Whenever there is a sale or purchase of immovable property i.e. land or building or bungalow or apartments etc we have seen that many people tend to accept either a small amount or token amount in cash and they thinks it is a small amount and if they declare it in their Income tax return under capital gain there will be no consequences.
However, is it correct that one could accept consideration in cash while selling house or land and there are no consequences or penalty for same?
Let’s start our discussion with Section 269SS which deals with accepting cash in relation to certain transaction. Extract of Section 269SS is as under:
“No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if,—
(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),
is twenty thousand rupees or more:”
There are three types of transactions covered under above section, two of which we are well aware of i.e. loan and deposit. Let’s discuss the third component i.e. specified sum.
Section 269SS deals with definition of specified sum as under:
““specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.”
Thus, from the above definition it is very clear that if we accept any cash in relation to transaction of immovable property above Rs. 20,000 it will be covered under the provisions of Section 269SS.
Once it is covered under provision of section 269SS let’s understand what is the penalty which will be leviable on same. Section 271D deals with penalty if a person fails to comply with Section 269SS and relevant extract of Section 271D are as under:
“If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.”
There are 2 things to note from the provision of Section 271D which is as under:
It is applicable to all person who does not comply with provision of Section 269SS and it is the duty of the officer to levy penalty and it is not at the discretion of officer to charge penalty as word “shall” has been used in the section and “may” has not been used as in various penalty provision.
Thus, 100% penalty will be applicable on amount so accepted in contravention of provision of section 269SS.
Hence, if a person accepts cash of Rs. 40,000/- in a property deal of Rs. 12 lakh then 100% penalty will be charged on such Rs.40,000 in our opinion.
Now let’s see on whom provision of Section 269SS are not applicable:
The provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,
(a) the Government;
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a Central, State or Provincial Act;
(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
Thus, considering above if a normal individual accepts cash in relation to transaction of immovable property then he/ she might be liable for 100% penalty. Therefore, it is advisable to not accept cash in immovable property transaction.
Guidance on above article by:
Naman Maloo (C.A., B.Com)
He is currently working as Partner – Direct Tax with a renowned firm in Jaipur having experience in dealing Assessments before Income Tax authority, Tax Audit, International Taxation, Tax planning for NRI, Business planning and consultation.
E-mail: firstname.lastname@example.org | LinkedIn: Naman Maloo
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