Nirav Mahendrabhai Tamboli Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT Deletes Section 271D Penalty on Cash Component of Property Sale; Reasonable Cause and Consistency Among Co-owners Recognised
Summary: The assessee and several family members jointly sold ancestral property for a recorded consideration of ₹27.90 crore. A subsequent search revealed that the actual consideration was ₹35.57 crore, including a cash component of ₹7.67 crore, of which the assessee’s share was ₹15,97,906. For Assessment Year 2021-22, the assessee filed an updated return under Section 139(8A), disclosed the entire consideration and increased his taxable income from ₹13,83,210 to ₹29,81,120.
Although the Assessing Officer accepted the income disclosed in the updated return, penalty proceedings under Section 271D were initiated for receipt of cash in violation of Section 269SS. The AO levied a penalty of ₹15,97,906, which was confirmed by the CIT(A), on the ground that the assessee had not established sufficient cause under Section 273B.
The assessee submitted that the property was jointly owned by numerous family members, most of whom were agriculturists with limited education and awareness of tax provisions. The family urgently needed to liquidate the inherited property, while the purchasers dictated the terms of payment. The assessee also pointed out that the entire consideration was subsequently disclosed and that penalty proceedings arising from the same transaction had been dropped in the case of another co-owner, Jayaben Ramanlal Tamboli.
The Ahmedabad ITAT found that the matter was squarely covered by the Co-ordinate Bench decision in Ashok Ramanlal Tamboli, ITA No. 344/Ahd/2026 for A.Y. 2021-22. In that case, similar circumstances, including the family’s bona fide explanation, urgent financial circumstances, lack of awareness of the statutory provisions and subsequent disclosure of the cash consideration, had been accepted as constituting reasonable cause under Section 273B.
The Tribunal also noted that, in the case of co-owner Jayaben Ramanlal Tamboli, penalty proceedings under Section 271D arising from the same property transaction had been dropped. Considering the identical facts, the Tribunal held that the assessee’s case was on an equal footing with the co-owner whose penalty proceedings had been dropped.
Accordingly, respectfully following the Co-ordinate Bench decision, the ITAT deleted the penalty of ₹15,97,906 under Section 271D and allowed the assessee’s appeal. The order was pronounced on 21.08.2026.
The assessee and several family members jointly sold ancestral property for a recorded consideration of ₹27.90 crore. A subsequent search revealed that the actual consideration was ₹35.57 crore, including a cash component of ₹7.67 crore. The assessee’s share of the cash consideration was ₹15.98 lakh.
The assessee filed an updated return under Section 139(8A), disclosed the entire consideration and increased his taxable income from ₹13.83 lakh to ₹29.81 lakh. Although the AO accepted the updated return, he levied a penalty of ₹15.98 lakh under Section 271D for violation of Section 269SS, which the CIT(A) confirmed.
The assessee explained that:
- The property was jointly owned by numerous family members;
- Most co-owners were agriculturists with limited education and awareness of tax law;
- The family urgently needed to liquidate the inherited property;
- The purchasers dictated payment of part consideration in cash;
- The entire consideration was subsequently disclosed and tax paid; and
- In the case of another co-owner involved in the same transaction, the AO had dropped identical penalty proceedings.
The Ahmedabad ITAT found the issue squarely covered by its decision in Ashok Ramanlal Tamboli, another co-owner in the same transaction. In that case, the Tribunal had accepted the family’s bona fide explanation, urgent financial circumstances, lack of awareness and subsequent disclosure as constituting reasonable cause under Section 273B.
The Tribunal also considered that penalty proceedings had been dropped in the case of another co-owner, Jayaben Ramanlal Tamboli, arising from the identical transaction. Co-owners placed on an equal footing could not reasonably be subjected to inconsistent treatment.
Accordingly, the ITAT deleted the entire ₹15.98-lakh penalty under Section 271D and allowed the assessee’s appeal.
List of Cases Discussed / Relied Upon
- Ashok Ramanlal Tamboli,ITA No. 344/Ahd/2026, ITAT Ahmedabad, A.Y. 2021-22 — Co-ordinate Bench decision on the same property transaction, holding that the circumstances surrounding receipt of cash consideration constituted reasonable cause and directing deletion of the Section 271D penalty.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (hereinafter referred to as “CIT(A)”), dated 20.03.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) confirming the levy of penalty under section 271D of the Act and relates to Assessment Year (A.Y.) 2021-22.
2. The assessee has challenged the appellate order in the following ground:
(1) NFAC has erred in confirming the levy of penalty of Rs.15,97,906/- u/s 271D of the Act.
