VERAMBALLY THAZHIKUNIYIL VINODAN,KOZHIKODE V. THE JOINT COMMISSIONER OF INCOME TAX, KOCHI

ITA 350/COCH/2025

AI Insights

The case involves Verambally Thazhikuniyil Vinodan, a Non-Resident Indian engaged in property dealings, who faced penalties for accepting a substantial portion of cash as sale consideration for a property transaction, which violated section 269SS of the Income Tax Act, 1961. The penalty was initially contested at the level of the Joint Commissioner of Income Tax (JCIT) and upheld by the Commissioner of Income Tax (Appeals) (CIT(A)). The main legal contention revolved around whether the penalty proceedings were initiated within a reasonable period and whether the cash received constituted a 'specified sum' under section 269SS. The Tribunal found that the proceedings were timely and the cash transaction fell within the ambit of section 269SS, thus confirming the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714334 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2016-2017
• Other Referred Cases: Grihalaxmi Vision vs. Addl. CIT [2015] 379 ITR 100 (Ker.), PCIT vs. K. Umesh Shetty (2025) 303 taxman 318, Subramanian Harikumar Palakkad vs. JCIT in ITA No. 711/Coch/2024, CIT vs. Jai Laxmi Rice Mills 379 ITR 521 (SC), Grandhi Srivenkata Anarendra vs. JCIT in WP No. 32190/2023, Al-Ameen Educational Trust in ITA Nos. 199 & 203/2013, Kundrathur Finance & Chit Co. vs. JCIT, Manoj Lalwani vs. JCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJIT KUMAR DAS
• Assessee Lawyers: R. KRISHNAN
• Keywords: Set aside; Reasonable cause; Income from undisclosed sources; Ignorance of law; Search and seizure; Competent authority; Initiation of penalty proceedings
• Section: 143(3); 153A; 273B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SONJOY SARMA, JM ITA No. 350/Coch/2025 Assessment Year: 2016-17 Verambally Thazhikuniyil Vinodan, .......... Appellant 1 Silent Valley, High School Road, Perambra, Kozhikode. [PAN: ANLPV 7321 F] vs. Joint Commissioner of Income Tax .......... Respondent Central Range, Kochi Appellant by: Shri R. Krishnan, CA Respondent by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 13.06.2025 Date of Pronouncement: 06.08.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax, Kochi-3 [CIT(A)] dated 27.03.2025 for Assessment Year (AY) 2016-17. 2. Brief facts of the case are that the assessee is an individual and Non-Resident Indian, engaged in the business of dealing properties. No regular return of income u/s. 139(1) had been filed by the assessee for the A.Y. 2016-17. A search and seizure operations in the business and residential premises of the assessee on 10/02/2016 Printed from counselvise.com 2 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan were concluded. During the course of search and seizure operations, certain incriminating material was stated to have been found and seized. Based on this incriminating material, the ACIT, Central Circle-1, Kozhikodre (for short, 'AO') issued notice u/s. 153A of the Income Tax Act, 1961 (for short, 'the Act'). In response to the notice issued, the assessee filed his return of income declaring income of Rs. 7,36,140/-. Against the said return of income, the assessment was completed by the AO vide order dated 31/12/2017 passed u/s. 143(3) of the Act at a total income of Rs. 7,49,97,987/-. Subsequently, JCIT, Central Range, Kochi issued notice u/s. 274 r.w.s. 271D of the Act dated 18/10/2022 calling upon the assessee to show-cause as to why penalty should not be levied for violation of provisions of section 269SS, for accepting cash sale consideration of Rs. 8,32,99,000/- in connection with property at Sirajul Huda Educational Complex. The sale deed was registered on 16/06/2015 vide registration No.1135/2015only for Rs. 53,80,000/-,out of total consideration of Rs.13,72,99,000/-received in cash an amount of Rs. 8,32,99,000 on 15/06/2015. The JCIT was of the opinion that receipt of consideration in cash was made after the amended provision to section 269SS came into effect from01/06/2015. He formed an opinion that assessee had violated the provisions of section 269SS. Accordingly, issued a show-cause notice. In response to the show-cause notice, it is submitted that there is no violation of provisions of section 269SS, as the amount in question received on sale of immovable property, which was executed and Printed from counselvise.com 3 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan registered on 16/06/2015. It is further submitted that since part consideration was received much before the amendments to section 269SS come into effect, the assessee was forced to receive the balance amount of consideration in cash. However, JCIT rejected the above contention and proceeded with levy of penalty of Rs. 4,16,49,500/- being 50% share of the assessee in the sale consideration. 