Smt. Sujatha Vaddanapu Vs ITO (ITAT Hyderabad)
Cash Sale Consideration for Property Falls under Section 269SS, Not Section 269ST: ITAT Deletes Section 271DA Penalty
Background of the Case
The Hyderabad Tribunal examined whether cash consideration received at the time of registration of immovable property falls within Section 269SS or Section 269ST of the Income-tax Act, 1961. The distinction was decisive because the Assessing Officer had imposed a penalty under Section 271DA, which applies to contraventions of Section 269ST.
The assessee, jointly with her husband, sold an immovable property for ₹34 lakh through a sale deed dated 16 July 2019. Of the total consideration, ₹4 lakh was received in cash, and ₹2 lakh was attributed to the assessee.
Following reassessment proceedings, the Assessing Officer treated the assessee’s cash receipt of ₹2 lakh as a violation of Section 269ST and imposed an equivalent penalty of ₹2 lakh under Section 271DA. The CIT(A) confirmed the penalty.
Dispute Concerned the Applicable Provision
Before the Tribunal, the assessee did not dispute either the cash receipt or the attribution of ₹2 lakh to her. Her challenge concerned the statutory provision governing that receipt.
The assessee argued that money received towards transfer of immovable property constitutes a “specified sum” under Explanation (iv) to Section 269SS. Consequently, the transaction was governed by Section 269SS, for which the corresponding penalty provision is Section 271D.
Since Section 269ST expressly excludes transactions of the nature referred to in Section 269SS, the penalty imposed under Section 271DA could not survive.
The Revenue maintained that receipt of ₹2 lakh in cash attracted Section 269ST and supported the orders of the lower authorities.
“Specified Sum” Extends Beyond an Advance
The Tribunal examined the definition of “specified sum”, which covers money receivable “whether as advance or otherwise” in relation to transfer of immovable property, whether or not the transfer takes place.
It held that the definition turns on the connection between the money and the property transfer, rather than merely on whether the money was received as an advance.
Restricting the provision to advances would deprive the words “or otherwise” of independent meaning. According to the Tribunal, part consideration, balance consideration and full consideration payable for a property transfer all retain the necessary connection with that transaction.
Receipt at the time of registration does not create an exclusion from Section 269SS. Likewise, completion of the transfer does not take the consideration outside the definition.
The Tribunal also rejected a restrictive reading of “receivable”. That expression describes the character of the money payable in connection with the transfer. It cannot exclude the amount when actually received, because acceptance of that money is precisely the event regulated by Section 269SS.
Judicial Reasoning and Legislative Purpose
For the interpretative significance of “otherwise”, the Tribunal drew support from CIT v. A.N. Naik Associates (2004) 265 ITR 346 (Bom.) and CIT v. Mansukh Dyeing and Printing Mills (2022) 449 ITR 439 (SC).
Those decisions concerned the former Section 45(4). The Tribunal expressly acknowledged that they did not directly decide the scope of Section 269SS. Their reasoning supported giving meaningful effect to additional statutory words, while the present conclusion rested on the language and scheme of Section 269SS itself.
The Tribunal also referred to the explanatory memorandum accompanying the Finance Bill, 2015. The amendment sought to curb generation of black money through cash dealings in immovable property and extended the restriction to money received as advance or otherwise. The relevant amendments took effect from 1 June 2015, before the transaction under consideration.
Section 269SS and Section 269T Use Different Definitions
The Tribunal highlighted the distinction between “specified sum” under Section 269SS and “specified advance” under Section 269T.
Section 269T refers to money in the nature of an advance, whereas Section 269SS expressly extends beyond advances. Importing the narrower definition from Section 269T into Section 269SS would erase this legislative distinction.
Accordingly, the assessee’s ₹2 lakh cash receipt towards sale consideration constituted a specified sum governed by Section 269SS.
Express Exclusion Defeats Section 271DA Penalty
Clause (ii) of the proviso to Section 269ST excludes transactions of the nature referred to in Section 269SS. Once the receipt was identified as such a transaction, Section 269ST ceased to apply.
The fact that the receipt equalled the ₹2 lakh threshold under Section 269ST could not override that express exclusion.
The Tribunal held that the essential basis for imposing a penalty under Section 271DA was therefore absent. A penalty under that provision could not be sustained merely because the receipt might attract consideration under another penalty provision.
The ₹2 lakh penalty was deleted, and the appeal was allowed.
Author’s Comments
The ruling carries an important distinction: deletion of the Section 271DA penalty does not establish that cash property consideration is permissible.
The Tribunal’s interpretation places such consideration within Section 269SS, which operates at the substantially lower threshold of ₹20,000 or more, subject to its statutory conditions and exceptions.
The relief arose because the authorities invoked the wrong statutory provision. The Tribunal neither imposed nor adjudicated a penalty under Section 271D. Its decision reinforces that a penalty must satisfy the conditions of the provision actually invoked; possible exposure under another provision cannot cure that defect.
Cases Discussed
- CIT v. A.N. Naik Associates — (2004) 265 ITR 346 (Bombay HC).
- CIT v. Mansukh Dyeing and Printing Mills — (2022) 449 ITR 439 (SC).
