Income Tax Appellate Tribunal - Chennai
Sreenivasan Ramya,Coimbatore vs Acit, Ncc-2,, Coimbatore on 16 April, 2026
आयकर अपीलीय अिधकरण, 'ए' ायपीठ, चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
ी एस एस िव ने रिव, ाियक सद एवं ी एस. आर. रघुनाथा, लेखासद के सम"
BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND
SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER
आयकर अपीलसं./ITA No. 3162/CHNY/2025
( नधारण वष / Assessment Year:2020-21)
Sreenivasan Ramya, Assistant Commissioner of
No. 108, NSR Road, vs. Income Tax,
Saibaba Colony, Non Corporate Circle -2,
Coimbatore - 641 011. Coimbatore.
[PAN:EKBPR-2064-A]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/Appellant by : Mr. Jai V Vairav, CA
यथ क ओर से/Respondent by : Mr. Saujanya Ranjan, JCIT
सुनवाई क तार ख/Date of Hearing : 12.02.2026
घोषणा क तार ख/Date of Pronouncement : 16.04.2026
आदे श / O R D E R
PER S.R. RAGHUNATHA, AM:
The present appeal is filed by the assessee against the order dated 19.09.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "ld.CIT(A)"), dismissing the appeal filed by the assessee against the penalty order dated 17.12.2024 passed u/s.271D of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), pertaining to Assessment Year (A.Y.) 2020-21.
:-2-: ITA. No: 3162/Chny/2025
2. The assessee is an individual had not filed the return of income for the impugned assessment year 2020-21. As per the information available with the department, the assessee has sold immovable property for Rs.50,50,000/-. Accordingly, the AO issued the notice u/s. 148 of the Act and reopened the assessment. In response to notice u/s. 148 of the Act, the assessee filed return of income on 18.06.2024 by declaring a total income of Rs.60,830/-. Later, other statutory notices were issued during the course of assessment proceeding, and in response the assessee filed the details. The assessment was concluded by passing an order u/s.147 r.w.s. 144B of the Act dated 17.12.2024 by accepting the return of income filed by the assessee in response to notice u/s.148 of the Act. Further, the AO initiated the penalty proceedings u/s.271D of the Act for violation of provisions of section 269SS of the Act by accepting cash of Rs.12,62,500/- towards the sale consideration of immovable property. Accordingly, the statutory notices were issued u/s.271D of the Act to the assessee for levying penalty which is equal to cash receipts by Rs.12,62,500/-. In response, the assessee filed detailed reply explaining the reasonable cause for accepting the cash for sale of immovable property and prayed for not levying the penalty. However, the AO passed an order u/s.271D of the Act dated 04.06.2025 by levying penalty of Rs.12,62,000/-.
3. Aggrieved by the penalty order of the AO, the assessee preferred an appeal before the ld.CIT(A). On perusal of the submissions and grounds of appeal raised by the assessee, the ld.CIT(A) confirmed the penalty by passing an order dated 19.09.2025 by holding as under:
"6. I have carefully considered the penalty order and the ground raised by the appellant. In the instant case, the appellant had sold an immovable property and was in receipt of cash of Rs. 12,62,000/- as part payment. The penalty order of the AO states that the registered sale deed executed specifically mentions the receipt of payment in cash. The appellant contends in his ground that the whole transaction was made through cheque. The onus is upon the appellant to prove the nature of the transaction made during the transfer of property.
6.2 The appellant during the appellate proceedings had contended that the entire transaction was disclosed in her return of income including the cash receipt in favour of the transfer of immovable property. According to section 269SS, no :-3-: ITA. No: 3162/Chny/2025 person shall take or accept, twenty thousand rupees or more from any other person any loan or deposit otherwise than by an account payee cheque and failure to comply to section 269SS will attract penalty which shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. The relevant portion of the two sections is reproduced below:
"269SS. Mode of taking or accepting certain loans, deposits and specified sum. 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, 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 of 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 271D. Penalty for failure to comply with the provisions of section 269SS- 71(1)] if a person takes or accepts any loan or deposit 8for specified sum] in contravention of the provisions of section 26955, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit for specified sum] so taken or accepted."
