Veera Mani Kumar Vatti Kooti Vs ITO (ITAT Hyderabad)
Cash Recital in Sale Deed Does Not Make Penalty Inevitable: Section 273B Relief Granted on Cumulative Facts
The legal principle
The Hyderabad Tribunal deleted a ₹20.94 lakh penalty under section 271D, holding that the assessee had established reasonable cause under section 273B on the cumulative circumstances of the case.
Although the registered sale deed recorded receipt of cash, the assessee consistently denied receiving it, explained why the recital had been inserted and furnished the purchaser’s affidavit. The Assessing Officer had neither examined the purchaser nor effectively rebutted the explanation.
In the connected quantum appeal, the Tribunal also deleted additions for agricultural receipts and a loan, finding that the supporting evidence had been rejected without adequate verification.
Background of the assessment
The assessee had not filed a return for AY 2016–17. Information regarding cash deposits of ₹48.60 lakh and time deposits of ₹13 lakh led to reassessment proceedings.
The assessment was completed on 21 March 2024, determining total income at approximately ₹87.48 lakh, including additions under section 69A, capital gains and disallowance of deductions.
The CIT(A) partly allowed the quantum appeal but confirmed the separate penalty under section 271D. Both matters came before the Tribunal.
Agricultural receipts explained through land and lessees
The assessee owned 4.86 acres of agricultural land, which had been leased to two persons who cultivated sunflower seeds.
Under the arrangement, the assessee received one-third of the sale proceeds of the agricultural produce. The disputed receipts of ₹1,38,000 and ₹1,20,250 were transferred by the lessees through banking channels.
The Tribunal found no dispute concerning ownership of the land, the lease arrangement, agricultural operations or receipt of the assessee’s share. The receipts were thus linked to identified persons, identified land and identified agricultural activity.
No contrary material showed that the amounts arose from another source. The Tribunal therefore held that they could not be treated as unexplained money merely by rejecting the agricultural-income explanation. Both additions under section 69A were deleted.
Loan confirmation required enquiry, not summary rejection
A further ₹3 lakh addition under section 69A concerned a loan received through banking channels.
The assessee furnished the bank statement and the lender’s confirmation. The Tribunal held that, if the Assessing Officer doubted the lender’s identity, creditworthiness or the transaction’s genuineness, he should have examined the evidence and cross-verified the explanation by issuing an appropriate notice.
Instead, the addition was made without such verification or contrary material discrediting the confirmation.
The Tribunal expressly recognised that receipt through a bank is not conclusive by itself. Here, however, the bank evidence, lender’s confirmation and absence of rebuttal collectively supported the explanation. The addition was deleted.
Property transfer to son-in-law and the disputed cash recital
The penalty appeal concerned a property transferred by the elderly assessee to his son-in-law, as part of arrangements to reside with his daughter and son-in-law.
The agreed consideration was ₹45.50 lakh, while the stamp duty value was ₹66.44 lakh. The sale deed was executed on 12 August 2015.
According to the assessee, the advocate preparing the deed recorded the difference of ₹20.94 lakh as cash received to bring the stated consideration in line with the stamp duty value, although no such cash had actually been paid.
The Assessing Officer treated the recital as establishing a cash receipt in violation of section 269SS and imposed an equivalent penalty under section 271D.
Relevant recital, but explanation also required examination
The assessee had denied receiving cash from the inception of the assessment proceedings. His son-in-law furnished an affidavit affirming that no cash had been paid.
The Tribunal acknowledged that a recital in a registered sale deed is relevant evidence and cannot be disregarded merely because of a subsequent denial.
Nevertheless, the consistent explanation and purchaser’s affidavit required examination. The Assessing Officer did not examine the son-in-law or effectively verify and rebut his affidavit.
The Tribunal also cautioned that advanced age or a close family relationship, independently, does not automatically justify cancellation of penalty.
Cumulative circumstances established reasonable cause
The Tribunal considered the family arrangement, the assessee’s age, his consistent denial, the explanation concerning the stamp-value difference, the supporting affidavit and the absence of verification together.
On that cumulative assessment, it held that reasonable cause under section 273B was established and directed deletion of the ₹20.94 lakh penalty.
The quantum appeal was partly allowed, while the penalty appeal was allowed. The order did not grant relief on every quantum issue.
Author’s comments
A cash recital is serious evidence, but penalty still requires consideration of the complete factual explanation. The Tribunal neither treated the recital as irrelevant nor granted a blanket exemption for family transactions.
The practical lesson is also one of drafting discipline. A sale deed should accurately record actual consideration and payment modes. Recording an unpaid stamp-value difference as cash consideration can itself generate avoidable tax disputes.