3. Brief facts of the case are as under: The assessee and other several other persons including person from his family had sold the property to M/s. Shiv Construction for total consideration of Rs.27,90,00,000/-. Theth assessee had 1/48 share in the said property and the assessee’s share of the sale consideration was reported as Rs.58,12,500/- based on which the assessee computed Long Term Capital Gain of Rs.11,13,515/- in its return of income for Asst. Year 2021-22. Later, there was a search on Darshnam-Vihar group and the post search investigation revealed that the property was sold for a total consideration of Rs.35,56,99,500/- as against the amount of Rs.27,90,00,000/- noted in the sale deed. The differential amount of Rs.7,66,99,500/- was taken in cash and the assessee’s share to that Rs.15,97,906/-.
4. The assessee filed an updated return u/s. 139(8A) of the Act and disclosed the total receipt of Rs.74,10,410/- and accordingly declared taxable income of Rs.29,81,120/- as against the total taxable income of Rs.13,83,210/- shown in the return filed u/s. 139(1) of the Act.
5. In the assessment order, the assessing officer accepted the income as disclosed in the updated return but initiated penalty proceedings u/s. 271D for the reason that the assessee had accepted cash of Rs.15,97,906/-. Subsequently, in the order passed u/s. 271D of the Act, the assessee’s submissions were considered and it was held that having accepted cash the assessee had violated provisions of Section 269SS and was not prevented by sufficient cause within the meaning of Section 273B. It was thus held to be a fit case for levy of penalty of Section 271D and penalty of Rs.15,97,906/- was levied on the assessee. This levy was confirmed by the Ld. CIT(A),NFAC.
6. In the impugned appellate order, we notice that the Ld. CIT(A), while describing the facts, has wrongly picked up another assessee Shri Jagdish C. Tamboli and narrated the facts related to his case. However, subsequently, the Ld. CIT(A) in the appellate order has reproduced the contentions of the assessee in the present appeal and the confirmed the levy of penalty of Rs.15,97,906/-.
7. The Ld. A.R. Shri Mehul K. Patel summarized the contentions raised by the assessee before the lower authorities which are as under;
“1. Fragmented Family: The joint owners of the land were part of the family which consisted of descendants of six brothers, most of whom were adults and had their individual family interests in mind.
2. The education of the assessee family: From the chart, you will appreciate that largely the family members had a very minimal education.
3. Health of the assessee: A large number of family members were ageing and were ill with serious illnesses requiring medical support.
4. No choice of the assessee; No buyers were found for a very long period and the buyers dictated terms which had to be agreed to fetch the kind of price which was offered to them. The family was in a hurry to encash the only large piece of land which was inherited and there was a lot of dissatisfaction and disharmony amongst the family members.
5. General market conditions to receive the payment in cash. The market conditions were such that the family had to agree to receive some consideration in cash and large members of the family were agriculturists and other agriculturists often mentioned that agricultural lands were often sold in cash.
6 The land sold was originally agricultural land. The income of the family was mainly agricultural income. It is only to find a buyer and get a better price the Land was converted to NA.
7. Multiple Owners Since the land belonged to a large number of individuals given the fact of death of brothers who had inherited the lands from their parents, Ownership was fragmented, and each owner did not wish to remain a joint owner of the said land.
8 Passage of Time and Disharmony among the family members Given the passage of time and almost minimal agricultural income, there was an urgency of liquidating the asset at an early date. Disharmony amongst the owners resulted because of the delay in the sale of the property, the lack of an adequate number of buyers also added to the dissatisfaction amongst the owners.
9. Reasonable Cause. All the above factors along with the fact that there is no evasion of tax in the transaction constitute a valid reasonable cause and ignorance of the law and no loss to the revenue with minimal education, failing health of the ageing members of the family needs to be considered as “Reasonable Cause as contemplated by Section 2738 of the Act.
10. There is no loss to the Revenue as each member of the family has disclosed the entire consideration in the updated returns filed. The purpose for which the section was introduced was to curb black money. Since the taxes are paid, the question of “black money” does not arise.
11 The entire consideration was receivable in instalments over a period of few years from the year 2018 and the same was not fully received till the date of the filing of the returns by the family members. Some instalments were to be received after the completion of the assessment.”
8. The assessee had also contended that in case its prayer for deletion of penalty is not accepted on the ground of reasonable cause as demonstrated in the submissions, the penalty should be restricted only to the amount received during the previous year relevant to Asst. Year 2021-22, which was Rs.2,55,823/-. The assessee had also submitted that in the case of one of the co- owner Shri Jagdish Tamboli, the assessing officer had levied a penalty for only Rs.6,56,052/- received in cash during the relevant Financial Year while his share of the consideration received in cash was Rs.42,61,089/-. The Ld. A.R. has filed before us a decision of the ITAT Bench ‘B’ in ITA No. 344/Ahd/2026 in the case of Ashok Ramanlal Tamboli for the Asst. Year 2021-22. The assessee in the said appeal is also part of the persons which were sellers in the transaction under consideration in the present appeal.
