Section 271D Penalty for Technical Violation of Section 269SS not sustainable

Gopinath Kanduri Vs ITO (ITAT Hyderabad)

In the case of Gopinath Kanduri vs. ITO (ITAT Hyderabad), a medical practitioner faced a penalty under section 271D of the Income Tax Act due to a technical violation of section 269SS.

Case Background: During the financial year 2017-18, the assessee earned income from both medical practice and capital gains derived from the sale of property. The total proceeds from the property sale amounted to Rs. 1,25,58,000. While the assessee reported this income for capital gains tax, the Assessing Officer (AO) noted that a portion of the sale consideration, totaling Rs. 94,38,000, was received in cash.

Penalty Imposition: The AO initiated penalty proceedings under section 271D of the Income Tax Act, citing the violation of section 269SS due to the receipt of cash. The imposed penalty equaled the amount received in cash.

Assessee’s Defense: The assessee put forth a robust defense. It contended that the sale was legitimate, and the cash receipts were genuine, as substantiated by registered documents. Several reasons were provided for accepting cash, including the absence of banking facilities at the sale location and the fact that the purchasers did not have bank accounts. The assessee asserted that accepting cash was a necessity due to safety concerns and the inability to postpone the sale.

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