Equally, this order should not be described as deleting the penalty solely because no cash was received. The operative relief was expressly founded on reasonable cause under section 273B, established through the cumulative circumstances.
The quantum findings reinforce the same evidentiary approach: supported explanations must be examined through meaningful enquiry before receipts are labelled unexplained.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT HYDERABAD
These two appeals are filed by Shri Veera Mani Kumar Vatti Kooti (“the assessee”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi (“Ld. CIT(A)”) dated 29.01.2026 & 11.02.2026 for the A.Y. 2016-17. Since both the appeals relates to the same assessee for same A.Y., for the sake of convenience, these appeals were heard together and are being disposed of by this common and consolidated order.
ITA No.1069/Hyd/2026:
2. The assessee has raised the following grounds of appeal:
A: General Grounds
1. The Ld. CIT-A of NFAC erred in partially upholding the order of the AO w.r.t additions made U/s 69A and interest income which order is contrary to the facts of the case and the provisions of law;
B: Grounds relating to additions made U/s 69A
2. The Ld. CIT-A and the AO erred in the facts and circumstances of the case in treating the amount of Rs 2,00,000/- as unexplained money U/s 69A of the IT Act, 1961;
3. The Ld. CIT-A and the AO erred in the facts and circumstances of the case in treating the amount of Rs 138,000/- as unexplained money U/s 69A of the IT Act, 1961;
4. The Ld. CIT-A and the AO erred in the facts and circumstances of the case in treating the amount of Rs 120,250/- as unexplained money U/s 69A of the IT Act, 1961;
5. The Ld. CIT-A and the AO erred in the facts and circumstances of the case in treating the amount of Rs 300,000/- as unexplained money U/s 69A of the IT Act, 1961;
6. The Ld. CIT-A and the AO erred in the facts and circumstances of the case in treating the amount of Rs 15,633/- as taxable income from other sources under the IT Act, 1961;
C: General Grounds
7. The Ld.CIT-A and AO erred in law and facts of the case in demanding the consequential interest U/s 234A and 234B;
8. The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal.
I, Mrs. VEERA MANI KUMARI VATTI KOOTI, the Appellant, do hereby declare that what is stated above is true to the best of my information and belief.
| Hyderabad | For Mrs. VEERA MANI KUMARI VATTI KOOTI |
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| 29.03.2026 | APPELLANT |
3. The brief facts of the case are that the assessee is an individual who had not filed any return of income under section 139 of the Income-tax Act, 1961 (“the Act”) for the Assessment Year 2016-17. On the basis of the information available, the Assessing Officer (“AO”) noticed that the assessee had deposited cash amounting to Rs.48,60,000/- in his bank account maintained with Vijaya Bank and had also made time deposits amounting to Rs.13,00,000/- during the year under consideration. Accordingly, the AO initiated reassessment proceedings under section 147 of the Act. After passing an order under section 148A(d) of the Act on 18.03.2023, the AO issued a notice under section 148 of the Act on 19.03.2023. After considering the submissions of the assessee, the AO completed the assessment under section 147 read with sections 144 and 144B of the Act, vide order dated 21.03.2024, making separate additions of Rs.27,66,000/-, Rs.2,00,000/-, Rs.1,38,000/-, Rs.1,20,250/- and Rs.3,00,000/- under section 69A of the Act. The AO further made an addition of Rs.15,633/- on account of disallowance of deductions under Chapter VI-A of the Act and an addition of Rs.52,08,151/- on account of capital gains, thereby determining the total assessed income of the assessee at Rs.87,48,034/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that ground nos.1, 7 and 8 are general in nature and that the assessee is not pressing ground nos.2 and 6. Accordingly, ground nos.1, 7 and 8 do not require separate adjudication and are dismissed. Ground nos.2 and 6 are dismissed as not pressed.
6. Ground nos.3 and 4 relate to the additions of Rs.1,38,000/- and Rs.1,20,250/-, respectively, made under section 69A of the Act by treating the amounts claimed as agricultural income as unexplained money. The Ld. AR submitted that the assessee owned 4.86 acres of agricultural land, which had been given on lease to Mr. G. Veerabhadrarao and Mr. G. V.V. Satyanarayana (“the lessees”). The lessees carried out agricultural operations on the said land and produced sunflower seeds. Out of the sale proceeds of the agricultural produce, they transferred the assessee’s one-third share, amounting to Rs.1,38,000/- and Rs.1,20,250/- respectively, through banking channels. The Ld. AR submitted that the AO made the additions without properly considering the assessee’s ownership of the agricultural land, the agricultural operations carried out by the lessees and the receipt of the assessee’s share through banking channels. Accordingly, the Ld. AR prayed for deletion of the additions.
7. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities.
8. We have heard the rival submissions and perused the material available on record. There is no dispute regarding the fact that the assessee owned 4.86 acres of agricultural land and had given the same to the lessees for carrying out agricultural operations. There is also no dispute that the assessee received the amounts of Rs.1,38,000/- and Rs.1,20,250/- respectively through banking channels from the lessees as his one-third share of the sale proceeds of the agricultural produce. These receipts have thus been explained with reference to an identified person, the agricultural land owned by the assessee and the agricultural operations carried out thereon. The receipt through banking channels, considered together with the undisputed ownership of the agricultural land and the arrangement under which the assessee received his share of the agricultural proceeds, supports the explanation offered by the assessee. No contrary material has been brought on record to establish that the impugned receipts arose from any other source or that the explanation regarding their agricultural character was incorrect. In these circumstances, the amounts cannot be treated as unexplained money merely by rejecting the assessee’s claim of agricultural income. Accordingly, we direct the AO to delete the additions of Rs.1,38,000/- and Rs.1,20,250/- made under section 69A of the Act.
9. Ground no.5 relates to the addition of Rs.3,00,000/- made under section 69A of the Act in respect of a loan received by the assessee. The Ld. AR submitted that the assessee received a loan of Rs.3,00,000/- from Mr. Venkata Ramana Babu (“lender”) through banking channels. The assessee furnished the bank statement evidencing the receipt and the confirmation of the lender before the lower authorities. However, the AO made the addition without cross-verifying the transaction with the lender. The Ld. AR submitted that the assessee had explained the nature and source of the credit and supported the explanation with documentary evidence. Accordingly, the Ld. AR prayed for deletion of the addition.
10. Per contra, the Ld. DR relied upon the orders of the lower authorities.
11. We have heard the rival submissions and perused the material available on record. The assessee explained that the amount of Rs.3,00,000/- credited to his bank account represented a loan received from the lender. In support of this explanation, the assessee furnished the bank statement evidencing receipt of the amount through banking channels and the confirmation of the lender. Thus, the assessee identified the person from whom the amount was received and furnished documentary evidence explaining the nature and source of the receipt. If the AO was not satisfied with the identity or creditworthiness of the lender or the genuineness of the transaction, he ought to have examined the evidence furnished and cross-verified the explanation by issuing an appropriate notice to the lender in accordance with law. However, the AO made the addition without undertaking such verification or bringing any contrary material on record to discredit the confirmation furnished by the assessee. Although receipt through banking channels by itself is not conclusive, the bank statement, read together with the lender’s confirmation and the absence of any material rebutting the explanation, supports the assessee’s contention in the present case. In these circumstances, the explanation furnished by the assessee could not have been rejected without examining the supporting evidence and making the necessary enquiry. On the material available on record, the addition of Rs.3,00,000/- under section 69A of the Act is not sustainable. Accordingly, we direct the AO to delete the said addition.
12. In the result, the appeal of the assessee in ITA No. 1069/Hyd/2026 is partly allowed.
ITA No.1218/Hyd/2026:
13. The assessee has raised the following grounds of appeal:
1. The CIT-A of the NFAC erred in the facts and circumstances of the case in confirming the penalty order of the Assessing officer who levied penalty of Rs 20,94,000/- U/s 271D;
2. The CIT-A of the NFAC and the AO erred in confirming / levying penalty U/s 271D of Rs 20,94,000/- for unintentional technical breach;
3. Without prejudice to the above ground raised in Ground # 2, the CIT-A of the NFAC and the AO ought to have appreciated that the penalty provisions of 271D are not applicable in the cases of transactions between the family members;
4. The CIT-A of the NFAC and the AO ought to have appreciated that penalty is not applicable if the Appellant is not required to file a return U/s 139(1) but became liable to file return after issuance of notice U/s 148;
5. Without prejudice to the above grounds, the CIT-A of the NFAC and the AO ought to have appreciated that there is a reasonable cause for violation of the provisions of Sec 269SS and hence ought not to have confirmed / levied the penalty U/S 271D;
6. The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal.
I, Mrs. VEERA MANI KUMARI VATTI KOOTI, the Appellant, do hereby declare that what is stated above is true to the best of my information and belief.
| Hyderabad | For Mrs. VEERA MANI KUMARI VATTI KOOTI |
|---|---|
| 05.04.2026 | APPELLANT |
14. The brief facts of the case are that the AO during the quantum assessment proceedings had observed that the assessee had received cash of Rs. 20,94,000/- towards the transfer of an immovable property. According to the AO, acceptance of the said amount in cash constituted a contravention of the provisions of section 269SS of the Act. Accordingly, the AO initiated penalty proceedings under section 271D of the Act and, vide order dated 06.09.2024, levied a penalty of Rs. 20,94,000/- on the assessee.
