269SS. In view of above, the ground No. 2 of appeal is hereby dismissed. Ground No.3:- The appellant has contended that this is a genuine transaction and should not be treated as black money to impose penalty. It is important to mention that Ld. AO in his impugned Assessment order has already stated that the cash sales have been recorded in the books of accounts and the registered sales deeds produced by the assessee. To this effect no addition has been made u/s 68 of the Act by the Ld. A.O. However, the material fact is only that the appellant has accepted cash from his buyers beyond the limit prescribed u/s 269SS of the Act. The provision of section 269SS are just one of the intentions of the legislature to ITA No.90/DDN/2023 5 curb use of unaccounted cash in business transactions. Further, nowhere has the appellant been able to prove that he has a reasonable cause to accept cash from the buyers. In view of the discussion, the ground of appeal no. 3 is hereby dismissed. In the result, the appeal is dismissed.” 3. On hearing both the sides, it comes up that primarily the contention of the ld. counsel for the assessee is that no satisfaction was recorded for the initiation of penalty proceedings by the AO and JCIT had no jurisdiction to issue the notices and for this reliance has been placed on the judgement of the Hyderabad Bench of ITAT in the case Sri Raja Reddy Nalla, Warangal vs. Addl.CIT, ITA No.520/Hyd/2022, order dated 31.05.2023. 3.1 Then, it was submitted that the AO has also not drawn any conclusion that there was violation of the provisions of section 269SS as the entire sale proceeds were tendered as income. 3.2 The ld. counsel also submitted that specified sum as referred in Explanation to section 269SS of the Act is only applicable for advance money given at the time of entering into agreement for purchase and not for sale consideration received at the time of registration of sale deed and for this reliance has been placed on the decision of Chennai Bench of the ITAT in the case ITO, Kanchipuram vs. Shri R. Dhinagharan (HUF), ITA No.3329/Chny/2019, order dated 29.12.2023. 3.3 The ld. DR, however, relied the orders of the ld. tax authorities below. ITA No.90/DDN/2023 6 4. We have given thoughtful consideration to the matter on record and the submissions. It is undisputed that when the assessment order was passed, not a word was mentioned by the AO that any query was raised or the issue of application of section 269SS of the Act was examined during the assessment proceedings. 4.1 As we go through the order of Ld. JCIT dated 24.05.2019, we find that it is mentioned that AO had submitted a proposal for initiation of penalty u/s 271D for contravention of section 269SS of the Act. We fail to reconcile between the assessment order and the penalty order as to if the AO had in any way shown any indulgence during the assessment proceedings about the contravention of section 269SS of the Act. We are of the considered view that even if it is assumed that subsequent to the assessment order dated 26.11.2018 the AO had submitted a proposal for initiation of penalty u/s 271D, then, the particulars of that communication should have been part of the impugned penalty order. In any case, if after conclusion of the assessment order any proposal was forwarded by the AO that does not fulfill the mandate of law which requires that the satisfaction of violation of section 269SS and a reference for initiating penalty u/s 271D of the Act should be made and recorded by the AO in the body of the assessment order. The reliance in this regard is rightly placed by Ld. AR on the decision of the Hyderabad Bench of the ITAT in the case of Sri Raja Reddy Nalla, Warangal (supra). ITA No.90/DDN/2023 7 5. Further, we are of the considered view that the interpretation given to words, ‘specified sum’ by terming it as ‘residuary term’ to encompass all other transactions done in cash beyond a specified sums is incorrect interpretation. This aspect has been duly examined in the decision of the Chennai Bench in the case of Shri R. Dhinagharan (HUF)(supra) and we consider it appropriate to reproduce the relevant findings from para 12 onwards:- “12. We have heard the rival contentions, and gone through the facts and circumstances of the case. We find that the Revenue has challenged the correctness of the decision rendered by the CIT(A) vide order dated 30.09.2019 in deleting the penalty levied u/s 271D of the Act vide penalty order dated 12.06.2019. The CIT(A) had deleted the penalty on two counts namely on the non-applicability of the provisions of Section 269SS of the Act to the facts of the present case and on the ground of reasonable cause within the scope of Section 273B of theAct. We noted that the provisions of Section 269SS of the Act was amended w.e.f. 01.06.2015 to include the 'specified sum' within its ambit and the said term was defined in Explanation to the said Section which is reproduced as under: o \"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. The Budget Speech of the Hon'ble Finance Minister while placing the Finance Bill, 2015 highlighting the intention of the amendment relevant for decision making in the present appeal is captured below: 3. A. Measures to curb black money 3.1 With a view to curbing the generation of black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re- payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property. It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions. ITA No.90/DDN/2023 8 The Memorandum forming part of Finance Bill, 201.5 highlighting the intention of the amendment is captured below: