Income Tax Appellate Tribunal - Bangalore
Dabbahalli, Krishnegowda Harisha ... vs Income Tax Officer Ward-4(3)(3), ... on 27 April, 2026
ITANo.2457/Bang/2025
DabbahalliKrishnegowda Harisha, Bengaluru
IN THE INCOME TAX APPELLATE TRIBUNAL
"A''BENCH: BANGALORE
BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT
AND
SHRI KESHAV DUBEY, JUDICIAL MEMBER
ITA No. 2457/Bang/2025
Assessment Year : 2018-19
Dabbahalli Krishnegowda Harisha
No.3/16, Shop No.1, Mandarthi Complex
Sarakki Gate, Sarakki ITO
Vs.
Bengaluru 560 078 Ward 4(3)(3)
Bengaluru
PAN NO :AJDPH4966J
APPELLANT RESPONDENT
Appellant by : Shri Shivkumar, A.R.
Respondent by : Sri Balusamy N., D.R.
Date of Hearing : 18.02.2026
Date of Pronouncement : 27.04.2026
ORDER
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld.CIT(A)/NFAC dated 10.10.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1081645877(1) passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") for the AY 2018-19.
2. The assessee has raised the following grounds of appeal:-
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3. Brief facts of the case are that during the course of assessment proceedings, the AO observed that the assessee had taken/accepted cash loan from various persons amounting to Rs.2,00,000/-. The AO was of the opinion that the assessee has violated the section 269SS of the Act by accepting cash loan amounting to Rs.20, 000/- each and accordingly liable to pay penalty u/s 271D of the Act on contravention of section 269SS of the Act. As a consequence of the above, the AO initiated the penalty proceedings u/s 271D of the Act dated 04/09/2023. In response to the show cause notice/letter, the assessee submitted his reply dated 28.3.2024 stating that the assessee was under a honest and Bonafide belief that the provisions of section 269SS of the Act applies for the loans accepted in cash over Rs.20,000/- in a financial year and not for exact Rs.20,000/-. Further, had the assessee knew the fact that accepting the cash loan amount exactly of Rs.20,000/- was in violation of provisions of section 269SS of the Act, the assessee would have never accepted the same. The assessee also submitted that the acceptance of loan in cash was also unavoidable as the said amount was required to meet the registration expenses and other incidental charges for the registration of immovable property on 12/06/2017 and the transaction was also traceable and identifiable and accordingly submitted that the acceptance of cash loan was on an honest & Bonafide belief and there was reasonable cause for accepting the cash loan of Rs.2,00,000/-.
3.1. The ld. AO on the other hand, did not accept the contention of the assessee by stating that as a responsible citizen, the assessee is bound to know the provision of the Act. Further, ignorance of law is not an excuse for such default. The assessee ought to have received the amount in his bank account, however, the assessee has defaulted in making transaction in cash in the form of loans ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 4 of 14 which is prohibited as per the provisions of section 269SS of the Act and accordingly the AO was satisfied that the assessee had committed default within the meaning of section 269SS of the Act and therefore, imposed a penalty of Rs.2,00,000/- u/s 271D of the Act.
4. Aggrieved by the penalty order passed u/s 271D of the Act dated 11.6.2024, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee by not condoning the delay of 80 days as the assessee could not demonstrate that there was sufficient cause in filing the appeal belatedly within the meaning of section 249(3) of the Act read with section 5 of the Limitation Act. Accordingly, the appeal was not admitted for adjudication on merits.
6. Again aggrieved by the order of ld. CIT(A)/NFAC dated 10.10.2025, the assessee has filed present appeal before this Tribunal.
7. Before us, the ld. A.R. of the assessee vehemently submitted that the penalty order was passed by the AO on 11.6.2024 and the appeal before the ld. CIT(A) ought to have filed on or before 11.07.20204, however the appeal was actually filed on 29.8.2024 with an actual delay of 49 days & not 80 days as stated by the ld. CIT(A)/NFAC. The assessee had sought condonation of delay in Form 35 stating that the penalty order u/s 271D of the Act was delivered through e-mail on 11.6.2024. However, the assessee did not see his e-mail for few days as he was busy in some other priority issues. Further, the assessee submitted that during the month of July, 2024, the consultant of the assessee was busy in ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 5 of 14 filing return of income of non-audited assessees and therefore, it was not possible to file the appeal within the prescribed period. The appeal was finally ready by last week of August, 2024 and the assessee could filed the appeal with a delay of 49 days along with condonation of delay and accordingly prayed that the delay before the ld. CIT(A) may be condoned. Lastly, the ld. A.R. of the assessee vehemently submitted that there was reasonable cause in accepting the cash of Rs.20,000/- from each persons as the assessee was on an honest and Bonafide belief that the provisions of section 269SS of the Act applies for the loan accepted in cash over Rs.20,000/- in financial yar and not for exact Rs.20,000/- and accordingly prayed that the penalty may be deleted.
