ITAT Jaipur quashes Section 271D penalty as funds received were advances, not loans

Sh. Balbir Singh Vs ACIT (ITAT Jaipur)

Income Tax Appellate Tribunal (ITAT) Jaipur has quashed a penalty levied under Section 271D of the Income Tax Act against Balbir Singh, ruling that the funds he received were advances against a property sale, not loans. This decision follows a second round of litigation, where the ITAT revisited the case to verify the ownership of the property in question. The initial dispute centered on Rs. 1 crore received by Singh from Smt. Maya Devi, which the Assessing Officer (AO) had deemed a loan, triggering the penalty for non-compliance with Section 269SS, which mandates certain transactions to be conducted through banking channels.

In the first round of litigation, the ITAT had directed the AO to investigate whether Singh owned the land related to the transaction. The tribunal’s earlier order stated that if the land was indeed owned by Singh, his claim that the funds were advances against a property sale should be accepted, and no penalty levied. Following this directive, the AO obtained information from the Sub-Registrar, Neemrana, confirming that Singh had purchased the land on April 10, 2013. This finding was crucial, as it established Singh’s ownership at the time of the transactions.

The ITAT, in its recent order, noted that Singh received the funds—Rs. 40 lakh on April 11, 2013, Rs. 50 lakh on April 22, 2013, and Rs. 10 lakh on June 20, 2013—after acquiring the property. Based on this timeline and adhering to its previous directive, the tribunal concluded that the funds were indeed advances against the property sale. Therefore, consistent with its earlier stance, the ITAT quashed the penalty imposed under Section 271D.

The tribunal’s decision underscores the importance of verifying property ownership in such disputes and ensures that penalties are not levied when transactions are genuinely related to property sales. This ruling reaffirms that when an assessee owns the property, and the money is received after the purchase of the property, the money is considered as an advance, and no penalty can be levied.

Petitioner was represented by Sh. Sidharth Ranka, Adv. & Sh. Saurav Harsh, Adv.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

By way of present appeal, the assessee challenges the order of the National Faceless Appeal Centre, Delhi dated 06/12/2023 [ for short CIT(A)] which was for the assessment year 2014-15. The said order of the ld. CIT(A) arises because the assessee has challenged the penalty order dated 25.03.2019 passed under section 271D/250/254 of the Income Tax Act, [ for short “AO”] by ACIT, Circle-02, Alwar.

2. At the outset of hearing, the Bench observed that there is delay of 108 days in filing of the present appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:

Application for condonation of delay u/s 253(5) of the I.T. Act. 1961 read with section 5 of Limitation Act in filing of appeal

Hon’ble Sir(s),

The humble assessee appellant applicant respectfully prays for the condonation of delay of 108 days in the filling of Appeal for the following reason:

1. That the Id. CIT (Appeals) passed his order on 06.12.2023 which was served upon the email Id. ankushchoudhary07@gmail.com which is belongs to the Son of the assessee appellant Shri Ankush Choudhary.

2. That Shri Ankush Choudhary is suffering from mental trauma because of one accident happened in the family in which the 3-Year-old child of Shri Ankush Choudhary is died and Shri Ankush Choudhary Son of assessee appellant went into the Mental Trauma.

3. That assessee appellant not well aware about the Income tax provision and online proceeding and also has no email account therefore the in the income tax portal the email which is provided is belongs to his son and due to the accident as stated above, his son has not seen any email and therefore the order dated 06.12.2023 was not communicated to the assessee appellant.

4. That assessee appellant received the outstanding demand notice from the income tax department on 04.05.2024 through post and only then the knowledge of passing the impugned order dated 06.12.2023 came to the knowledge of the assessee appellant. Copy of track report of the Post is enclosed herewith.

5. That subsequently, the assessee after came to the knowledge of the order passed by the Id. CIT(A) without any further delay, filed the appeal before the Hon’ble Income tax Appellate Tribunal with delay of 108 days.

6. An Affidavit of assessee appellant is duly sworn in this regard is also enclosed herewith.

With this background, we request your honour to take stock of the situation in totality, take a lenient and human approach towards the humble assessee appellant as the delay was not intentional and due to unavoidable circumstances.

That in these circumstances we request your honor’s to kindly condone the delay and oblige.

3. During the course of hearing, the ld. DR objected to assessee’s application for condonation of delay. She stated that the assessee even did not represent his case before the ld. CIT(A) even after giving sufficient opportunity of being heard and therefore, the assessee cannot be afford more leniency.