6.3 The Tribunal, Hon'ble ITAT, Chennai, in the case of Sri Sai Balaji Gas Cylinder (P.) Ltd. v. Assistant Commissioner of Income-tax (OSD) reported in 155 taxmann.com 319 (Chennai Trib) [09-06-2023] held in favour of revenue and it observed as follows: -
II. Section 269SS, read with sections 269TT, 271D, 271E and 273B, of the Income-tax Act, 1961 (Reasonable cause) Assessment year 2012-13 Assessee had - Deposits Mode of accepting/taking accepted loans and advances from its Managing Director (MD) Assessing Officer levied penalty under sections 271D and 271E for contravention of provisions of sections 269SS and 269TT for accepting and re-paying loans and advances in cash It was observed that assessee could not explain as to why loans and advances had been received in cash - Further, assessee received a sum of Rs. 18 lakhs from MD on 14-9-2011, even though, assessee had more than Rs. 11 lakhs cash in hand as on that date in books of account Whether since assessee could not explain reasonable cause for accepting loans and advances in cash in contravention of provisions of sections 269SS and 269TT, penalty levied under sections 271D and 271E was justified - Held, yes [Paras 13 and 14].
6.4 Further, in the case of Mahak Singh vs. Commissioner of Income-tax [2013] 37 taxmann.com 390 (Allahabad) [12-08-2013] held the following: -
:-4-: ITA. No: 3162/Chny/2025 "Section 269SS, read with sections 271D and 2738, of the Income-tax Act, 1961-Loans or deposits, mode of taking or accepting - Assessment year 2005-06-Assessee took loan from four parties in cash in excess of Rs. 20 thousand agricultural land with a bank against loan taken from it -
On his failure to Assessee's case was that he had mortgaged his repay loan amount, bank had initiated attachment proceedings - Thus, in order to protect his agricultural land from being sold in open market, assessee borrowed aforesaid loan in cash in hurry so as to repay bank loan - Assessing Officer rejected assessee's explanation and passed a penalty order under section 271D for violating provisions of section 269SS Commissioner (Appeals) as well as Tribunal confirmed penalty order - Whether since authorities below concurrently held that there was no reasonable cause inasmuch as story set up by assessee to arrange money in hurry to save honour of family was not proved, assessee would not get benefit of section 273B Held, yes - Whether as a consequence, impugned penalty order was to be upheld - Held, yes."
There is no dispute that in the present case the amount of loan was raised and was deposited in the bank to save the agricultural land from being sold in recovery proceedings. The appellant, however, could not satisfactorily give explanation for the alleged hurry in which he had to arrange the money to be deposited in bank for release of the property.
6.5 The Hon'ble High Court of Allahabad in the case of Commissioner of Income- tax 1, Kanpur vs. Sunil Sugar Co. [2017] 85 taxmann.com 254 (Allahabad) [27- 07-2017] held in favour of revenue as follows: -
"Section 269SS, read with section 271D, of the Income-tax Act, 1961 Deposits Mode of taking/accepting (Penalty) - Assessment year 1994-95- On perusal of book entries of assessee firm, Assessing Officer noted that assessee had received loans/deposits to extent of Rs. 46 lakh through non-banking channel in contravention of section 269SS and consequently levied penalty under section 271D - Assessee submitted that said entries arose out of normal day to day business transactions and, they were not in nature of loan or deposit so as to attract provision of section 269SS - Whether once any amount received by assessee had been shown in its books of account, it partakes nature of deposit - Held, yes Whether since assessee could not prove that it had a reasonable cause which had occasioned above contravention to get any advantage under section 2738. Tribunal was not justified in deleting penalty Held. yes.
