Naresh Kumar Vs ITO (ITAT Delhi)
Delhi ITAT Deletes Penalties under Sections 271D & 271E: Cash Transactions with Farmers Held Protected by ‘Reasonable Cause’
The Delhi ITAT deleted penalties of ₹34 lakh each levied under sections 271D and 271E for alleged violations of sections 269SS and 269T, holding that the assessee had established a reasonable cause under section 273B. The Tribunal accepted that the cash receipts and repayments were genuine transactions connected with the proposed purchase of agricultural land.
The assessee, an agriculturist, had received cash from three farmers for purchase of agricultural land. However, the transaction could not materialise due to the death of the assessee’s father, following which the amounts were returned to the farmers in cash after about six months. The Assessing Officer treated the cash receipts and repayments as violations of sections 269SS and 269T and levied penalties under sections 271D and 271E, which were confirmed by the CIT(A).
Before the Tribunal, the assessee produced bank statements, the father’s death certificate, affidavits, revenue records (Jamabandi), and other supporting documents to establish the genuineness of the transactions and the circumstances leading to the cancellation of the land deal.
The Tribunal found that these documents sufficiently demonstrated a reasonable cause for receiving and repaying the amounts in cash. It observed that the transactions were bona fide, arose out of a failed agricultural land transaction, and were not intended to evade tax.
Relying on the Pune ITAT decision in Nilons Enterprises Pvt. Ltd. v. ITO, which followed a jurisdictional High Court decision affirmed by dismissal of the Revenue’s SLP by the Supreme Court, the Tribunal held that where reasonable cause exists, penalties under sections 271D and 271E cannot be sustained. Accordingly, it set aside the orders of the Assessing Officer and the CIT(A) and deleted both penalties.
Cases Discussed
- Nilons Enterprises Pvt. Ltd. vs. ITO (ITAT Pune), ITA No. 1600/Pun./2024, order dated 15.01.2025
- [2019] 102 taxmann.com 57 (SC)
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeals filed by the assessee are against the orders dated 11.11.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [hereinafter referred to as “the CIT(A)”] under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) arising out of assessment orders dated 25.09.2024 and 24.09.2024 passed by Ld. Assessing Officer (‘AO’) u/s 271D and 271E of the Act respectively for assessment year 2016-17.
2. Brief facts of the case are that the information on Insight Portal that the assessee Naresh Kumar had made cash deposit and earned interest other than interest on securities to the tune of Rs. 1,24,38,724/- (Cash Deposit Rs. 1,20,01,000/-, interest Rs. 4,37,724/-) during the financial year 2015-16 relevant to assessment year 2016-17 was available. The assessee did not file return of income. The case was reopened and notice u/s 148 of the Act dated 29.03.2023 was issued. The assessment u/s 147 r.w.s. 144 of the Act was completed on 16.03.2024 on Nil income. During the assessment proceedings, it was observed that the assessee had violated section 269SS of the Act by receiving cash loan of Rs. 15,00,000/-, Rs. 10,00,000/- and Rs. 9,00,000/- to Sh. Kuldeep, Sh. Satyapal and Sh. Jasbir respectively. Therefore, penalty proceedings u/s 271D of the act was initiated. Show cause notices dated 16.03.2024 and 22.08.2024 were issued. The assessee submitted submissions. On completion of proceedings, ld. AO vide order dated 25.09.2024 imposed penalty of Rs. 34,00,000/- u/s 271D of the Act r.w.s. 274 of the Act.
3. On above facts, during the assessment proceedings, it was observed that the assessee had violated section 269T of the Act by repaying cash of Rs. 15,00,000/-, Rs. 10,00,000/- and Rs. 9,00,000/- to Shri Kuldeep, Sh. Satyapal and Sh. Jasbir respectively. The penalty proceeding u/s 271E of the Act, Show cause notice dated 16.03.2024, 05.06.2024 and 22.08.2024 were issued. After that the assessee submitted replies. On completion of proceedings, Ld. AO vide order dated 24.09.2024 imposed penalty of Rs. 34,00,000/- u/s 271E of the Act.
