Mohammed Shabbir Bhojani Vs ITO (ITAT Hyderabad)
Core Issue: The primary issue was whether cash received as sale consideration for immovable property attracts penalty under Section 271D for violation of Section 269SS, and secondly, whether penalty can be levied without recording satisfaction in assessment proceedings.
Facts: The assessee, engaged in real estate business, sold multiple properties and received consideration partly in cheque and partly in cash at the time of registration before the Sub-Registrar. No regular assessment proceedings were conducted, yet the JCIT levied penalty of ₹36,00,000 under Section 271D alleging violation of Section 269SS.
AO / Department’s Findings: The Department held that cash receipt constitutes “specified sum” under Section 269SS, and since the amount exceeded ₹20,000, penalty u/s 271D equal to cash received was leviable. It was argued that JCIT has independent jurisdiction to initiate penalty based on information from Investigation Wing, even without assessment proceedings.
CIT(A) Decision: The CIT(A) confirmed the penalty, accepting the view that cash received in property transactions violates Section 269SS, and upheld the validity of penalty proceedings initiated by JCIT.
ITAT Findings: The ITAT deleted the penalty on two decisive grounds. First, it held that cash received as sale consideration at the time of execution of registered sale deed does NOT fall within the ambit of Section 269SS, as the provision targets loans, deposits, or advances (specified sum), not completed sale transactions. Second, the Tribunal held that penalty proceedings are invalid in absence of assessment proceedings or recorded satisfaction by the Assessing Officer, which is a mandatory jurisdictional requirement. Thus, the penalty u/s 271D was held unsustainable in law.