6.6 The Hon'ble High Cour of Punjab and Haryana in the case of Charan Dass Ashok Kumar vs. Commissioner of Income-tax [2014] 52 taxmann.com 424 (Punjab & Haryana)/ [2015] 231 Taxman 513 (Punjab & Haryana)/ [2014] 365 ITR 367 (Punjab & Haryana) (14-03-2014] held the matter as follows:-
"Section 269SS, read with section 271D of the Income-tax Act, 1961- Deposits Mode of taking/accepting (Penalty) - Assessment year 2006-07- Assessee-firm had accepted was of Rs. 5 lakhs in cash - Whether where :-5-: ITA. No: 3162/Chny/2025 assessee had failed to establish that there existed reasonable cause in taking or accepting said loan or deposit otherwise than by an account payee cheque or account payee bank draft, penalty levied was justified- Held, yes."
6.7 In view of the above judicial pronouncements, and considering circumstances of the case it is opined that the appellant was in receipt of cash in favour of transfer of property and it is in contravention of section 269SS It is acceptable if funds transferred outside the banking channel when the appellant and parties from whom payment was made in remote place where banking facility for encashment of the multicity cheques and/or transfer of funds was not available. There is a difference between the expression 'genuine and bona fide transaction' and the 'reasonable cause' for not complying with the provisions of section 269SS to avoid penalty proceeding under section 271D. The appellant failed to explain with reason in accepting deposit otherwise than by an account payee cheque or account payee bank draft. Further, the appellant failed to prove before the undersigned. In the light of the above discussions the penalty levied by the AO is upheld. The related grounds raised by the appellant are dismissed accordingly."
4. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us by raising the following grounds of appeal:
"1. The Learned Assessment Officer has erred in levying penalty of Rs 12.62,000 u/s 271D for alleged violation of Section 269SS without appreciating that the amount received in cash was part of the full and final sale consideration for transfer of immovable property, not a loan, deposit or advance, and thus lies outside the scope of Section 269SS.
2. The Learned Assessing Officer and CIT(A) failed to appreciate that Explanation (iv) to Section 269SS defining "specified sum" was intended only to cover advances received in relation to property transactions (as clarified by the Finance Act 2015 and CBDT Circular No. 19/2015 dated 27-11-2015), and not the cash component of registered sale consideration.
3. The learned Assessing officer and CIT(A) failed to consider that the entire sale consideration, including the cash portion, was disclosed in the registered document and in the return of income, and no part of the transaction was found to be unaccounted or intended for tax evasion.
4 The Learned Assessing Officer ought to have accepted that the cash receipt was necessitated by a medical emergency, and hence constituted a reasonable cause within the meaning of Section 2738. The penalty order ignores this vital fact and fails to record reasons for rejecting the assessee's explanation.
5. The Learned CIT(A) erred in law and on facts in confirming penalty without examining the legislative intent and judicial precedents of various Tribunals including Noordeen Ahmed Amina v. ITO (ITAT Chennai, 2023), Wahid Ali v. JCIT (ITAT Delhi, 2024), and ITO v. R Dhinagharan HUF (ITAT Chennai 2023), :-6-: ITA. No: 3162/Chny/2025 which have categorically held that Section 269SS does not apply to genuine cash sale consideration recorded in registered deeds.
6. The Learned CIT(A) has erred in holding that penalty urider Section 271D is automatic. It is well-settled in law [Hindustan Steel Ltd. v. State of Orissa (83 ITR 26 SC)] that penalty is not to be imposed for technical or venial breaches committed in good faith.
7. The order passed is contrary to the principle of natural justice inasmuch as the authority failed to consider the assessee's written explanation and proceeded mechanically to levy penalty merely because the cash component exceeded Rs 20,000.
8. The Learned CIT(A) erred in upholding penalty without recording a finding as to the existence of mens rea or intention to evade tax, thereby rendering the penalty order invalid, disproportionate and contrary to law.
9. Without prejudice, the penalty of Rs 12,62,000 being equal to the entire cash receipt is grossly disproportionate, unjust and contrary to the object of the Act, since the transaction was fully tax-neutral and did not result in any revenue loss to the department.