4. We have heard the contention of the parties and perused the materials available on record. The bench noted that in this case ld. CIT (Appeals) passed his order on 06.12.2023 which was served upon the email Id. ankushchoudhary07@gmail.com which was belongs to the Son of the assessee appellant Shri Ankush Choudhary. The assessee stated that Shri Ankush Choudhary is suffering from mental trauma because of one accident happened in the family in which the 3-Year-old child of Shri Ankush Choudhary died and Shri Ankush Choudhary Son of assessee appellant went into the Mental Trauma. That assessee appellant not well aware about the Income tax provision and online proceeding and also has no email account therefore the in the income tax portal the email which is provided is belongs to his son and due to the accident as stated above, his son has not seen any email and therefore the order dated 06.12.2023 was not communicated to the assessee appellant. That assessee appellant received the outstanding demand notice from the income tax department on 04.05.2024 through post and only then the knowledge of passing the impugned order dated 06.12.2023 came to the knowledge of the assessee appellant and thereby immediately the appeal was filed. In support of the contention so raised assessee filed an affidavit also. Considering the fact that the assessee was prevented with sufficient cause for not filling the appeal in time and therefore, the same is condone. Thus the delay of 108 days in filing the appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause.

5. In this appeal, the assessee has raised following grounds: –

“1. That on the facts and circumstances of the case and in law the ld. CIT in passing the ex-parte and confirming the penalty of Rs. 1,00,00,000/- u/s 271D imposed by the ld. assessing officer.”

2. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”

6. Further, in this appeal, the assessee has raised additional ground praying there to admit the same as it is pure technical and does not require any further finding of facts : –

1. That in the law the impugned penalty order passed u/s 271D of the Act is without jurisdiction as the same has been passed by the ld. Assistant Commissioner of Income tax whereas as per section 271D(2) the same could have been levied by ld. Joint Commissioner of Income Tax only which makes the impugned order illegal, void-ab-initio, bad in law and the same deserves to be quashed and set-aside.

As the above ground being technical in nature we admit the same for considering while dealing with the appeal of the assessee.

7. Succinctly, the fact as culled out from the records are that the assessee is an Individual and engaged in the business of hotel and agricultural activities. For the assessment year 2014-15 while completing the assessment proceeding ld. AO noted that the assessee has accepted cash loan for an amount of Rs. 1.00 crore therefore, he was subjected to proceeding u/s. 271D of the Act. In that proceeding assessee explained that the amount of Rs. 1.00 crore received from Smt. Maya Devi was not a loan but it was an advance against the sale of land vide registered agreement. In that penalty proceeding ld. AO considered that agreement as an afterthought as the stamp paper was old and it was an attempt to create evidence that the transaction is for sale of property and not as a loan. Consequently, penalty of Rs. 1.00 crore was levied u/s. 271D of the Act vide order dated 17.05.2017. That order for levy of penalty was challenged before the ld. CIT(A) who has considered the submission of the assessee and thereby directed to delete that penalty of Rs. 1.00 crore. Revenue challenged that order of ld. CIT(A) before the ITAT. The co-ordinate bench considering the rivial contention set aside the order by observing as under:

6. We have heard the rival contentions and perused the material available on the record. The Assessing Officer has observed that the amount of Rs. 1.00 crore received by the assessee from Smt. Maya Devi was a loan and the alleged agreement produced by the assessee is nothing but an afterthought attempting to create an evidence to give the colour of the transaction of loan as advance against the sale of the property. Thus, the Assessing Officer has treated the said amount as loan in contravention of the provisions of Section 269SS of the Act and consequently imposed the penalty U/s 271D of the Act. The ld. CIT(A) has accepted the transaction as advance received against the sale of property by accepting the agreement to sell notarized on 20/6/2013. Except the agreement in question which is claimed to have been notarized and not a registered agreement there is no other document in support of the claim that the amount was received as an advance against the sale of property. The only evidence which can be independently verified is the receipt of payment of Rs. 50/- in the office of the SubRegistrar, Behror on 21/4/2017. The said receipt was subsequent to the assessment order as well as the show cause notice issued U/s 271D of the Act on 25/1/2017, therefore, prior to the show cause notice U/s 15/1/2017, there was no document which can independently verified the existence of this claim though the assessee has produced this agreement dated 20/6/2013. It is pertinent to note that if the assessee is having/ holding the land in question i.e. khasra No. 24 measuring 1.11 hectare situated at village Dhodhakari, Tehsil-Neemrana, Alwar then in absence of any contrary record, the explanation of the assessee that the said amount was received as an advance against the sale of the land, cannot be rejected. However, neither the Assessing Officer nor the ld. CIT(A) has examined whether the assessee owned this land in question which is subject matter of the transaction. Even the assessee did not produce any record about the ownership of the said land in question, therefore, to give the concluding finding on the matter, it is necessary to verify the fact that the land in question is owned by the assessee and free from all encumbrances so it can be freely transferred. Accordingly for the limited purpose we set aside this issue to the record of the Assessing Officer to conduct a necessary enquiry in respect of the status and ownership of the land in question as on the date of the alleged agreement. In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty can be levied.

