ITAT Deletes Rs. 13.56 Lakh Penalty Under Section 271D; Cash Received on Flat Sale Held Bona Fide

The assessee, engaged in construction as M/s. Vidya Builders and also in private finance, filed his return for AY 2016-17 declaring income of Rs. 9,59,390, which was accepted under Section 143(3). During scrutiny, it was noticed that he had received Rs. 13,56,500 in cash from four buyers towards the sale of flats. As each receipt exceeded Rs. 20,000, penalty proceedings were initiated under Section 271D for alleged violation of Section 269SS.

The assessee explained that the buyers were temple workers without effective banking facilities and insisted on cash payments, and that refusal would have resulted in cancellation of transactions. The AO rejected the explanation and levied penalty equal to the cash received, which was confirmed by the CIT(A)/NFAC.

Issue Before Tribunal: Whether penalty under Section 271D was leviable for accepting Rs. 13,56,500 in cash, or whether the assessee had established “reasonable cause” under Section 273B.

Tribunal’s Ruling: The Tribunal noted that the receipt of cash and sale transactions were not in dispute. The genuineness of the transactions had been accepted during assessment proceedings, and buyers had filed confirmation letters. There was no finding that the transactions were sham or intended to introduce unaccounted money.

The Tribunal observed that penalty under Section 271D is not automatic. Section 273B provides relief where the assessee establishes bona fide circumstances. In the present case, the explanation that buyers lacked active banking access and insisted on cash was found plausible. The transactions were genuine and duly recorded.

The Tribunal directed deletion of the entire penalty of Rs. 13,56,500. The appeal was allowed.

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