B. MEASURES TO CURB BLACK MONEY Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances The existing provisions contained in section 269SS of the Income- tax Act provide 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 have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide 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 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 it is proposed to amend section 269SS, of the Income-tax Act so as 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 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 is also proposed to amend section 269T of the Income-tax Act so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. It is further proposed to make consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, ITA No.90/DDN/2023 9 respectively. These amendments will take effect from 1st day of June, 2015. The Notes on Clauses forming part of Finance Bill, 2015 highlighting the intention of the amendment is captured below: Clause 66 of the Bill seeks to substitute section 269SS of the Income-tax Act relating to mode of taking or accepting certain loans and deposits. The existing provision contained in section 269SS provides 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. It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, 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 or specified sum is twenty thousand rupees or more. It is also proposed to define \"specified sum\" as any sum of money receivable, whether as advance or otherwise in relation to transfer of an immovable property whether or not the transfer materialises. These amendments will take effect from 1st June, 2015. 12.1 In the present case, the sale consideration was received in cash at the time of execution of multiple sale deeds from different persons for the sale of plots and accepted as genuine in the assessment order completed on 23.05.2018 and admittedly there was no advance received by the seller. The amended provisions of Section 269SS of the Act was applied by the A.O to the facts of the present case only to the sale consideration received as 'specified sum' and on such presumption the JCIT levied penalty u/s 271D of the Act. The intention of the amendment is very clear right from the Budget speech of the Finance Minister that the said amendment is brought into the statute in Section 269SS of the Act would get attracted to sum received in cash as an advance in an immovable property transaction and not to the completed transaction namely cash received as a sale consideration at the time of execution of the registered sale deed. In fact, the statute brought in another amendment in Section 269ST of the Act from the assessment year 2017-18 with a view to cover all situations of cash transaction Rs. 2 Lakhs or over other than the situation captured in Section 269SS of the Act. This provision has been explained with more clarity by the CBDT Circular No.19 of 2015, dated 27.11.2015 and the relevant circular reads as under:- ITA No.90/DDN/2023 10 Departmental Circular No.19 of 2015, dated 27-11-2015:- 54. Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances. 54.1 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. 54.2 Similarly, the 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 loan or deposit is twenty thousand rupees or more. 54.3 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. 54.4 Section 269T of the Income-tax Act has also been amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place. 54.5 Consequential amendments in section 271D and section 271E, to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively, have also been made. ITA No.90/DDN/2023 11 54.6 Applicability: These amendments have taken effect from 1st day of June, 2015. From the above provisions, Memorandum explaining the intention of amendment by Finance Bill, 2015 including the definition of 'sum specified' brought in the Explanation to Section 269SS of the Act, it is clear that the intention for brining this provision was to curb the generation of black money in real estate prohibiting acceptance or repayment of advance in cash of Rs.20,000/- or more for any transaction in immovable property. This was explained by Hon'ble Finance Minister while placing the Finance Bill, 2015 in her budget speech highlighting the intention of the amendment that the amendment in Explanation to Section 269SS i.e., 'sum specified' means only applicable for advance receivable, whether as advance or otherwise means advance can be in any manner. Hence, this provision will not apply to the transaction that happens at the time of final payment at the time of registration of sale deed and payment is made before sub-registrar at the time of registration of property. In the present case before us, it is an admitted fact that all sale deeds were registered and cash payment was made at one go before the sub- registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances of the case and hence, penalty is not exigible in this case. Hence, we confirm the order of CIT(A) deleting the penalty but on entirely different ground i.e., on jurisdictional issue only. Accordingly, the appeal of the Revenue is dismissed.” 6. In the light of the aforesaid discussion, we consider the penalty levied to be against the provisions of law. The grounds are sustained. The impugned penalty is quashed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07.11.2024. Sd/- Sd/- (BRAJESH KUMAR SINGH) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07th November, 2024. ITA No.90/DDN/2023 12 dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, Dehradun "