10. For these reasons and such additional grounds as may be urged at the time of hearing, the appellant prays that the impugned order passed under Section 271D and confirmed by the CIT(A) may kindly be set aside and the penalty of Rs 12,62,000/- imposed for the alleged violation of Section 269SS be deleted in full."
5. Before us, the ld.AR stated that the transactions of sale of immovable property has been properly disclosed in the income tax returns filed before the AO and the same has been accepted by the AO by passing an assessment order u/s. 147 of the Act. It proves that the transactions have been recorded in the books of accounts and accepted by the authorities as genuine. Therefore, there is no intention of avoiding any of the transactions from the eyes of tax authorities. Further, the word "specified sum" u/s. 269SS was intended only to cover advances received in relation to property transactions and not the cash component received at the time of registration itself towards sale consideration. Further, the cash has been accepted for the reason medical and emergency and hence it is a reasonable cause within the meaning of section 273B of the Act and hence, the levy of penalty u/s. 271D of the Act cannot be sustained. The ld.AR also relied on the following decisions :
(i) Noordeen Ahmed Amina vs ITO (ITAT Chennai, 2023) ITA No. 1118/Chny/2022 dated 26.07.2023 :-7-: ITA. No: 3162/Chny/2025
(ii) Wahid Ali vs JCIT (ITAT Delhi, 2024) ITA No. 1916/Del/2022 dated 08.01.2024
(iii) ITO vs R Dhinagharan HUF (ITAT Chennai, 2023) ITA No. 3329/Chny/2019 dated 29.12.2023
(iv) Hindustan Steel Ltd vs State of Orissa (83 ITR 26 SC)
6. In view of the above, the ld.AR prayed for deleting the penalty levied and confirmed by the ld.CIT(A).
7. Per contra, the ld.DR supported the orders of the authorities and prayed for confirming the same.
8. We have heard the rival submissions and perused the material available on record, including the penalty order passed u/s.271D of the Act, the impugned appellate order of the ld. CIT(A), and the case law relied upon by the assessee. The undisputed facts are that the assessee, an individual, sold an immovable property for a total consideration of Rs.50,50,000/-, out of which a sum of Rs.12,62,500/- was received in cash. It is also not in dispute that the transaction of sale of property was disclosed before the Department, that the assessee, in response to notice issued u/s.148 of the Act, filed return of income declaring total income of Rs.60,830/-, and that the assessment came to be completed u/s.147 r.w.s 144B of the Act by accepting the returned income. Thus, the underlying transaction of transfer of immovable property and the consideration received therefrom have not been doubted by the Revenue. The penalty has been levied solely on the footing that receipt of cash of Rs.12,62,500/- attracted the mischief of section 269SS, thereby warranting penalty u/s.271D of the Act.
9. The primary question which arises for consideration is whether the cash component received by the assessee as part of the final sale consideration for transfer of immovable property, duly reflected in the registered transaction, can be brought within the ambit of section 269SS of the Act. The said provision, as is well settled, was enacted to curb the proliferation of unaccounted transactions :-8-: ITA. No: 3162/Chny/2025 in the nature of loans, deposits, and, after the amendment, specified sums received in relation to transfer of immovable property. The contention of the ld.AR is that the expression "specified sum" covers only advance money received in relation to transfer of immovable property and not the amount received as part of the final sale consideration at the time of execution/registration of the sale transaction.
10. On a careful consideration of the statutory scheme, we find substance in the plea of the assessee. Explanation (iv) to section 269SS defines "specified sum" to mean 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. However, the legislative background and the context in which the provision was introduced indicate that the object was to regulate unaccounted cash receipts in property transactions, particularly amounts taken in advance prior to completion of transfer. Where the entire transaction culminates in a registered conveyance and the receipt forms part of the disclosed sale consideration itself, the character of such receipt stands on a different footing from a loan, deposit, or even a standalone advance disconnected from the completed transfer.