3. Being aggrieved, an appeal was filed before the CIT(A) contending that penalty proceedings are bad in law and the same were not initiated within a reasonable period and there is no violation of provisions of section 269SS.The provisions of section 269SS are not attracted in the case of money received on sale of immovable property and only it covers advance received against the sale of immovable property. It is further contended that most of the sale consideration was received prior to the amendment to the provisions of section 269SS. Therefore, the assessee was forced to accept the balance consideration in cash, however, Ld. CIT(A) placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of Grihalaxmi Vision vs. Addl. CIT [2015] 379 ITR 100 (Ker.) held that penalty proceedings initiated by the JCIT are well within the time. Accordingly, upheld the validity of initiation of penalty proceedings. The Ld. CIT(A) also held that ignorance does not constitute reasonable cause. Accordingly, confirmed the levy of penalty. Printed from counselvise.com 4 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan 4. Being aggrieved, the assessee is in appeal before the Tribunal in the present appeal. 5. Learned counsel for the assessee submitted that the initiation of penalty proceedings were bad in law. The proceedings were initiated not well within the reasonable period, placing reliance on the decision of Hon'ble Karnataka High Court in the case of PCIT vs. K. Umesh Shetty (2025) 303 taxman 318. It is further submitted that in absence of recording of satisfaction by the AO, the penalty proceedings initiated u/s. 271D are bad in law. Non-recording of satisfaction in the assessment order for initiation of penalty proceedings u/s. 271D bad in law. Finally, he submitted that receipt of sale consideration in cash at the time of sale of property does not come within the ambit of specified sum as defined in 269SS of the Act brought into effect from 01/06/2015. It is submitted that since the major portion of sale consideration was received well before the amended provision to section 269SS came into force, the assessee was forced to accept the balance consideration in cash which constitute the reasonable cause and, therefore, no penalty should be levied.f 6. On the other hand, ld. CIT-DR placing reliance on the provisions of clause (iv) of Explanation inserted to section 269SS of the Act submitted the fact that the assessee executed and registered the sale deed was apparent consideration of Rs. 53,80,000/- only and not filed the return of income within the time prescribed u/s. 139(1) Printed from counselvise.com 5 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan would demonstrate the contemptuous conduct of the assessee in concealing the actual consideration. He further submitted that the deletion of penalty would be defeated the very purpose because the enactment of section 269SS of the Act. He also placed reliance on the decision of coordinate bench of this Tribunal in the case of Subramanian Harikumar Palakkad vs. JCITin ITA No. 711/Coch/2024, dated 20/03/2024. 7. We have heard rival submissions and perused the material on record. 8. The issue that arises for our consideration is whether the Ld.CIT(A) was justified in confirming the levy of penalty u/s. 271D having regards to the facts of the case. Undisputed facts of the case are that assessee sold property jointly held with his wife Smt.Premaja Vinodan to Sirajul Huda Educational Complex for apparent consideration of Rs.53,80,000/- vide sale deed No. 1135/2015, dt. 16/06/2015, whereas the actual consideration received was Rs. 13,72,99,000/-. Out of this amount, a sum of Rs.8,32,99,000/- was received in cash on 15/06/2015. The said consideration was received on the following dates:- Date of receipt Amount received in cash (Rs.) 19/03/2015 40,00,000 24/04/2015 5,00,00,000 16/06/2015 8,32,99,000 Total 13,72,99,000 Printed from counselvise.com 6 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan From the above details, it is clear that a sum of Rs. 8,32,99,000/- was received in cash after amendment to the provisions of section 269SS came into effect from 01/06/2015. It is significant to note that the amount of actual sale consideration received was unearthed only during the course of search and seizure proceedings. But in the search and seizure operations, the assessee would not have disclosed the actual consideration received. The assessee had not filed the return of income u/s. 139(1) of the Act and the assessee concealed the sale consideration, in registered the sale deed as the consideration shown was of Rs. 53,80,000/- only. There is no dispute with regard to actual sale consideration of Rs. 13,72,99,000/- Based on this information, the AO formed a opinion that the assessee violated the provisions of section 269SS. Accordingly, made a reference on 11/10/2022 to the JCIT for initiation of penalty proceedings u/s. 271D of the Act. Based on this reference, JCIT issued a show-cause notice u/s. 274 r.w.s. 271D on 18/10/2022 and in response to the show-cause notice, the assessee filed explanation stating that the penalty proceedings were bad in law and the same were not initiated within the reasonable period, the assessee was ignorant about the amended provision to section 269SS, which came into effect just 15 days before the alleged violation took place. The said explanation was rejected by the AO and levied penalty of Rs. 4,16,49,500/- being 100% amount, 50% share in the property, being 50% held by the assessee in the property. Even, in appeal before the Ld. CIT(A), the issue of Printed from counselvise.com 7 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan limitation was rejected by placing reliance on the decision of Jurisdictional High Court in the case of Girihalaxmi Vision (supra) and held that there was no reasonable cause for accepting the sale consideration in cash. Accordingly, confirmed the levy of penalty. 