Penalty Deleted: Cash Sale Consideration at Registration Not “Specified Sum” u/s 269SS

Penalty Deleted: Cash Sale Consideration at Registration Not “Specified Sum” u/s 269SS

Issue

Whether the penalty under Section 271D is applicable when the entire sale consideration for an immovable property is received in cash at the time of executing the sale deed, or if Section 269SS is restricted only to cash advances in property transactions.

Facts

• Transaction: The assessee sold a plot during FY 2016-17.

• Payment Mode: The entire sale consideration of Rs. 7.41 Lacs was received in cash.

• Timing: The full amount was received on 01-07-2016, exactly at the time of executing the sale deed. The assessee admitted that no advance was received prior to this date.

• AO’s Action: The Assessing Officer (AO) treated this cash receipt as a violation of Section 269SS (which prohibits accepting ‘specified sum’ in cash for property transfer) and levied a penalty of Rs. 7.41 Lacs (100% of the amount) under Section 271D.

• CIT(A)’s Stand: The CIT(A) confirmed the penalty.

Decision

1. “Specified Sum” Means Advance:

• The Tribunal relied on the Chennai Bench decision in ITO vs. Shri R. Dhinagharan (HUF). It held that the amendment to Section 269SS introducing the term “specified sum” was intended to curb the generation of black money via cash advances.

• The Finance Minister’s budget speech and the explanatory memorandum clarify that the provision applies to “advance or otherwise”—interpreted to mean money in the nature of an advance.

2. Distinction in Timing:

• Advance: If cash is received before the transfer (as a booking or advance), Section 269SS applies.

• Simultaneous Payment: If the payment is made at one go at the time of registering the sale deed (final payment), it does not fit the definition of “advance.” Therefore, Section 269SS is not attracted.

3. Wrong Section:

• The Tribunal noted that Section 269ST was introduced (effective AY 2017-18) specifically to cover other cash transactions of Rs. 2 Lakhs or more that are not covered by Section 269SS.

• Since the transaction did not fall under Section 269SS, the specific penalty under Section 271D was legally unsustainable.

4. Verdict:

• The appeal of the assessee was allowed. The penalty of Rs. 7.41 Lacs was deleted. [In favour of assessee]

Key Takeaways

• Interpretation of “Specified Sum”: This order reinforces the view that Section 269SS is strictly for “loans, deposits, and advances for property.” It may not cover spot-settlements where the entire money is exchanged simultaneously with the title deed registration.

• Section 269ST Risk: While the assessee escaped the Section 271D penalty here, such a transaction (Cash > Rs. 2 Lakhs) would typically be hit by Section 269ST, which carries a similar 100% penalty under Section 271DA. The Revenue failed here likely because they invoked the wrong section (269SS instead of 269ST).

• No Capital Gain, No Assessment: The Tribunal noted that no regular assessment was framed because the transaction resulted in a capital loss. The penalty proceedings were independent, highlighting that penalties can be initiated even if there is no taxable income, provided the technical violation exists.