My client's husband gave her the money to buy a plot registered in her name, partly in cash. Is that a s.269SS violation?
The Jaipur Bench deleted the s.271D penalty. It held that registering property in a wife's name is guided by family and societal factors and by the Government's own incentive of reduced stamp duty for female purchasers, that pooling family funds in that situation calls for a flexible approach to the reasonableness of the explanation, and that where the whole transaction is documented in the registered sale deed and the cash portion came from the husband's known sources, the assessee had shown reasonable cause and did not deserve to be penalised.
Decided by the ITAT (Sandeep Gosain, Judicial Member and Vikram Singh Yadav, Accountant Member) on 2021-10-21, reported as ITA No.1201/JP/2019; Assessment Year 2009-10; Income Tax Appellate Tribunal, Jaipur Bench 'A'. It bears on section 271D, section 269SS, section 273B of the Income Tax Act 1961, in Cash Transaction Limits, Penalty, Gifts, Shares & Angel Tax and Evidence & Burden of Proof matters.
The close-relative defence is the most frequently pleaded and the most loosely pleaded answer to a s.271D notice, and it does not succeed merely because the parties are related. What carried it here was the combination of four things: the relationship, a documented registered transaction, an identified and lawful source of the cash in the hands of the husband, and a practical compulsion — the seller insisted on the balance in cash at the registry and the deal would otherwise have failed. Note the shape of the facts, because they are common: Rs 6 lakh had already gone by demand draft in advance and only the balance of Rs 1 lakh was paid in cash at registration and handing over of possession. Note also what this order does not decide. The year is 2009-10, before the Finance Act 2015 inserted 'specified sum' into s.269SS from 1 June 2015; the receipt in issue was funds from the husband, analysed as a loan or deposit, not as a property advance. Nothing here decides how a post-2015 property receipt is treated.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee purchased a plot of land, registered in her own name, and constructed on it. The source of the investment was money received from her husband; she had no known sources of income of her own. The registered sale deed showed consideration of Rs 6 lakh paid in advance by demand draft and the remaining Rs 1 lakh paid in cash at the time of registry and handing over of possession. It was stated at the Bar that the seller had insisted on the balance in cash and that the deal might not have gone through otherwise. Construction expenses were also incurred in cash, towards purchase of construction material and payment to labourers. A penalty under s.271D was levied for receiving the funds otherwise than through banking channels.
The appeal was allowed and the penalty under s.271D deleted. The assessee had offered a reasonable explanation justifying the cash transactions, everything flowed from the registered sale deed in which both the demand draft and the cash payment were documented, the funds were from the known sources of the husband, and there was no mala fide; she did not deserve to be punished by way of penalty under s.271D for receiving money from her husband to purchase family property (para 17).
The Tribunal placed the transaction in its social and policy setting: the practice of registering property in the name of the wife is guided by various family and societal factors besides the Government's encouragement of such transactions by female members of the family through reduced stamp duty. Where a family is guided by its internal requirements and by that policy incentive, and pools family funds, particularly where the assessee has no known source of income of her own, the explanation deserves to be appreciated and the approach of the authorities needs to be flexible in assessing its reasonableness. It then tested the documents: the registered sale deed recorded both the advance by demand draft and the cash at registry, so the transaction was fully documented and the source was the husband's known funds. It accepted the explanation that the seller had insisted on cash and that without it the deal might not have fructified, and accepted that construction expenses of that kind are necessarily incurred in cash. It drew support from the coordinate bench in Tuhinara Begum, which had dealt with the reverse situation of a wife giving money to her husband for construction of a house and had held s.271D not attracted (para 17).
We therefore find that the assessee has offered reasonable explanation justifying the cash transactions
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Handle my notice → Ask a CA on WhatsAppThe Jaipur Bench deleted the s.271D penalty. It held that registering property in a wife's name is guided by family and societal factors and by the Government's own incentive of reduced stamp duty for female purchasers, that pooling family funds in that situation calls for a flexible approach to the reasonableness of the explanation, and that where the whole transaction is documented in the registered sale deed and the cash portion came from the husband's known sources, the assessee had shown reasonable cause and did not deserve to be penalised. This was decided by the ITAT (Sandeep Gosain, Judicial Member and Vikram Singh Yadav, Accountant Member) and bears on section 271D, section 269SS, section 273B of the Income Tax Act 1961. It is reported as ITA No.1201/JP/2019; Assessment Year 2009-10; Income Tax Appellate Tribunal, Jaipur Bench 'A'. The close-relative defence is the most frequently pleaded and the most loosely pleaded answer to a s.271D notice, and it does not succeed merely because the parties are related. What carried it here was the combination of four things: the relationship, a documented registered transaction, an identified and lawful source of the cash in the hands of the husband, and a practical compulsion — the seller insisted on the balance in cash at the registry and the deal would otherwise have failed. Note the shape of the facts, because they are common: Rs 6 lakh had already gone by demand draft in advance and only the balance of Rs 1 lakh was paid in cash at registration and handing over of possession. Note also what this order does not decide. The year is 2009-10, before the Finance Act 2015 inserted 'specified sum' into s.269SS from 1 June 2015; the receipt in issue was funds from the husband, analysed as a loan or deposit, not as a property advance. Nothing here decides how a post-2015 property receipt is treated. If it applies to you, the first step is this: Do not plead the relationship alone. Prove the source in the relative's hands, the relative's capacity, and why the money had to move in cash on that date.