9. The correctness of the findings of Ld. CIT(A) is under challenge before us. We shall now deal with the contention of the assessee that the proceedings initiated u/s. 271D are barred by limitation. The material on record clearly indicates that the AO has made reference to the JCIT to initiate penalty proceedings for violation of section 269SS on 11/10/2022. The JCIT initiated penalty proceedings on 18/10/2022 and the penalty order was finalized on 28/04/2023. Thus, the penalty proceedings were concluded within a period of 06 months from the date of initiation of penalty proceedings by the JCIT, therefore it cannot be said that penalty proceedings are barred by limitation, in view of the judgment of the Hon'ble Kerala High Court in the case of Grihalaxmi Vision (supra). If the assessment order is to be taken into consideration, as the initiation of penalty proceedings, it would amounts to penalty proceedings by the AO who is incompetent and therefore proceedings will be treated as without jurisdiction. The ratio of the decision of the Tribunal relied upon by learned authorized representative is not binding on us in view of the authoritative pronouncement of law by the Jurisdictional High Court in the case of Grihalaxmi Vision (supra). Printed from counselvise.com 8 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan 10. Next, we shall deal with the submission of the assessee that in absence of finding by the AO, the penalty proceedings are bad in law in view of the decision of Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills 379 ITR 521 (SC). The AO had not recorded his satisfaction in the assessment order for initiation of penalty proceedings u/s. 271D. However, the Hon'ble Kerala High Court in the case of Grihalaxmi Vision (supra) vide para 10, held that “the statement in the assessment order that the proceedings u/s. 271D and section 271E are initiated is inconsequential” as it amounts to initiation of proceedings by incompetent authority and, therefore, the date of initiation of penalty proceedings by the JCIT alone be reckoned. The decision of Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills (supra) deals with the issue whether penalty order passed, based on the original assessment order which was set aside would survive or not. The issue of limitation was not before the Hon'ble Apex Court. The issue, recording of satisfaction in the assessment order is mandatory or not, was not before the Hon'ble Apex Court. The observations made by the Hon'ble Apex Court are in the context of validity of original penalty proceedings in the remand proceedings before AO. Therefore, the decision of Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills (supra) does not come to the aid of the appellant. 11. In view of binding judgment of Hon'ble Kerala High Court in Grihalaxmi Vision’s case (supra), the decision of Hon'ble Andhra Printed from counselvise.com 9 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan Pradesh High Court in the case of Grandhi Srivenkata Anarendra vs. JCITin WP No. 32190/2023 dated 03/10/2024 cannot be applied. 12. Next contention of the assessee is that sale consideration received in cash at the time of execution of registration of sale deed, does not come within the ambit of other sums as defined in explanation to 269SS inserted by Finance Act, 2015. The said issue was dealt with by the Cochin Bench of this Tribunal in the case of Subramanian Harikumar Palakkad (supra) wherein after making a reference to the provisions of clause (iv) of Explanation inserted to section 269SS of the Act as amended by the Finance Act, 2015, held as under:- “8. We have heard the rival contentions of both the parties and perused the material available on record. Admittedly, in the present case the appellant had received sale consideration on sale of residential property located at Vadakkanthara Road, Palakkad in cash at the time of registration of the sale deed. It is the case of the Jt. Commissioner of Income Tax that receipt of sale of consideration of the property in cash falls within the ambit and scope of provisions of clause (iv) of Explanation inserted to section 269SS of the Act. The said provisions of clause (iv) of the Explanation to section 269SS reads as under: - “Mode of taking or accepting certain loans, deposits and specified sum. 269SS. …………………………………. (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.” In the present case, admittedly, the sale consideration