A woman who received Rs 2 lakh in cash as her share of the sale consideration from a property transaction has won relief from the Income Tax Appellate Tribunal (ITAT). The Hyderabad bench of the ITAT deleted the penalty imposed by the tax department, holding that the officer had invoked the wrong provision of the Income Tax Act.
The ruling is important for property buyers and sellers because it clarifies how cash received in connection with the transfer of an immovable property is treated under two provisions of the Income Tax Act. The tribunal held that such a receipt is covered by Section 269SS as a specified sum and is excluded from the scope of Section 269ST. As a result, the penalty imposed under Section 271DA could not be sustained.
The case relates to Sujatha Vaddanapu, an individual taxpayer from Nalgonda in Telangana. She and her husband jointly sold an immovable property for Rs 34 lakh through a sale deed registered on July 16, 2019. Out of the total sale consideration, Rs 4 lakh was received in cash. The Assessing Officer (AO) attributed Rs 2 lakh of this amount to Sujatha.
The tax department later treated her share of the cash receipt as a violation of Section 269ST and imposed a penalty of Rs 2 lakh under Section 271DA. The penalty was equal to the amount received in cash.
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Sujatha challenged the penalty before the Commissioner of Income Tax Appeals. However, the appellate authority upheld the tax officer’s decision in an order dated April 7, 2026. She then approached the Hyderabad bench of the ITAT.
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Why did the tax department impose the penalty?
The dispute was not about whether Sujatha had received Rs 2 lakh in cash. She did not dispute the cash receipt or the fact that this amount represented her share of the sale consideration.
Her argument was about the section under which the tax department had imposed the penalty.
She told the tribunal that the receipt was covered by Section 269SS of the Income Tax Act. This provision restricts the acceptance of loans, deposits and specified sums of Rs 20,000 or more through cash. Such amounts have to be received through an account-payee cheque, account-payee bank draft or permitted electronic modes, subject to statutory exceptions.
The definition of a specified sum under Section 269SS includes any amount received in relation to the transfer of an immovable property, whether as an advance or otherwise. Sujatha argued that the cash received at the time of property registration was covered by this definition.
The tax officer, however, had invoked Section 269ST. This provision generally restricts a person from receiving Rs 2 lakh or more in cash in specified circumstances. A violation can attract a penalty under Section 271DA, which is equal to the amount received.
Why did the ITAT agree with the taxpayer?
The tribunal examined the language of Section 269SS and focused on the expression “advance or otherwise” used in the definition of a specified sum.
It held that the provision was not limited to advances received before a property transaction was completed. The words “or otherwise” extended its coverage to other forms of consideration connected with the transfer of an immovable property.
This could include part consideration, balance consideration or even the full sale consideration. The fact that the payment was made at the time of registration did not change its nature, the tribunal observed.
The ITAT also pointed out that the definition covers money received in relation to a property transfer whether or not the transfer eventually takes place. Therefore, the provision was wide enough to cover the cash consideration received by Sujatha when the sale was registered.
The tribunal also examined the background to the amendment made to Section 269SS through the Finance Act, 2015. The amendment, which took effect from June 1, 2015, was introduced to curb the generation of black money through cash dealings in immovable property transactions.
The memorandum explaining the amendment specifically referred to money received in relation to the transfer of property, whether as an advance or otherwise. The ITAT said this legislative intent supported its interpretation that the provision covered cash sale consideration as well.
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Why Section 269ST did not apply
The most important part of the ruling was the tribunal’s interpretation of the relationship between Sections 269SS and 269ST.
Section 269ST contains an express exclusion for transactions of the nature referred to in Section 269SS. In other words, a receipt that is covered by Section 269SS is excluded from the scope of Section 269ST.
Since Sujatha’s Rs 2 lakh receipt was a specified sum under Section 269SS, the tribunal held that it could not be treated as a violation of Section 269ST.
The fact that the amount was exactly Rs 2 lakh did not change this position. The exclusion under Section 269ST depended on the nature of the transaction, not merely on the amount received.
The ITAT also clarified that Section 271D is the corresponding penalty provision for a violation of Section 269SS, subject to the conditions and protections applicable to that section. However, the tax officer had imposed the penalty under Section 271DA, which applies to violations of Section 269ST.
The tribunal said a penalty under Section 271DA could not be sustained merely because the receipt might need to be examined under another penalty provision.
It accordingly deleted the entire Rs 2 lakh penalty and allowed Sujatha’s appeal.
What property sellers should understand
The ruling does not mean that property sellers can freely accept cash as part of a sale transaction. Section 269SS continues to restrict the acceptance of specified sums of Rs 20,000 or more through cash, subject to the exceptions provided under the law.
The decision is about the correct legal provision applicable to the receipt and the penalty imposed by the tax department. It does not give property buyers and sellers permission to accept cash consideration.
Ravi Thakkar, partner at NRS Consultancy and Associates, said, “The important takeaway from this ruling is that taxpayers should look at the exact nature of a transaction before a penalty is imposed. Cash received in connection with the transfer of an immovable property is specifically covered under Section 269SS. Since Section 269ST excludes transactions covered by Section 269SS, the tax authorities must apply the correct provision while examining such receipts. This does not make cash property transactions permissible. Taxpayers should continue to follow the prescribed banking and electronic payment modes.”
For property buyers and sellers, the practical lesson is to keep sale consideration payments properly documented and use permitted banking or electronic channels. If a penalty notice is received, taxpayers should examine not only the amount involved but also the specific provision invoked by the tax department.
The ITAT pronounced its order on October 16, 2026. The appeal was heard on August 24, 2026, and the tribunal deleted the penalty imposed under Section 271DA.
Disclaimer:
This is a case-specific ruling by the Income Tax Appellate Tribunal. It does not mean that cash transactions in property deals are freely permitted. Section 269SS continues to restrict the acceptance of specified sums in connection with the transfer of immovable property through cash, subject to prescribed exceptions. Taxpayers should understand the applicable provisions and follow the prescribed banking or electronic payment modes.
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This article was first uploaded on November nine, twenty twenty-six, at twenty-four minutes past five in the evening.
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