Kusum Devi Goyal Vs ACIT (ITAT Kolkata)
Unsigned and unstamped sale agreement cannot prove actual receipt of ₹25 lakh cash advance: Kolkata ITAT deletes Section 271DA penalty
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal has deleted a penalty imposed under Section 271DA for alleged violation of Section 269ST, holding that an unsigned and unstamped draft agreement, relating to a transaction that never materialised, could not by itself prove that the assessee had actually received a cash advance of ₹25 lakh.
The Tribunal found that the Department had failed to bring any independent evidence on record to substantiate the alleged cash receipt or to show that the contemplated property sale had actually taken place.
Draft agreement recovered during search
The assessee filed her return for AY 2021-22 declaring a total income of ₹32.38 lakh.
A search under Section 132 was conducted on February 24, 2022 in the cases of the Naxal Group. The assessee was also covered by the search proceedings.
During the search, the Department retrieved a document from a mobile phone belonging to Shri Prithiviraj Goyal, identified in the seized material as item PRG HD/1.
The document was described as an agreement for sale dated March 15, 2021 between the assessee, Smt. Kusum Devi Goyal, as the proposed seller and M/s Swastil Vilas Pvt. Ltd. as the proposed purchaser.
The draft agreement contained a recital stating that the assessee had received ₹25 lakh in cash as advance consideration for the proposed sale.
Based solely on this recital, the AO concluded that the assessee had received ₹25 lakh otherwise than through the prescribed banking channels and had thereby violated Section 269ST. A penalty was accordingly imposed under Section 271DA.
The CIT(A) confirmed the penalty, following which the assessee approached the Tribunal.
Agreement was neither signed nor stamped
The assessee argued that the document recovered during the search was merely an unsigned and unstamped draft agreement. It had not been executed by either party, and the proposed property transaction had never materialised.
Therefore, the recital regarding receipt of ₹25 lakh could not be treated as proof that cash had actually changed hands.
The Department was unable to produce any corroborative evidence, such as:
- A signed or registered agreement;
- A receipt acknowledging payment of cash;
- Confirmation from the proposed purchaser;
- Evidence of withdrawal or availability of cash;
- Subsequent execution of a sale deed;
- Possession or transfer of the property; or
- Any other material showing actual payment and receipt of ₹25 lakh.
The case for penalty was thus founded entirely upon a statement appearing in an unexecuted document.
Penalty requires proof of actual receipt
Section 269ST prohibits a person from receiving ₹2 lakh or more otherwise than through prescribed banking modes in specified circumstances. Section 271DA provides for a penalty where a person receives an amount in contravention of Section 269ST.
Thus, the essential jurisdictional fact for imposing penalty is the actual receipt of money in the prohibited manner.
The Tribunal observed that although the recovered agreement contained details of a cash payment, it was admittedly unsigned and unstamped. Further, the contemplated transaction was never implemented.
An unsigned document lacking legal sanctity could not, without supporting evidence, establish that the transaction described in it had actually occurred.
The Tribunal also noted that the AO had failed to substantiate that the assessee had sold the property during the relevant year. There was no evidence proving either completion of the sale transaction or actual receipt of the alleged cash advance.
Accordingly, the draft agreement could not be treated as a valid basis for imposing penalty under Section 271DA.
The Tribunal set aside the CIT(A)’s order and directed the AO to delete the penalty.
Delay of 21 days condoned
The assessee’s appeal before the Tribunal was delayed by 21 days. She filed an affidavit, an application explaining the delay and supporting evidence.
The Tribunal found that the reasons furnished were bona fide and reasonable. It consequently condoned the delay and admitted the appeal for adjudication on merits.
Author’s comments
The crucial point in this case was not merely that the agreement was unsigned. In income-tax proceedings, even an unsigned document, loose sheet or digital record may possess evidentiary relevance if its contents are supported by surrounding circumstances and independent material.
However, penalty under Section 271DA cannot be imposed merely because an unexecuted draft contains a recital regarding cash payment. The Revenue must establish that the assessee actually received the specified amount in contravention of Section 269ST.
The distinction between a proposed transaction and a completed transaction is particularly important. Draft agreements are often prepared during negotiations, and their recitals may describe intended payment terms rather than payments already made. Unless execution or actual performance is proved, the document alone may not establish receipt.
Further, the document was recovered from another person’s mobile phone. The order does not refer to any admission by the assessee, confirmation by the proposed purchaser or supporting financial trail. Nor was there evidence that the property was eventually sold. These evidentiary gaps materially weakened the Department’s case.
The decision should not be understood as laying down an absolute rule that every unsigned agreement must be ignored. If an unsigned document is supported by statements, bank withdrawals, cash-flow evidence, possession records or subsequent conduct of the parties, it may still be relied upon in appropriate proceedings.
The ruling instead affirms a narrower and sound principle: before imposing a penalty equal to the alleged prohibited cash receipt, the Department must first prove the fact of receipt. A mere recital in an unsigned and unimplemented draft agreement cannot substitute such proof.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, KOLKATA BENCH
This appeal preferred by the assessee is against the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (hereinafter referred to as the “ld. CIT(A)”], dated 28.08.2025 for the Assessment Year (AY) 2021-22.
2. The appeal is barred by 21 days. The assessee filed affidavit along with the condonation of delay letter, explaining the delay in filing the appeal. The assessee has also filed the evidences for proving the contents of the affidavit. Therefore, we find the reasons as bonafide. And reasonable. Accordingly, the delay in filing the appeal is condoned and the appeal is admitted for adjudication.
3. The issue in Ground No.1 is against the imposition of penalty u/s 271DA of the Income-Tax Act, 1961 (In short, ‘the Act’) on the basis of unsigned agreement alleging receipt of advance of Rs.25,00,000/-, which was never materialized and executed .
4. The facts of the case in brief are that the assessee filed return of income on 15.03.2022, declaring total income of Rs.32,37,730/-. A search action u/s 132 of the Act was conducted on 24.02.2022 and subsequent dates against the Naxal Group of cases. The case of the assessee was also covered for action u/s 132 of the Act. An agreement was retrieved from the seized document/item namely PRG HD/1, which was mobile phone of Shri Prithiviraj Goyal and the paper is unsigned and unstamped agreement for sale dated 15.03.2021 between Smt. Kusum Devi Goyal, seller and M/s Swastil Vilas Pvt. (Purchaser). As per the agreement for sale, the assessee, Smt. Kusum Devi Goyal had received Rs.25,00,000/- in cash as advance, which is in contravention of the provisions of section 269ST of the Act attracting u/s 271D of the Act. Finally, the AO levied the penalty vide order dated 30.03.2023 passed u/s 271DA of the Act.
5. In the appellate proceedings, the ld. CIT(A) confirmed the penalty initiated by the AO.
6. We have heard rival submissions and perused the materials available on record. Undisputedly, the agreement found during the course of search action between Smt. Kusum Devi Goyal and M/s Swastil Vilas Pvt. Ltd., though contained the details of payment of cash, however, the same was unsigned and unstamped and also the deal was never materialized. Therefore, we find merit in the contention of the assessee that unsigned document has no validity or veracity in law and Department cannot impute the assessee to have any transaction is stated in the agreement to sell. The AO failed to substantiate with evidence that the assessee has in fact sold the property during the year under consideration. Therefore, in our opinion said document has no legal sanctity and cannot be relied. Accordingly, we hold that the same cannot be a basis for levying the penalty on the assessee u/s 271DA.
Consequently, we set aside the order of ld. CIT(A) and direct the AO to delete the penalty.
7. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 11/09/2026.