against sale of immovable property was received in cash at the time of Printed from counselvise.com 10 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan execution and registration of sale deed. The Parliament has enacted the provisions of section 269SS in order to curb the device of unaccounted income brought to the books of account in the form of loans and deposits from third parties. The provisions of section 269SS bars a person from taking or accepting deposits otherwise than by an account payee bank draft, if the aggregate of such loan or deposit exceeds Rs. 20,000/-. These provisions were brought into the statute by Finance, 1984 w.e.f. 01.04.1984. The provisions of section 269SS are subsequently amended by enlarging the scope of section 269SS by insertion of clause (iv) to Explanation to section 269SS and amendment of clause (a) of section 269SS in order to curb generation of black money by dealing in cash in immovable property transactions. The CBDT has elaborated the amendment vide circular No. 19 of 2015 dated 27.11.2015 as follows: - “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 269-SS 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 269-SS of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or Printed from counselvise.com 11 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan deposit or any sum of money, whether as advance or otherwise, relation to transfer of an immovable property (specified sum) otherwise than by an account payer cheque or account payee bank draft or by electronic clearing system through a bank account, if for 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 sections 269-SS and 269T, respectively, have also been made. 54.6 Applicability: – These amendments have taken effect from 1-6-2015.” 9. As a result of the amended provisions of section 269SS, no person shall take or accept from other persons loans or deposits or any specified sum if the aggregate of the amount of such loan, deposit or specified sum exceeds Rs. 20,000/- otherwise by an account payee cheque or account payee bank draft or otherwise of any electronic clearing system through a bank account or through such electronic mode as may be specified. Violation of these provisions of section 269SS attracts penalty u/s. 271D of the Act in the absence of any reasonable cause as specified u/s. 273 of the Act. Therefore, in the present case the appellant had not received the consideration in advance. Therefore the question that requires to be determined by us is whether the transaction of receipt of sale consideration in cash at the time of execution and registration of Printed from counselvise.com 12 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan sale deed falls within the ambit and scope of provisions of clause (iv) of Explanation inserted to section 269SS of the Act. In other words, the issue is based on the interpretation of the words “or otherwise” found in clause (iv) of Explanation to section 269SS of the Act. No doubt, these words are not restrictive but inclusive. In the context of clause (iv) to Explanation to section 269SS is to fix the event or action with reference to transfer of immovable property. Therefore, the words “or otherwise” have to be read with the words “in relation to the transfer of immovable property”. Therefore, the receipt of sale consideration in cash against sale of immovable property falls within the ambit and scope of clause (iv) of Explanation to Section 269SS of the Act and, therefore, there is clear violation of provisions of section 269SS of the Act. Therefore, the appellant had violated provisions of section 269SS of the Act and liable to pay penalty subject to proving the existence of reasonable cause to the satisfaction of the Jt. Commissioner of Income Tax. In the present assessee the appellant had not took the plea of reasonable cause for non-levy of penalty. The only plea took by the learned counsel for the assessee is that there is no violation of provisions of section 269SS, as according to him the receipt of sale consideration in cash does not fall within the ambit of advance so as to attract clause (iv) of Explanation to section 269SS of the Act. She also placed reliance on the decision of the coordinate bench of the Tribunal in the case of Bhaskar Thattaruthodiyil (supra). 10. In our considered opinion the decision of the coordinate bench have failed to interpret the words “or otherwise” found in clause (iv) of the Explanation inserted to section 269SS of the Act. Thus, the decision of the coordinate bench is a per incuriam and does not constitute binding precedent. As regards the contention of the appellant that satisfaction to initiate penalty proceedings were recorded by the AO but the penalty proceedings were initiated by the Jt. Commissioner of Income Tax, therefore, the penalty proceedings are bad in law cannot be accepted in view of decision of the Hon'ble Kerala High Court in the case of Grihalakshmi Vision (supra) wherein it was held as under: - “10. Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of Printed from counselvise.com 13 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings could not have been done by the Assessing Officer. The statement in the assessment order that the proceedings under Section 271D and E are initiated is inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice issued by the Joint Commissioner to the assessee to which he has filed his reply” Thus, we do not find any merit in the appeal filed by the assessee. Grounds of appeal are dismissed.” 13. As regards to the reasonable cause, the plea of the assessee that the assessee was post facto accepted the sale consideration and the major portion of sale consideration was received prior to the amended provisions to section 269SS came into effect from 01/06/2015, cannot be accepted. In view of the fact that, butfor the search and seizure operations, the actual consideration received by the assessee would not have come into light. The contemptuous conduct of the assessee is demonstrated by the fact that sale deed was registered by the assessee for a consideration of Rs. 53,80,000/- only and the assessee had not disclosed the capital gain in the return of income u/s 139(1) by showing the actual sale consideration of Rs. 13,72,99,000/-. Therefore, the ratio of the decision of the Hon'ble Printed from counselvise.com 14 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan Kerala High Court in the case of CIT vs. M/sAl-Ameen Educational Trust in ITA Nos. 199 & 203/2013, dt. 13/03/2018 is squarely applicable as the assessee failed to show reasonable cause. The relevant portion of the said judgment reads as under:- “7. The facts indicate that for the year 2005-06, there were loans and advances of Rs.1,29,40,000/- and in the second year [2006-07] Rs.15,25,000/-. In the first year, out of Rs.1,28,40,000/-, Rs.49,00,000/- is with respect to the loan advanced from the daughter of the President; a further Rs.1,00,000/- again a loan from the daughter, having been paid in cheque. The AM in his order remanded the issue regarding Rs.49,00,000/- for fresh consideration on verification of the relevant facts and adjudication on merits, since a specific contention was taken of the daughter having taken loan from a Bank and advanced it on the very same day to the Trust. The JM passing the order at the first instance and the Vice-President after the split verdicts; deleted the penalty in toto. 8. The explanation of the assessee was manifold: (i) no evasion of tax , hence no penalty can be levied, (ii) deposits taken from staff were refundable, (iii) Rs.50 lakhs was a loan taken from one Zeenath, since cash was required urgently and (iv) no penalty proceedings issued by A.O. The loans and deposits taken from staff members was detailed in a list produced at Annexure-B. Annexure- B also indicated that some of those loans were repaid by cheques. The Addl. Commissioner who passed the original order under Section 271D found that there is no mandate of detection of evasion to impose penalty. Section 269SS was intended at plugging inflow of black money, to ensure transactions above a threshold limit are traceable and there is no differentiation as far as genuine transactions are concerned. The contention of refundable advance even if accepted, would not offer any mitigation to the assessee insofar as the penalty imposed under Section 271D since the law does not distinguish refundable or non-refundable loans or deposits. As far as urgent requirement of funds, it was found that the ground raised is of a general and vague nature without any substantiating material produced. The next contention as to the Printed from counselvise.com 15 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan Assessing Officer having not initiated any proceedings was rejected on the finding that the Assessing Officer had clearly recorded in the assessment order, the fact of the assessee having accepted loans and advances in violation of Section 269SS and noticed the penalty proceedings initiated separately. The A.C imposed penalty on the amounts received by the assessee other than by way of cheque or drafts. The first appellate authority also affirmed the same. The Tribunal, by majority deleted the penalty on the ground that the assessee had offered a reasonable cause for having accepted money in cash. 9. As to reasonable cause, various decisions were placed before us. P.K.Shamsuddin was a case in which an assessee who retired from a Circus Company, started an industry and took loans from various Banks through his relatives. A Division Bench of this Court found that borrowers from Bank having themselves taken a loan could not have issued cheques to further lend the amounts and in such circumstance there was a reasonable cause put forth. Especially in the context of there being no possibility of tax evasion or infusion of black money, the explanation offered by the assessee was found to be plausible. K.V.George was a case in which the assessee again contended ignorance of law as a ground for having accepted money other than by way of cheque in excess of the limit as prescribed under Section 269SS. This