7. In the result, appeal of the revenue is allowed for statistical purposes only.

8. In the set aside proceeding as is evident from the appeal effect order so passed the same was passed by the ACIT wherein he confirmed the levy of penalty holding that the assessee prepared the document on old stamp paper and it was a afterthought evidence.

9. Aggrieved with that order of levying the penalty the assessee again filed an appeal before the ld. CIT(A) who has dismissed the appeal of the assessee by observing as under :

8. The solitary issue involved in the present appeal relates to levying of penalty of Rs. 1,00,00,000/- u/s. 271D of the Act. DEPAR

8.1 For better appreciation of the facts involved in respect of the issue under dispute, reference was made to the ITAT’s order passed in the appellant’s case. The facts emanating from the Hon’ble ITAT’s order in ITA No 669/JP/2018 Dated 20.12.2018 passed by ITAT Jaipur, “B” Bench are summarized here under

8.2 The assessee had entered into agreement on 12.12.2012 for transfer of land to one Smt. Maya Devi and had received advance of Rs. 1,00,00,000/-. However, the Assessing Officer observed that the alleged agreement was notarized only on 20.06.2013 and the payment was made on 11.04.2013, 22.04.2013 and 20.06.2013. He further noted that there were no records substantiating any payments made prior to the alleged agreement 12.12.2012. And thus the AO was of the opinion that the document dated 12.12.2012 is an after thought to give a color to the transaction of the loan as advance against property. Accordingly, the fact that the agreement in question was claimed to have been executed on 12.12.2012 and the same was notarized only on 20.06.2013 shows that this agreement was prepared subsequently by using old stamp paper to give the color of sale of property. Thus, the AO considered the sum of Rs. 1,00,00,000/- received by the appellant from Mrs. Maya Devi as loan and accordingly penalty proceedings u/s 271D of the Act for violating the provisions of section 26955 of the Act and penalty of Rs. 1,00,00,000/- u/s 2710 of the Act was levied vide order dated 17.05.2017. The Ld. CIT appeal however accepted the transactions as advance received against the sale of property and accordingly deleted the penalty of Rs. 1,00,00,000/-

8.3 Aggrieved with the decision of the CIT Appeal, the department approached the ITAT, which held that prior to the show cause notice u/s 271D of the Act on 25.01.2017,

“there was no document which can independently verified the existence of this claim though the assessee has produced this agreement dated 20/6/2013. It is pertinent to note that if the assessee is having/holding the land in question le khasra No. 24 measuring 1.11 hectare situated at village Dhodhakari, Tehsil-Neemrana, Alwar then in absence of any contrary record, the explanation of the assessee that the said amount was received as an advance against the sale of the land, cannot be rejected. However, neither the Assessing Officer nor the Id. CIT(A) has examined whether the assessee owned this land in question which is subject matter of the transaction. Even the assessee did not produce any record about the ownership of the said land in question, therefore, to give the concluding finding on the matter, it is necessary to verify the fact that the land in question is owned by the assessee and free from all encumbrances so it can be freely transferred Accordingly for the limited purpose we set aside this issue to the record of the Assessing Officer to conduct a necessary enquiry in respect of the status and ownership of the land in question as on the date of the alleged agreement. In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty can be levied.” Emphasis implied

8.4 During the course of set aside proceedings and in compliance to the order of the ITAT, the AO vide his letter to Sub-Registrar, Neemrana, sought the Jamabandi and the Sale deed for this land. On perusal of the sale deed received from the Sub registrar Office, it was revealed that Shri Balbir Singh had purchased the land in contention only on 10.04.2013. That is to say, the assessee was not the owner of the land as on the date of purported agreement i.e. 12.12.2012.