11. In the present case, the Revenue has not brought any material on record to show that the impugned cash receipt represented an undisclosed transaction, accommodation entry, or any device adopted to evade tax. On the contrary, the sale transaction itself stands accepted in the reassessment proceedings. No addition has been made on account of suppression of sale consideration or unexplained money. Therefore, the foundational object behind section 269SS, namely prevention of false explanation of unaccounted cash in the guise of loans, deposits, or similar receipts, does not appear to be attracted on the peculiar facts of the present case.
12. We further note that the assessee has consistently pleaded that the receipt of cash was on account of medical exigency and, therefore, there :-9-: ITA. No: 3162/Chny/2025 existed a reasonable cause within the meaning of section 273B of the Act. The authorities below have not properly controverted this explanation by bringing any material to show that the explanation was false, mala fide, or inherently improbable. It is trite law that penalty u/s.271D of the Act is not automatic merely because there is a technical breach. Once the assessee offers an explanation and demonstrates surrounding circumstances showing bona fides, the authority is required to examine the same in the light of section 273B. In the instant case, the explanation of medical emergency has not been meaningfully dealt with either in the penalty order or in the appellate order, except by mechanically observing that the amount was received in cash in excess of the prescribed threshold.
13. The judicial precedents cited by the ld.AR also lend support to the view that where cash is received as part of genuine sale consideration of immovable property and the transaction is duly recorded, section 269SS may not be invoked in a rigid or mechanical manner. The coordinate bench decisions referred to by the assessee, namely Noordeen Ahmed Amina v. ITO, Wahid Ali v. JCIT, and ITO v. R. Dhinagharan HUF (supra), have taken the view that genuine and disclosed cash sale consideration recorded in registered property documents does not automatically justify levy of penalty u/s.271D. Though each case turns on its own facts, the ratio emerging from these decisions is that the substance of the transaction and the legislative purpose of the provision must prevail over a purely literal or technical approach.
14. The reliance placed by the assessee on the decision of the Hon'ble Supreme Court in Hindustan Steel Ltd. v. State of Orissa is also apposite to the extent that penalty is not to be imposed merely because it is lawful to do so. Even in fiscal statutes, penalty provisions are required to be invoked with due regard to the conduct of the assessee, the surrounding circumstances, and the existence of contumacious or deliberate default. In the present case, the material on record does not indicate any attempt at tax evasion, concealment, :-10-: ITA. No: 3162/Chny/2025 or introduction of unaccounted money. The transaction is admitted, documented, and acted upon by the Department itself in the reassessment proceedings.
15. Having regard to the totality of the facts, we are of the considered view that the impugned penalty u/s.271D of the Act is not sustainable. Firstly, the cash receipt in question formed part of the disclosed and completed sale consideration of immovable property and cannot, in the facts of the present case, be equated with a loan, deposit, or such "specified sum" as would attract penal consequences u/s.271D of the Act in the manner understood by the lower authorities. Secondly, even assuming that there was a technical infraction, the explanation furnished by the assessee regarding medical urgency constitutes a plausible and bona fide explanation, thereby bringing the case within the protective ambit of section 273B of the Act.
16. Accordingly, we hold that the ld. CIT(A) was not justified in confirming the penalty of Rs.12,62,000/- levied by the AO u/s.271D of the Act. The same is directed to be deleted. The grounds raised by the assessee are allowed.
17. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16th April, 2026 at Chennai.
Sd/- Sd/-
(एस एस "व#वने$ र"व) (एस. आर. रघुनाथा)
(S.S. VISWANETHRA RAVI) (S.R. RAGHUNATHA)
%या यक सद'य/Judicial Member लेखा सद'य/Accountant Member
चे ई/Chennai,
िदनां क/Dated, the 16th April, 2026
JPV
आदे श की ितिलिप अ ेिषत/Copy to:
1. अपीलाथ#/Appellant
2. $%थ#/Respondent
3.आयकर आयु&/CIT- Chennai/Coimbatore/Madurai/Salem
4. िवभागीय $ितिनिध/DR
5. गाड+ फाईल/GF PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.04.20 10:59:09 +05'30'