15. Aggrieved with the penalty order, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the penalty and dismissed the appeal of the assessee.
16. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. At the outset, the Ld. AR submitted that the solitary issue arising in the present appeal relates to the levy of penalty of Rs. 20,94,000/- under section 271D of the Act. He submitted that the assessee is an elderly person who, with a view to making arrangements for his future and residing with his daughter and son-in-law, decided to transfer his immovable property to his son-in-law for a consideration of Rs. 45,50,000/-. The sale deed was executed on 12.08.2015. While preparing the sale deed, the concerned advocate noticed that the agreed consideration was lower than the stamp duty value of Rs. 66,44,000/-. The Ld. AR submitted that, to bring the consideration recorded in the sale deed at par with the stamp duty value, the advocate mentioned receipt of the differential amount of Rs. 20,94,000/- in cash, although no such amount was actually received by the assessee. The Ld. AR further submitted that the assessee had consistently denied receipt of any cash from his son-in-law since the inception of the assessment proceedings. In support of her explanation, the assessee also furnished an affidavit of his son-in-law affirming that he had not paid any cash to him towards the transfer of the property. It was submitted that the recital in the sale deed did not reflect any actual receipt of cash and, therefore, the penalty deserved to be deleted.
17. Alternatively, the Ld. AR submitted that, even assuming that the cash mentioned in the sale deed had been received, the transaction was between close family members and arose out of the assessee’s decision to settle with his daughter and son-in-law in his old age. He submitted that these circumstances constituted reasonable cause within the meaning of section 273B of the Act and prayed for deletion of the penalty.
18. Per contra, the Ld. DR relied on the orders of the lower authorities and supported the levy of penalty under section 271D of the Act.
19. We have heard the rival submissions and perused the material available on record. The issue before us is whether, in the peculiar facts and circumstances of the present case, the penalty of Rs. 20,94,000/- levied under section 271D of the Act deserves to be sustained. The basis of the penalty is the recital in the registered sale deed recording receipt of the said amount in cash. The assessee, however, has consistently denied receipt of any such cash from his son-in-law since the inception of the assessment proceedings. His explanation is that the agreed consideration was Rs. 45,50,000/- and that the differential amount of Rs. 20,94,000/- was mentioned by the advocate merely to bring the consideration recorded in the sale deed at par with the stamp duty value of Rs. 66,44,000/-.
20. We find that the assessee’s explanation is supported by an affidavit furnished by his son-in-law, who has affirmed that no cash was paid by him to the assessee. Although the recital in a registered sale deed is relevant evidence and cannot be disregarded merely on the basis of a subsequent denial, the explanation offered by the assessee and the supporting affidavit also required examination. Despite the assessee’s consistent denial, the AO did not examine his son-in-law or obtain confirmation from him regarding the alleged cash payment. Thus, the specific explanation furnished by the assessee, supported by the affidavit of the other party to the transaction, was not effectively verified or rebutted.
21. We further note that the property was transferred by the assessee to his own son-in-law in the course of making arrangements to reside with his daughter and son-in-law in his old age. The close relationship between the parties or the assessee’s advanced age, taken independently, would not automatically justify deletion of a penalty. However, these circumstances have to be considered cumulatively with his consistent denial of receipt of cash, the explanation regarding the differential stamp duty value, the supporting affidavit of his son-in-law and the absence of any examination of him by the AO. In this regard, we have gone through the provision of section 273B of the Act, which is to the following effect:
“Penalty not to be imposed in certain cases.
273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) 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 271GB,] section 271H, section 271-I], [section 271J,] 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 sub-section (1) of section 272BBB or clause (b) of sub-section (1) 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.
22. On perusal of the above, we find that the provisions of section 273B of the Act provides that penalty under section 271D of the Act shall not be imposed where the person concerned proves that there was reasonable cause for the failure. Having regard to the cumulative circumstances discussed above, we are satisfied that the assessee has established reasonable cause within the meaning of section 273B of the Act. Accordingly, we set aside the order of the Ld. CIT(A) and direct the AO to delete the penalty of Rs. 20,94,000/- levied under section 271D of the Act.
23. In the result, the appeal of the assessee in ITA No.1218/Hyd/2026 is allowed.
24. To sum up appeal of the assessee in ITA No.1069/Hyd/2026 is partly allowed and appeal in ITA No.1218/Hyd/2026 is allowed.
Order pronounced in the Open Court on 9th October, 2026.