8.5 As such, the claim of the assessee, on the strength of that agreement dated 12.12.2012, that the amount of Rs. 1,00,00,000/- was received from Smt. Maya Devi on account of advance for sale of land, stood negated and the only inference which could be drawn was that the agreement dated 12.12.2012 was prepared on an old stamp paper. Accordingly, the AO reiterated the original contention of the Department. that the amount of Rs. 1,00,00,000/- was not towards advance against the proposed sale of property but in the nature of loan. Accordingly, the AO revived the penalty levied u/s. 271D to the tune of Rs. 1,00,00,000/-.

8.6 It appears that the issue at hand revolves around the nature of a transaction involving an alleged advance received for the sale of agricultural land. The Assessing Officer contends that the amount received was a loan, while the appellant asserts that it was an advance against the sale of the property. At the core of the matter is the ownership status of the agricultural land in question as on the alleged date of agreement i.e. 12.12.2012. The conclusion of whether the amount received was a loan or an advance against the sale of the property, hinges on the verification of the land’s ownership by the assessee, along with its freedom from encumbrances for a lawful transfer.

8.7 The fact that the appellant was not owning the subject property as on 12.12.2012 and became the owner only on 10.04.2013 stands substantiated by the documents received from the Sub Registrar’s Office. This was the limited purpose for which the issue was set aside by the Hon’ble ITAT. The Hon’ble ITAT had given a clear direction that “In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty can be levied.” As a natural corollary, in case the land in question is not found to be owned by the assessee on 12.12.2012 then the claim of the assessee shall not be accepted and the penalty can be levied. It is reiterated that neither in the statement of facts nor in the grounds of appeal filed by the appellant, anything has been stated against the factual finding brought on record by the AO by way of documents received from the Sub Registrar’s Office.

8.8 In view of the observation and discussions made above and the fact that the issue was set aside by the Hon’ble ITAT for the limited purpose of verifying the ownership of the land with the appellant as on 12.12.2012, the AO’s action is upheld and the penalty of Rs. 1,00,00,000/- levied u/s 271D of the Act is hereby confirmed. Ground No. 1 raised by the appellant is treated as Dismissed.

10. Feeling dissatisfied with that order of the ld. CIT(A) the assessee is in appeal before this tribunal on the grounds as stated herein above. Apropos to the grounds so raised ld. AR of the assessee filed a detailed written submission which reads as under :

1. That the assessee appellant is a proprietor of M/s Rajputana Milestone Resorts and also earned income from sale and purchase of agriculture land. During the year under consideration assessee appellant filed its Income tax return on 29.03.2015 and declared total income at Rs 73,36,400/-.

2. That the case of the assessee was selected for Limited Scrutiny and assessee was assessed u/s 143(3) and income of the assessee was re-assessed at Rs 1,58,32,530/- vide order dated 19.12.2016.

3. That during the assessment proceeding, it was alleged by the ld. AO that assessee has taken loan of Rs 1.00 Crore in cash and thus penalty proceeding u/s 271D was initiated and vide order dated 17.05.2017 penalty of Rs 1.00 Crore was levied u/s 271D of the Act.

4. That the assessee appellant during the year under consideration had entered into the agreement for sale of agriculture land owned by the assessee to Smt. Maya Devi at Rs 1.89 Crore and for that purpose an agreement to sale was executed between the assessee appellant and Smt. Maya Devi on 20.06.2013. (Paper Book- Pg. 1 to 5)

5. That the events of execution of agreement of sale between the assessee appellant and Smt. Maya Devi and dates of payment received by the assessee is as per following chart:

6. That instant appeal before the Hon’ble Bench is 2nd round of litigation and therefore for sake of convenience we are submitting herewith event wise Synopsys of the same:

7. That for ready reference section 269SS & 271D of the Act is reproduced below:

Mode of taking or accepting certain loans, deposits and specified sum

269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if,-

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:

Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,-

(a) the Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Provided also that the provisions of this section shall have effect, as if for the words “twenty thousand rupees”, the words “two lakh rupees” had been substituted in the case of any deposit or loan where,—

(a) such deposit is accepted by a primary agricultural credit society or a primary co-operative agricultural and rural development bank from its member; or

(b) such loan is taken from a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member.