Court distinguished P.K.Shamsuddin and specifically referred to Kum.A.B.Shanthi. In Kum.A.B.Shanthi, it was held that 'if there was a genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account payee cheque or account payee demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretionary power not to levy penalty'. K.V.George, the assessee contended before the Department that he was putting up an industrial unit and had received loans from various agriculturists who were residing in the State of Tamil Nadu. It was found that there was no proof of the same; not was there proof of the assessee having applied for a loan; which was not sanctioned and disbursed in time, as pleaded. The Division Bench distinguished the decision in P.K.Shamsuddin on facts and upheld the imposition of penalty. What is discernible from a reading of the above decisions is that P.K.Shamsuddin has application only in the peculiar facts coming out in the said Printed from counselvise.com 16 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan decision; and cannot be applied across the board in all cases where there is violation of Section 269SS leading to imposition of penalty under Section 271D 10. A.B. Shanthi found Sections 269SS and 271D to be constitutionally valid. The amendment was found to have been brought in, to put an end to the practice of false and spurious explanation by the taxpayers, on recovery of unaccounted cash, in the searches conducted by the I.T department and to plug the loopholes insofar as subsequent explanation offered of loans and deposits; with confirmatory letters from third parties. The attack on the ground of violation of Article 14; since the lender or depositor; whose income the loan or deposit would be, has not been taxed or penalised, was negatived. It was found that the amendment intends to curb the menace of frivolous explanations being offered for unaccounted money, with certificates obtained from third parties, of loans and deposits. The borrower who adopts such device, to account for unaccounted money, was found to have been rightly penalised especially viewing it from the angle of tax evasion. The penal provision, as it exists with Section 271D, which replaced the earlier provision providing for even imprisonment, was found to be neither draconian nor exproprietory in nature. Section 273B was also noticed, which offered mitigation insofar as genuine and bonafide transactions, whenever reasonable cause is shown for acceptance of cash. Mitigation cannot be without reasonable cause and the provision alone will not absolve a defaulter assessee of penalty, whenever an explanation is offered. It had to be reasonable. What is reasonable is the vexing question for which we get some guidance from the decisions cited on both sides. 11. Saini Medical Store and Lakshmi Trust Company are cases in which the two High Courts found no substantial questions of law arising from the order of the Tribunal, which held the explanation offered by the respective assessees to be reasonable so as to provide mitigation under Section 273B. From a reading of the aforesaid decisions nothing is discernible as to the facts or the explanation. Smt.Rosary Prem caused interference to the penalty on the ground of limitation. None of these decisions are applicable to the facts of the present case. Printed from counselvise.com 17 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan 12. Kundrathur Finance & Chit Co. carrying on chit business offered an explanation for accepting cash deposits; that its activities were carried on in a locality where no banking facility was available, which was found to be acceptable by the High Court of Madras. Manoj Lalwani again was a case in which the assessee an exporter had obtained a cash loan from his brotherin- law, for the purpose of ensuring time bound supplies, from his suppliers to fulfil his export obligations. It was in this context that the Rajasthan High Court found reasonable cause, especially when the amounts were deposited in the bank account so as to satisfy the demands of the assessee's suppliers. On facts, we do not see any of these decisions coming to the aid of the assessee to be absolved from penalty; based on the frivolous explanation offered.” We are of the considered opinion that the very object and purpose of enactment of the provisions of section 269SS as amended from time to time would bedefeated,if the penalty is deleted in the circumstances of the present case. Thus, we have no hesitation in confirming the order of levy of penalty passed u/s. 271D r.w.s. 274 of the Act. Accordingly, we do not find any merit in the appeal filed by the assessee, the same is hereby dismissed. 14. In the result, the appeal filed by the assessee is dismissed Order pronounced in the open court on 06th August, 2025. Sd/- Sd/- (SONJOY SARMA) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 06th August, 2025 Printed from counselvise.com 18 ITA No. 350/Coch/2025 Verambally Thazhikuniyil Vinodan vr/- Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin Printed from counselvise.com "