The assessee purchased a plot of land, registered in her own name, and constructed on it. The source of the investment was money received from her husband; she had no known sources of income of her own. The registered sale deed showed consideration of Rs 6 lakh paid in advance by demand draft and the remaining Rs 1 lakh paid in cash at the time of registry and handing over of possession. It was stated at the Bar that the seller had insisted on the balance in cash and that the deal might not have gone through otherwise. Construction expenses were also incurred in cash, towards purchase of construction material and payment to labourers. A penalty under s.271D was levied for receiving the funds otherwise than through banking channels. The matter was decided on 2021-10-21 by the ITAT (Sandeep Gosain, Judicial Member and Vikram Singh Yadav, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the penalty under s.271D deleted. The assessee had offered a reasonable explanation justifying the cash transactions, everything flowed from the registered sale deed in which both the demand draft and the cash payment were documented, the funds were from the known sources of the husband, and there was no mala fide; she did not deserve to be punished by way of penalty under s.271D for receiving money from her husband to purchase family property (para 17).
The Tribunal placed the transaction in its social and policy setting: the practice of registering property in the name of the wife is guided by various family and societal factors besides the Government's encouragement of such transactions by female members of the family through reduced stamp duty. Where a family is guided by its internal requirements and by that policy incentive, and pools family funds, particularly where the assessee has no known source of income of her own, the explanation deserves to be appreciated and the approach of the authorities needs to be flexible in assessing its reasonableness. It then tested the documents: the registered sale deed recorded both the advance by demand draft and the cash at registry, so the transaction was fully documented and the source was the husband's known funds. It accepted the explanation that the seller had insisted on cash and that without it the deal might not have fructified, and accepted that construction expenses of that kind are necessarily incurred in cash. It drew support from the coordinate bench in Tuhinara Begum, which had dealt with the reverse situation of a wife giving money to her husband for construction of a house and had held s.271D not attracted (para 17). In the words reproduced by the source cited on this page: "We therefore find that the assessee has offered reasonable explanation justifying the cash transactions" The decision followed or applied Tuhinara Begum (ITAT coordinate bench) — relied on for the converse situation.
It was decided by the ITAT on 2021-10-21 and is reported as ITA No.1201/JP/2019; Assessment Year 2009-10; Income Tax Appellate Tribunal, Jaipur Bench 'A'. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271D, section 269SS, section 273B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the penalty under s.271D deleted. The assessee had offered a reasonable explanation justifying the cash transactions, everything flowed from the registered sale deed in which both the demand draft and the cash payment were documented, the funds were from the known sources of the husband, and there was no mala fide; she did not deserve to be punished by way of penalty under s.271D for receiving money from her husband to purchase family property (para 17). It arises in Cash Transaction Limits, Penalty, Gifts, Shares & Angel Tax and Evidence & Burden of Proof matters, on section 271D, section 269SS, section 273B of the Income Tax Act 1961, and was decided by Sandeep Gosain, Judicial Member and Vikram Singh Yadav, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Produce the registered sale deed and show that the mode of every part of the consideration — draft and cash — is recorded in it. Where the seller insisted on cash at registration, get that on record contemporaneously; the Tribunal accepted a statement at the Bar here, but a written confirmation or the seller's own affidavit is worth far more. Where the assessee has no independent source of income, say so plainly and build the case on the family funds rather than leaving the source unexplained. Check the year: for a receipt on or after 1 June 2015 the Department will also invoke 'specified sum', and this order does not answer that.
Validity check could not be completed. Validity check could not be completed. I did not locate any later decision considering this order and did not check whether the Revenue appealed. The order turns wholly on its own facts and the Pune Bench's warning in Dr. Sanjiv Keshav Karande v. ITO — that in penalty matters reasons vary from one assessee to another and no two cases are identical — applies with full force to any attempt to transplant it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Paragraph 17 and the disposal line were returned verbatim in a fenced block; the printed text carries typographical errors ('donot', 'penaty', 'persual'), which is consistent with a true transcription and which I have not corrected inside the quote. The Tribunal cites a coordinate-bench decision in Tuhinara Begum as a reverse situation, where a wife gave money to her husband for construction of a house and no s.271D penalty was held leviable; I did not read that decision. The appeal number ITA No.1201/JP/2019 and the assessment year 2009-10 come from the page's header rendering rather than from a paragraph I read verbatim; the pronouncement date and the Members' names were confirmed from the signature block. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the penalty under s.271D deleted. The assessee had offered a reasonable explanation justifying the cash transactions, everything flowed from the registered sale deed in which both the demand draft and the cash payment were documented, the funds were from the known sources of the husband, and there was no mala fide; she did not deserve to be punished by way of penalty under s.271D for receiving money from her husband to purchase family property (para 17).
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