4. Against orders dated 25.09.2024 and 24.09.2024 of Ld. AO, the assessee filed separate appeals before ld. CIT(A) which were dismissed vide separate order dated 11.11.2025.
5. Being aggrieved the appellant/assessee preferred above captioned appeals.
6. Authorized Representative for appellant/assessee submitted that Ld. CIT(A) erred in confirming penalty orders u/s 271D and 271E of the Act. Ld. CIT(A) failed to appreciate that the appellant/assessee was agriculturist and had received amounts in cash and repaid the same in cash. The appellant/assessee had no bank account in his own name at the time of taking amounts from farmers for purchase of agricultural land. Since, the transactions were genuine, amount received in cash was deposited to the bank in good faith. The appellant/assessee had submitted:
| S. No. | Particulars | Page No. |
| 1 | Bank statement of the Assessee | 01–02 |
| 2 | Death Certificate of Partap – Father of assessee | 03–04 |
| 3 | Documents of Sh. Jasbir – farmer | 05–16 |
| 4 | Documents of Sh. Satpal Singh | 17–46 |
| 5 | Documents of Sh. Kuldeep | 47–56 |
| 6 | Copy of show cause notice dated 28.02.2024 | 57–66 |
6.1 The reliance was placed on order dated 15.01.2025 of ITAT Pune in ITA No. 1600/Pun. /2024 titled as Nilons Enterprises Pvt. Ltd. vs. ITO.
7. Ld. Departmental Representative relied on impugned orders.
8. From examination of record in light of the aforesaid rival contention, it is crystal clear that Ld. CIT(A) vide impugned orders dated 11.11.2025 confirmed the action of Ld. AO in imposing penalties of Rs. 34,00,000/- each u/s 271D and 271E of the Act for violation of provisions of Section 269SS and 269T of the Act for receiving and returning amounts of Rs. 15,00,000/-, Rs. 10,00,000/- and Rs. 9,00,000/- from Sh. Shri Kuldeep, Sh. Satyapal and Sh. Jasbir respectively and depositing the same in the bank accounts. Since the deal of purchase of agricultural land could not be completed due to death of his father, amounts were returned after six months to the farmers in cash. The appellant/assessee had deposited Rs. 1,20,01,000/- in his bank account. The appellant/assessee submitted his bank statements page No. 1 and 2 of paper book, death certificate of his father page No. 3 and 4 of paper book, affidavits, bank account statement, copy of revenue record, Jamabandi of Jasbir page No. 7 to 16 of paper book, documents i.e. affidavit, bank statement of Satyapal Singh page No. 17 to 46 of paper book, documents i.e. affidavit and bank statement of copy, jamabandi of Kuldip page No. 47 to 56 of paper book in support of submissions.
9. From above documents and submissions, it is evident that the appellant/assessee had a reasonable cause for violation of provision of Section 269SS and 269T of the Act.
10. As per order dated 15.01.2025 of ITAT Pune in ITA No. 1600/Pun./2024 titled as Nilons Enterprises Pvt. Ltd. vs. ITO in para No. 8.5 is observed as under:
“8.5 We find when the Revenue challenged the above order before the Hon’ble Supreme Court, the Hon’ble Supreme Court dismissed the SLP filed by the Revenue as reported in [2019] 102 taxmann.com 57(SC). Since the facts of the instant case are identical to the facts of the case decided by the Hon’ble Jurisdictional High Court and SLP has been dismissed by the Hon’ble Supreme Court, therefore, respectfully following the same, we are of the considered opinion that there is a ‘reasonable cause’ on the part of the assessee for such violation. We, therefore, set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the penalty levied u/sec. 271E of the Act. Grounds raised by the assessee are accordingly allowed.”
11. In view of the above material facts of reasonable cause on the part of the assessee for violation of provisions of Section 269SS and 269T of the act, the impugned action of Ld. CIT(A) and Ld. AO being illegal, is set aside. The grounds of appeal of the assessee are accepted.
12. In the result, the appeals filed by the appellant/assessee are allowed.
Order pronounced in the open court on 05.08.2026