9. In that case, the Ld. Counsel for the assessee had made similar submissions and pleaded that the circumstances were such that the receipt of part of the consideration in cash could be taken as exceptional and reasonable circumstances. The lack of awareness of statutory provisions, on the consequence of receipt of part of the sale consideration in cash, caused the assessee to accept the cash. In any case they had modified the return and included, the amount shown in the sale deed and the consideration received in cash, in the returns filed u/s. 139(8A) even before any action was initiated by the Department u/s. 147. The Counsel in that case had also pointed out that in the case of another co-owner, namely Jayaben Ramanlal Tamboli, the A.O. had accepted the explanations offered by the assessee and drop the penalty proceedings u/s. 271D of the Act.
10. In reply, Ld. Sr. D.R. Smt. Deeba Farhat defended the levy of penalty on the ground that receipt of cash beyond the limit prescribed was a clear violation of Section 269SS of the Act and therefore the penalty u/s. 271D was rightly imposed. She also stated that the conclusion drawn by one assessing officer in the case of one family member would not be binding on another assessing officer and therefore the dropping of penalty in the case of Jayaben Ramanlal Tamboli need not have been followed by the assessing officer in the present case.
11. After perusal of the facts and circumstances of the case and arguments of the Ld. A.R. and Ld. Sr. D.R., we find that this case is squarely covered by the decision of the Co- ordinate Bench in the case of Ashok Ramanlal Tamboli. The relevant portion of the decision in ITA No. 344/Ahd/2026 is reproduced below:
“3. The brief facts of the case are that the assessee along with other co-owners sold a property at a consideration of Rs.27,90,00,000/-. The assessee received his share of the sale consideration at Rs.1,16,25,000/- as per the sale deed. Apart from this amount, the assessee also received Rs.31,95,813/- as sale proceeds in cash. Though, the assessee, as advised, declared his share of sale consideration as per the sale deed in the return of income, however, did not disclose the amount of sale consideration received in cash. However, the assessee filed a revised return and declared the said cash amount of sale consideration therein. The AO accepted the revised return, however, levied penalty u/s 271D of the Act for receiving the sale consideration of Rs.31,95,813/- in cash in violation of provision of Section 269SS of the Act. The Ld. CIT(A) confirmed the penalty so levied by the AO.
4. Before us, at the outset, Ld. Counsel for the assessee submitted that it was duly explained before the lower authorities that the assessee and his family members were agriculturists and were not aware of the relevant provisions of the Act prohibiting acceptance of sale consideration in cash. It was further explained that the assessee and his family members were in dire need of funds, therefore, they collectively decided to sell their ancestral property. The purchasers were willing to purchase the property only if, the assessee and his family members would accept partial amount in cheque and partial amount in cash. Since, the assessee and his family members had no choice, but to accept the partial amount in cash in lieu of sale of the property because they were in dire need of funds, therefore, they acceded to the condition of the purchasers to accept partial amount in cash. That the assessees were not aware that the same would be in any manner a violation of Income Tax Provisions. Ld. AR of the assessee has further submitted that when the assessee and his family members came to know that they were supposed to disclose the entire sale consideration including the amount received in cash, they immediately filed revised return of income, even prior to issue of notice u/s 147 of the Act. The Ld. AR has submitted that the assessee and his family members were under bonafide belief that they have not committed any violation of law in accepting the partial amount in cash out of sale consideration. The Ld. Counsel for the assessee has further brought our attention to the order passed in case of co-sharer, namely, Jayaben Ramanlal Tamboli, PAN No. AFCPT8501L, order dated 25.09.2024, wherein, in identical facts and circumstances, in relation to same transaction of sale of land, penalty proceedings u/s 271D of the Act were initiated by the AO, however, after considering the submissions made by the said co-sharer who had sold the property in question alongwith the assessee, the AO accepted the explanation and no adverse inference was drawn against the said assessee and the penalty proceedings u/s 271D of the Act were dropped. Since, the said case is relating to the same transaction of the sale of the property and since, in the case of co-sharer, the AO has dropped the penalty proceedings u/s 271D of the Act, hence, the case of the assessee being on equal footing and the assessee having explained the reasons for acceptance of small amount in cash out of total sale consideration and duly offered the said sale consideration for taxation, the impugned penalty in the case of the assessee is ordered to be deleted.”
12. Since the facts of the case before us is identical to the case reproduced above, respectfully following the decision of the Co- ordinate Bench, the impugned penalty in the case of the assessee in the present appeal is deleted.
13. In the result, the appeal of the assessee is stands allowed.
This Order is pronounced on 21 /08/2026.