8. The ld. D.R. on the other hand vehemently supported the orders of authorities below and vehemently submitted that the assessee has violated the provisions of section 269SS of the Act by accepting the total cash loan of Rs.2,00,000/- from different parties & accordingly liable to pay penalty u/s 271D of the Act. Further, the ld. DR submitted that the assessee could not demonstrated the sufficient cause before the ld. CIT(A)/NFAC in filing the appeal belatedly by 49 days.
9. We have heard the rival submissions and perused the materials available on record. It is perceived that the explanation offered in the condonation application is plausible and sufficient cause has been shown by the assessee which prevented him from filing the appeal within the prescribed period before the ld. CIT(A)/NFAC and accordingly, we are inclined to condone the short delay of 49 days in filing the appeal and admit the appeal for adjudication.
ITA No.2457/Bang/2025DabbahalliKrishnegowda Harisha, Bengaluru Page 6 of 14 9.1 On going through the penalty order passed u/s 271D of the Act, we noticed that penalty u/s 271D of the Act was levied by the AO as the assessee had taken/accepted the cash loan from various persons amounting to Rs.2 lakhs. We are of the considered opinion that there is no dispute about taking/accepting the cash loan by the assessee from different persons for the purpose of payment of registration expenses and other incidental charges with regard to the registration of immovable property on 12/06/2017 and the transaction was also traceable and identifiable. Therefore, the genuineness of the transaction is clearly established. Before us, the AR of the assessee contended that the assessee was under a honest and Bonafide belief that the provisions of section 269SS of the Act applies for the loans accepted in cash over Rs.20,000/- in a financial year and not for exact Rs.20,000/-. Further, had the assessee knew the fact that accepting the cash loan amount exactly of Rs.20,000/- was in violation of provisions of section 269SS of the Act, the assessee would have never accepted the same.
9.2 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 7 of 14 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 by account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if -
the amount of such loan or deposit or specified sum or the aggregate
(a) amount of such loan, deposit and specified sum; or 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
(b) person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid;
or the amount or the aggregate amount referred to in clause (a) together with
(c) 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; ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 8 of 14 (c) any corporation established by a Central, State or Provincial Act;
any Government company as defined in clause (45) of section 2 of the
(d) Companies Act, 2013 (18 of 2013);
such other institution, association or body or class of institutions,
(e) 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, -
"banking company" means a company to which the provisions of the
(i) Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; "co-operative bank" shall have the same meaning as assigned to it in Part
(ii) V of the Banking Regulation Act, 1949 (10 of 1949);
(iii) "loan or deposit" means loan or deposit of money;
"specified sum" means any sum of money receivable, whether as advance
(iv) 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 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 9 of 14 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 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 10 of 14 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.
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."
9.3 Thus, the basic premise of section 269SS of the Act is 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 11 of 14 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".
9.4 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.
9.5 If assessee does not fulfil 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.
9.6 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 12 of 14 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. ParayankandiyalEravathKanapravan Kalliani Amma v. K. Devi ÅIR 1996 SC 1963. Therefore, in order to bring in application of section 27ID 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.
9.7 Levy of penalty under section 271D is not automatic. Before levying penalty, that concerned officer is required to find outthat 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 ITA No.2457/Bang/2025 DabbahalliKrishnegowda Harisha, Bengaluru Page 13 of 14 if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow.
9.8 In the instant case, acceptance of cash loan amounting to Rs. 2 lakhs is not disputed by either side. The assessee taken/accepted the cash loans under a honest and Bonafide belief that the provisions of section 269SS of the Act applies for the loans accepted in cash over Rs.20,000/- in a financial year and not for exact Rs.20,000/- and accordingly accepted cash loan of Rs. 20,000/- each from different persons. Further, the assessee contended that had he knew the fact that accepting the cash loan exactly of Rs.20,000/- was in violation of provisions of section 269SS of the Act, then the assessee would have never accepted the same. We find force in the contentions of the assessee. We noticed that the assessee in the present case had taken/accepted exact cash loan of Rs. 20,000/- from different parties & therefore we are inclined to accept that there was reasonable cause for accepting the cash loan of Rs. 20,000/- each from different persons.
9.9 Keeping all facts and relevant case laws (supra) into consideration, 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 in the case of the assessee. 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.2 lakhs.
ITA No.2457/Bang/2025DabbahalliKrishnegowda Harisha, Bengaluru Page 14 of 14
10. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 27th Apr, 2026 Sd/- Sd/-
(Prashant Maharishi) (Keshav Dubey)
Vice President JudicialMember
Bangalore,
Dated 27th Apr,2026.
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.