Explanation.- For the purposes of this section,-

(i) “banking company” means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;

(ii) “co-operative bank”, “primary agricultural credit society” and “primary co­operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;

(iii) “loan or deposit” means loan or deposit of money;

(iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

Penalty for failure to comply with the provisions of section 269SS.

271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

8. That it can be noticed that as per section 271D(2) of the Act, penalty u/s. 271D can be levied only by the ld. Joint Commissioner of Income Tax and not with the ld. Assistant Commissioner of Income Tax (who in the instant case has passed the impugned Penalty Order).

9. That the impugned penalty order dated 25.03.2019 is WITHOUT JURISDICTION and deserves to be quashed & set-aside on this count itself. That it is settled law that when a particular authority has been designated to record his/her satisfaction / decide on any particular issue, then it is that authority alone who should apply his/her independent mind. And that it was rectifiable under Section 292B of the IT Act cannot be accepted as such irregularity is not curable under Section 292B.

10. That it is well settled principle of law that where the power is given to do certain things in certain way, the thing has to be done in that way alone and no any other manner which is otherwise not provided under the law. The Hon’ble Supreme Court in the case of Chandra Kishore Jha v. Mahaveer and others 1999 8 SCC 266 has laid down the principle as under “it is well settled solitary principle that if statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. The said principle of law was further reiterated in the case of Cherrukurimani v. Chief Secretary Government of Andhra Pradesh and others 2015 13 SCC 722, wherein, it was held that “where law prescribe a thing to be done in a particular manner following a particular procedure, it shall have to be done in the same manner following the provisions of law without deviating from the prescribed procedure. The said principle has again been reiterated and followed in the case of Municipal Corporation Greater Mumbai v. Abhilash Lal and others 2020 13 SCC 234, and in the case of Opto Circuit India Limited v. Axis Bank and others 2021 6 SCC 707 and again in the case of Union of India v. Mahesh Sing CAP.No.4807 of 2022. In the case of Tata Chemicals Limited v. Commissioner of Customs (Preventive) 2015 11 SCC 628, it has been held that there can be no stopple against the law. If the law requires something to be done in a particular manner, then it must be done in that manner, if it is not done in that manner then it would have no existence in the eye of law. The Hon’ble Supreme Court held as under:

The Tribunal’s judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law. On fact, it has been more than amply proved that no representative of the appellant was, in fact, present at the time the Customs Inspector took the samples. Shri K.M. Jani who was allegedly present not only stated that he did not represent the Clearing Agent of the appellants in that he was not their employee but also stated that he was not present when the samples were taken. In fact, therefore, there was no representative of the appellants when the samples were taken. In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person.

11. That for the aforesaid reasons, the impugned penalty order passed is neither tenable, nor sustainable. The penalty order so passed being per se illegal, deserves to be set aside/quashed.

12. That furthermore the ld. Assessing Officer grossly erred in imposing the penalty and ignoring the fact that Hon’ble ITAT also acknowledged the averments of the assessee cannot be rejected that there is sale transaction between the party. That ld. Assessing Officer merely relying upon the date of stamp paper dated 12.12.2012 and did not consider the date of execution of agreement to sale which is also duly notarized dated 20.06.2013. That it is apparent that the ld. Assessing Officer went beyond the mandate of the directions of the Hon’ble ITAT.

13. That the ld. Assessing officer completely ignore the report of the Sub-registrar dated 19.03.2019 which clearly says that the assessee purchased the said land on 10.04.2013 and that agreement to sale was subsequently executed on 20.06.2013. That the copy of Civil Suit filed by Smt. Maya Devi are also on record of the Assessing Officer, which he has conveniently ignored. NO ONE states that agreement to sale was entered between the assessee & Smt. Maya Devi on 12.12.2012. ONLY stamp paper dated 12.12.2012 which is in the name of Smt. MAYA DEVI was used.

14. That the issue of whether the date on a stamp paper impacts the validity of an agreement executed on a subsequent date is a nuanced topic with significant implications in contractual law. This analysis seeks to elaborate on the principle that the date on a stamp paper does not affect the date of execution of the agreement, provided the document adheres to the requirements set forth by the Rajasthan Stamp Act, 1998. A deeper exploration of the legal provisions, judicial precedents and practical implications offers clarity on this proposition. The Rajasthan Stamp Act, 1998, governs the imposition and collection of stamp duty on various instruments executed within the state. However, the Rajasthan Stamp Act, 1998 NOWHERE stipulates that the date of purchase of the stamp paper must align with the execution date of the agreement. This distinction is pivotal to understanding the principle of validity in such cases.

