Property seller takes cash yet wins due to this reason
The Income Tax Appellate Tribunal (ITAT) Cuttack, in a recent judgement, has given relief to Mr Choudhury in a case involving cash component in the sale of a property in Jharsuguda, Odisha, during assessment year (AY) 2019-20. The Income Tax Department had questioned the transaction after Choudhury took Rs 5.22 lakh in cash and the remaining amount in his bank account. Under income tax rules, one cannot take more than Rs 2 lakh in cash for such transactions.
Also read: ₹1.70 crore undisclosed cash alleged in property sale, Income Tax Dept relies on WhatsApp chats and Excel sheets; here's why taxpayer wins at ITAT Delhi
Why did Choudhury take part-payment in cash for selling property?
The Income Tax Assessing Officer (AO) from Berhampur had learned from the property registrar office in Jharsuguda that Choudhury had sold his property to Mr Nayak and received part payment of Rs 5.22 lakh in cash. The registered sale deed also recorded this fact. Thus, the AO sent Choudhury an income tax notice under Section 269SS and imposed a penalty on him under Section 271DA.
Chartered Accountant Swarajya Sahu, representing Choudhury, contended before the ITAT Cuttack that the section invoked by the AO is Section 269SS. Based on this section, AO has treated the sale consideration received by Choudhury in cash as violation of income tax law. However, for this specific violation, Section 269ST is applicable, which has been introduced w.e.f. the AY 2017-2018.
Also read: Rs 48 lakh in cash received from the sale of two properties, paid capital gains tax but received an income tax notice; taxpayer wins the case in ITAT Cuttack for this reason
To support his arguments Sahu cited a related judgement of the ITAT Cuttack in the case of Arati Saraf (ITA No.375/CTK/2023), dated May 13, 2024.
Sahu highlighted that the ITAT Cuttack, in the case of Arati Saraf, had mentioned in its judgement that the AO had invoked the provisions of Section 269SS of the Act and levied the penalty under Section 271D of the Act for taking cash at the time of the sale of immovable property. However, provisions of Section 269ST and Section 271DA have been introduced for violations of the prohibition against cash transactions above Rs 2 lakh. The AO did not invoke these provisions in the case of Choudhary, even though the transaction fell under Section 269ST.
The ITAT Cuttack had also said in Arati Saraf’s case that the intention of the legislature, as explained in the memorandum and notes on clauses, while the amendment was made vide Finance Bill 2015, is clear that the intention for bringing this provision was to curb the generation of black money in real estate transactions by prohibiting the acceptance of the payment of specified advance in cash. The “specified sum” as defined is applicable only for “advance” receivable, whereas the “advance otherwise” means advance can be of any manner.
The ITAT Cuttack in Arati Saraf’s case said that this provision is not applicable to the transactions where no advance payment in cash has been received and the cash transactions have happened at the time of registration of the sale deed. The present case of the assessee (Arati Saraf) also falls in this category, where admittedly the entire cash was received by the assessee in one go at the time of execution of the sale deed. Therefore, the ITAT Cuttack in Arati Saraf’s case said that there is no violation of the provisions of Section 269SS, which has been wrongly invoked in this transaction.
ITAT Cuttack applies Arati Saraf’s precedent on Choudhury’s case
The ITAT Cuttack in the present case (Choudhury) applied the precedent set in Arati Saraf’s case, and said that the facts of the case clearly showed that the provisions of Section 269SS did not apply to the transactions for which the AO has sought to levy a penalty under Section 271D.
The ITAT Cuttack said: “This being so, respectfully following the decision of the coordinate bench of this Tribunal in the case of Arati Saraf as also in the case of Satyabrata Panda, as it is noticed that the AO has applied the provisions of Section 269SS in this case instead of applying the provisions of Section 269ST; therefore, the penalty levied under Section 271D stands cancelled.”
So, on October 5, 2026, Choudhury won the case in the ITAT Cuttack.
Also read: ₹1.70 crore undisclosed cash alleged in property sale, Income Tax Dept relies on WhatsApp chats and Excel sheets; here's why taxpayer wins at ITAT Delhi
Why did Choudhury take part-payment in cash for selling property?
The Income Tax Assessing Officer (AO) from Berhampur had learned from the property registrar office in Jharsuguda that Choudhury had sold his property to Mr Nayak and received part payment of Rs 5.22 lakh in cash. The registered sale deed also recorded this fact. Thus, the AO sent Choudhury an income tax notice under Section 269SS and imposed a penalty on him under Section 271DA.
Chartered Accountant Swarajya Sahu, representing Choudhury, contended before the ITAT Cuttack that the section invoked by the AO is Section 269SS. Based on this section, AO has treated the sale consideration received by Choudhury in cash as violation of income tax law. However, for this specific violation, Section 269ST is applicable, which has been introduced w.e.f. the AY 2017-2018.
Also read: Rs 48 lakh in cash received from the sale of two properties, paid capital gains tax but received an income tax notice; taxpayer wins the case in ITAT Cuttack for this reason
To support his arguments Sahu cited a related judgement of the ITAT Cuttack in the case of Arati Saraf (ITA No.375/CTK/2023), dated May 13, 2024.
Sahu highlighted that the ITAT Cuttack, in the case of Arati Saraf, had mentioned in its judgement that the AO had invoked the provisions of Section 269SS of the Act and levied the penalty under Section 271D of the Act for taking cash at the time of the sale of immovable property. However, provisions of Section 269ST and Section 271DA have been introduced for violations of the prohibition against cash transactions above Rs 2 lakh. The AO did not invoke these provisions in the case of Choudhary, even though the transaction fell under Section 269ST.
The ITAT Cuttack had also said in Arati Saraf’s case that the intention of the legislature, as explained in the memorandum and notes on clauses, while the amendment was made vide Finance Bill 2015, is clear that the intention for bringing this provision was to curb the generation of black money in real estate transactions by prohibiting the acceptance of the payment of specified advance in cash. The “specified sum” as defined is applicable only for “advance” receivable, whereas the “advance otherwise” means advance can be of any manner.
The ITAT Cuttack in Arati Saraf’s case said that this provision is not applicable to the transactions where no advance payment in cash has been received and the cash transactions have happened at the time of registration of the sale deed. The present case of the assessee (Arati Saraf) also falls in this category, where admittedly the entire cash was received by the assessee in one go at the time of execution of the sale deed. Therefore, the ITAT Cuttack in Arati Saraf’s case said that there is no violation of the provisions of Section 269SS, which has been wrongly invoked in this transaction.
ITAT Cuttack applies Arati Saraf’s precedent on Choudhury’s case
The ITAT Cuttack in the present case (Choudhury) applied the precedent set in Arati Saraf’s case, and said that the facts of the case clearly showed that the provisions of Section 269SS did not apply to the transactions for which the AO has sought to levy a penalty under Section 271D.
The ITAT Cuttack said: “This being so, respectfully following the decision of the coordinate bench of this Tribunal in the case of Arati Saraf as also in the case of Satyabrata Panda, as it is noticed that the AO has applied the provisions of Section 269SS in this case instead of applying the provisions of Section 269ST; therefore, the penalty levied under Section 271D stands cancelled.”
So, on October 5, 2026, Choudhury won the case in the ITAT Cuttack.
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