R. Anbuvelrajan Vs ACIT (ITAT Chennai)
In the case of R. Anbuvelrajan vs. ACIT (ITAT Chennai), the tribunal deliberated on whether a land aggregator acting as a broker could be penalized under Section 269SS of the Income Tax Act for receiving cash payments. Section 269SS prohibits acceptance of loans, deposits, or specified sums exceeding ₹20,000 in cash. However, exceptions exist for fiduciaries acting on behalf of principals. The bench analyzed the statutory provisions and ruled that such brokers or agents cannot be treated as recipients of the “specified sum” in their own right.
The tribunal highlighted that the term “specified sum,” as defined under Section 269SS, pertains to money received in connection with the transfer of immovable property, typically by the seller from the buyer. In the present case, the assessee was merely a facilitator, arranging land transactions on behalf of the buyer and transferring funds received from the buyer directly to the seller. The tribunal opined that the liability under Section 269SS applies only to the party owning or directly benefiting from the transaction. Thus, the agent, acting in a fiduciary capacity, cannot be penalized.
Judicial precedents further supported this interpretation. The tribunal referred to Section 226 of the Indian Contract Act, which states that acts performed by an agent are effectively those of the principal. This principle affirms that liabilities arising from contractual breaches are attributable to the principal, not the agent. The tribunal also emphasized that imposing penalties under Section 271D for violations of Section 269SS requires the party to have personally benefited from the transaction, which was not the case here.
Examining the Memorandum of Understanding (MoU) between the parties, the tribunal found that the assessee’s role was limited to identifying parcels of land, negotiating terms, and facilitating title transfers. The MoU clarified that the assessee did not have ownership over the payments and acted solely as a liaison. As such, the tribunal dismissed the penalty imposed on the assessee, ruling that the liability for compliance with Section 269SS lies with the principal parties to the transaction.
This ruling reinforces the principle that intermediaries operating in fiduciary capacities are distinct from the principal parties and cannot be held accountable for statutory violations applicable to the latter.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