15. That Hon’ble Supreme Court in the matter of Thiruvengada Pillai v. Navaneethammal & Anr. (2008) 4 SCC 530, held that an agreement executed on an old stamp paper does not become invalid solely due to the time lapse between the purchase of the stamp paper and the execution of the agreement.

16. That allegations of backdating agreements often arise when old stamp papers are used. However, the use of an old stamp paper does not inherently signify that an agreement has been backdated. The date of execution of the agreement is a factual matter, typically corroborated by witness testimony, supporting documentation, or circumstantial evidence such as financial transactions or correspondence contemporaneous with the execution date. If an allegation of backdating is raised, the onus lies on the party making the claim to substantiate it with credible evidence. Courts examine the totality of circumstances to determine the authenticity of such claims. In the instant case, this exercise is futile since it goes beyond the mandate and directions of the Hon’ble ITAT and further it ignores that the said agreement has been NOTARIZED. It also ignores the fact that subsequently Civil Suit was filed by Smt. Maya Devi wherein also relevant dates are duly mentioned.

That in light of above, the penalty imposed u/s 271D of the Act is WIHOUT JURISDICTION and the same is also beyond the beyond the mandate and directions of the earlier order passed by the Hon’ble ITAT and the same is based on wrong assumption and presumption and same deserves to be quashed & set-aside.”

11. To support the contention so raised in the written submission reliance was placed on the following evidence / records:

12. In addition to the written submission so filed ld. AR of the assessee submitted that the impugned levy of penalty is to be considered by the JCIT/Addl. CIT(A) whereas in the present case the same is passed by the ACIT and thereby the levy of penalty itself is bad in law and is required to be deleted. Alternatively, on the merit part of the case he argued that the assessee become the owner of the land as verified by the ld. AO in the remand proceeding as per direction of the ITAT on 10.04.2013 and the money has been accepted thereafter as detailed herein below:

Thus, as per the direction of the ITAT the penalty cannot be levied.

13. Per contra, the ld DR vehemently argued that the assessee did not respond to the notices given by ld. CIT(A) and ld. CIT(A) has rightly dismissed the appeal of the assessee. Ld. DR objected to the additional ground raised by the assessee and submitted that the said ground was not taken before the lower authorities. Ld. DR also vehemently argued that the Ld. ACIT has not passed an order for levy of penalty, but he has given the appeal effect arising on account of order of Co-ordinate Bench of ITAT and therefore, the issue of jurisdiction raised by the assessee has no merit and required to be dismissed. So far as the levy of penalty she relied upon the orders of the lower authority. She also submitted to consider the report of the AO placed on record. The report of the AO reads as under :

No. JCIT(OSD)/C-1/Alwar/2024-25/416

Dated: 23/01/2025

To.
The Commissioner of Income Tax(Sr. DR)-II
ITAT, Jaipur
Sir,

Through proper channel

Sub: In the appeal matter pending before the Hon’ble ITAT, Jaipur in the case of Balbir Singh, Alwar (PAN-AUQPS2392R), ITA No 734/JPR/2024 for A.Y. 2014-15 respectively-reg.

Ref: Letter No. CIT(Sr.DR-II)/ITAT/JPR/2024-25/10-15 dated 21.05.2025. Kindly refer to the subject mentioned above.

In this case assessment order u/s 143(3) was passed on 19.12.2016 assessing total income at Rs 1,58,32,530/- as against return income of Rs 73,36,400/- While passing the order u/s 143(3) of the Act, AO has initiated penalty proceeding u/s 271D of the Act as the assessee has accepted cash loan of Rs 100,00,000/- from Smt Maya Devi in contravention of provision of section 269SS of the Act. Accordingly reference for penalty proceeding u/s 271D of the Act was made to the Addl/Joint CIT, Range-2, Alwar. The Joint CIT, Range-2, Alwar vide order dated 17.05.2017 levied penalty u/s 271D of the Act for A.Y. 2014-15 for violation of provision of section 269SS of the Act(Copy of the order u/s 271D is enclosed as Annexure ‘A’ for kind perusal).

