ITAT Sets Aside Penalty Against Taxpayer For Receiving Property Sale Price In Cash At Registration

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed a penalty of Rs. 7.41 lakh imposed on a Ludhiana resident for receiving the sale consideration of a plot in cash at the time the sale deed was registered.

The order was passed by Accountant Member Manoj Kumar Aggarwal, who held that the penalty had been wrongly imposed, as the cash was received in a single transaction at the time of execution of a registered sale deed and not as an advance.

On those facts, the tribunal held that the penalty could not be sustained.

"It is an admitted position that the assessee has not received any advance out of sale consideration but has received entire sale consideration in one go at the time of execution of sale deed only. In such a case, Sec.269SS would not apply as per the decision of Chennai Tribunal in ITO vs. Shri R. Dhinagharan (HUF) (ITA No.3329/Chny/2019 dated 29-12-2023", the tribunal observed

The case related to the sale of a plot during the 2016–17 financial year. On July 1, 2016, the assessee received Rs. 7.41 lakh in cash when the sale deed was executed before the sub-registrar. There was no earlier payment, and no advance was received at any stage. The transaction eventually resulted in a capital loss, and no assessment was framed for that year.

Despite this, the tax department treated the cash receipt as a violation of Section 269SS of the Income-tax Act, which restricts acceptance of loans, deposits, and certain specified sums of Rs. 20,000 or more in cash. On that basis, a penalty equal to the amount received was imposed under Section 271D.

For context, Section 269SS was amended in 2015 to curb the use of cash in property transactions by bringing within its scope cash advances taken in connection with the transfer of immovable property. Where the provision is violated, Section 271D allows the tax authorities to levy a penalty equal to the amount received in cash.

It also rejected the department's argument that the wording of the law was wide enough to cover final sale consideration received in cash. Since it was an admitted position that the full amount was received in one go at the time of execution of the sale deed, the bench held that the transaction did not attract the penalty and allowed the appeal.

Case Detail: Surjit Kaur vs. ITO, Ward 3

Citation: 2026 LLBiz ITAT(MUM)12

Case Number: ITA No.1136/CHANDI/2025

For Appellant: Chartered Accountant Parikshit Aggarwal

For Respondent: Dr. Ranjit Kaur (Addl. CIT)

Click here to read the Order.