Being aggrieved by the order passed by the Joint CIT, Range-2, Alwar, the assessee preferred appeal before the Id. CIT(A), Alwar. The Id. CIT(A), Alwar vide the appellate order dated 07.03.2018 deleted the penalty of Rs 1,00,00,000/- holding that the alleged amount of Rs. 1 Cr was received by the assessee against the advance in pursuant to agreement to sell of the property. (copy of the order of ld CIT(A) is enclosed as Annexure ‘B’ for kind perusal).

Being aggrieved by the order passed by the CIT(A), Alwar, Revenue had preferred appeal before the Hon’ble ITAT, Jaipur. The Hon’ble ITAT, Jaipur has set aside the issue to the record of AO.

The ITAT has adjudicated that “neither the assessing officer nor the Id. CIT(A) has examined whether the assessee owned this land in question which is subject matter of the transaction. Even the assessee did not produced any record about the ownership of the said land in question, therefore, to give the concluding finding on the matter, it is necessary to verify the fact that the land in question is owned by the assessee and free from all encumbrances so it can be freely transferred. Accordingly for the limited purpose we set aside this issue to the record of the assessing officer to conduct a necessary enquiry in respect of the status and ownership of the land in question as on the date of the alieged agreement. In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty cab be levied.” (copy of ITAT order is enclosed as Annexure ‘C’ for kind perusal).

In compliance to the order of Hon’ble ITAT, a letter was sent to the Sub-Registrar, Neemrana to seek Jamabandi & Sale Deed for this land for verification of the issue, In response to same Sub-Registrar, Neemrana provided the required details vide his letter dated. 19.03.2019. On perusal of sale deed, it is revealed that Sh. Balbir Singh, had purchased the land in contention on 10.04.2013. Hence, it is ample clear that assessee was not owner on the date of purported agreement that is 12.12.2012. Therefore, claim of assessee that amount of Rs. 1,00,00,000/- was received from Smt. Maya Devi on account of advance is false and appears to be a concocted story. The ACIT, Circle-2, Alwar has passed order giving effect to the Hon’ble ITAT u/s 271D r.w.s. 250/254 of the Act on 25.03.2019 after verifying the facts from the details provided by the Sub-Registrar, Neemrana (Copy of order giving effect by the ACIT,Circle-2, Alwar enclosed as Annexure ‘D’ for kind perusal)

In view of the above facts, application to take legal ground of the appeal is not acceptable following reasons: on the

1. First legal ground of the appeal is that Id Assistant Commissioner of Income Tax, Circle-2 has imposed the penalty u/s 271D of the Act vide order dated 25.03.2019 is not acceptable because the ACIT has given appeal effect to the order of the Hon’ble ITAT vide order u/s 271D/250/254 dated 25.03.2019 after verification of facts as directed by the Hon’ble ITAT vide order dt. 20.12.2018. The penalty order u/s 271D was passed by the Jt CIT. Range-2, Alwar vide order dt. 17.05.2017 and not by the ACIT, Cirele-2, Alwar.

2. Second legal ground of the appeal that on perusal of order dt. 25.03.2019, it can be noticed that the order was not passed by the proper authority as provided under that Act. The order was passed by the Id. Assistant Commissioner of Income Tax whereas, as per section 271D(2) of the Act such penalty could have been imposed by the Joint Commissioner of Income Tax only also, not acceptable, since the order u/s 271D of the Act was passed by the Jt. CIT, Range-2, Alwar on 17.05.2017 and not Assistant Commissioner of Income Tax. The ACIT, Circle-2, Alwar has given appeal effect to the order of the Hon’ble ITATon 25.03.2019.

3. Third legal ground of the appeal is raising the additional ground of appeal which shall go into the root of the matter and which is purely legal in nature is also not acceptable since order u/s 271D of the Act has been passed by the proper authority as provided under the Act.

4. Fourth legal ground of appeal is that the application to take additional ground of appeal may kindly be allowed in light of judgment of Hon’ble Supreme Court in the case of NTPC vs CIT(2291TR383) is also not acceptable since the facts are different in the present case.

5. Additional ground of appeal is that in the law the impugned penalty order passed u/s 271D of the Act is without jurisdiction as the same has been passed by the Id Assistant Commissioner of Income Tax whereas as per section 271D the same could have been levied by the Id Joint Commissioner of Income Tax only which makes the impugned order illegal, void as initio bad in law and same deserved to be quashed and set aside. The contention of the assessee is not acceptable since order u/s 271D had been passed by the Jt. CIT, Range-2, Alwar as provided under the Aet and not by the ACIT, Circle-2, Alwar and impugned order is not illegal as bad in law.

Submitted for kind information & perusal please.”

14. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee is in second round of litigation. In the first round the matter was reached to this tribunal wherein the tribunal has directed to the ld. AO to verity the facts of the ownership issue in the hands of the assessee. The relevant direction of the coordinate bench was as under:

“6. We have heard the rival contentions and perused the material available on the record. The Assessing Officer has observed that the amount of Rs. 1.00 crore received by the assessee from Smt. Maya Devi was a loan and the alleged agreement produced by the assessee is nothing but an afterthought attempting to create an evidence to give the colour of the transaction of loan as advance against the sale of the property. Thus, the Assessing Officer has treated the said amount as loan in contravention of the provisions of Section 269SS of the Act and consequently imposed the penalty U/s 271D of the Act. The Id. CIT(A) has accepted the transaction as advance received against the sale of property by accepting the agreement to sell notarized on 20/6/2013. Except the agreement in question which is claimed to have been notarized and not a registered agreement there is no other document in support of the claim that the amount was received as an advance against the sale of property. The only evidence which can be independently verified is the receipt of payment of Rs. 50/- in the office of the Sub-Registrar, Behror on 21/4/2017. The said receipt was subsequent to the assessment order as well as the show cause notice issued U/s 2710 of the Act on 25/1/2017, therefore, prior to the show cause notice U/s 15/1/2017, there was no document which can independently verified the existence of this claim though the assessee has produced this agreement dated 20/6/2013. It is pertinent to note that if the assessee is having/holding the land in question i.e. khasra No. 24 measuring 1.11 hectare situated at village Dhodhakari, Tehsil-Neenrana, Alwar then in absence of any contrary record, the explanation of the assessee that the said amount was received as an advance against the sale of the land, cannot be rejected. However, neither the Assessing Officer nor the Id. CIT(A) has examined whether the assessee owned this land in question which is subject matter of the transaction. Even the assessee did not produce any record about the ownership of the said land in question, therefore, to give the concluding finding on the matter, it is necessary to verify the fact that the land in question is owned by the assessee and free from all encumbrances so it can be freely transferred. Accordingly for the limited purpose we set aside this issue to the record of the Assessing Officer to conduct a necessary enquiry in respect of the status and ownership of the land in question as on the date of the alleged agreement. In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty can be levied.”

15. Based on the above direction the ld. AO issued a letter to sub-registrar which is reported in his report reads as under:

“In compliance to the order of Hon’ble ITAT, a letter was sent to the Sub-Registrar, Neemrana to seek Jamabandi & Sale Deed for this land for verification of the issue, In response to same Sub-Registrar, Neemrana provided the required details vide his letter dated. 19.03.2019. On perusal of sale deed, it is revealed that Sh. Balbir Singh, had purchased the land in contention on 10.04.2013. Hence, it is ample clear that assessee was not owner on the date of purported agreement that is 12.12.2012. Therefore, claim of assessee that amount of Rs. 1,00,00,000/- was received from Smt. Maya Devi on account of advance is false and appears to be a concocted story. The ACIT, Circle-2, Alwar has passed order giving effect to the Hon’ble ITAT u/s 271D r.w.s. 250/254 of the Act on 25.03.2019 after verifying the facts from the details provided by the Sub-Registrar, Neemrana (Copy of order giving effect by the ACIT,Circle-2, Alwar enclosed as Annexure ‘D’ for kind perusal).”

16. Upon conjoint reading of the direction of the bench in the first round and the information received by the ld. AO from the registrar about the ownership of the land by the assessee it is evident that the assessee acquired the right over the property on 10.04.2013 [ though the stamp paper used for that transaction was dated 12.12.2012]. Therefore, based on the direction of the bench in the first round of litigation the assessee has first acquired the right over the property as per the registered agreement on 10.04.2013 and thereafter on 11.04.2013 accepted Rs. 40,00,000/-, 22.04.2013 Rs. 50,00,000/- and on 20.06.2013 Rs. 10,00,000/- totaling to Rs. 1,00,00,000/- from Smt. Maya Devi. Based on that set of facts and on being consistent to the finding so recorded by the bench vide order dated 20.12.2018 that “In case, the land in question is found to be owned by the assessee then the claim of the assessee shall be accepted and no penalty can be levied. (sic) we quash the levy of penalty in the hands of the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 24/02/2025.