The Income Tax Appellate Tribunal in Cuttack has quashed a penalty slapped on an Odisha taxpayer who accepted ₹47.54 lakh in cash for selling two properties, ruling that tax authorities bungled the law by invoking the wrong statutory clause.
The taxpayer hid nothing. He declared the twin land sales on his income tax return, computed the capital gains, and cleared every rupee owed to the exchequer. The Centralised Processing Centre in Bengaluru processed the filing and accepted his tax computation without raising a single flag. Then the Berhampur tax office stepped in.
An Assessing Officer in Berhampur launched an inquiry after learning the ₹47.54 lakh consideration moved entirely in physical currency. The officer invoked Section 269SS of the Income-tax Act—a provision barring cash loans, deposits, and transaction advances—and slapped an equivalent penalty under Section 271D. When the Commissioner of Income Tax (Appeals) dismissed the man's challenge, he escalated the battle to the Cuttack bench of the appellate tribunal.
On October 5, 2026, the tribunal struck down the penalty order. The bench held that Section 269SS governs loans, deposits, or advance payments—not the final, full consideration handed over upon concluding a property sale. To support its finding, the tribunal pointed to its March 16, 2026 ruling in the case of Satyabrata Panda, as well as an earlier precedent in Arati Saraf, where tax officers made the exact same statutory blunder.
The bench determined that the officer should have invoked Section 269ST—which bars cash receipts exceeding ₹2 lakh in a single day or transaction—alongside its corresponding penalty provision, Section 271DA. Because the assessing officer built the entire case on the wrong section, the penalty collapsed.
| Provision Invoked | Statutory Scope | Tribunal Determination |
|---|---|---|
| Section 269SS / 271D | Restricts cash loans, deposits, and land purchase advances | Inapplicable to final sale consideration |
| Section 269ST / 271DA | Bars cash receipts over ₹2 lakh in a single transaction | Correct provision, but never invoked by the officer |
The ruling shuts down the pending penalty, but questions linger over whether revenue authorities can mount a fresh assault. The inquiry centered on civil penalty proceedings rather than criminal prosecution.
"The taxpayer succeeded because the ITAT considered the cash as sale consideration received upon completion of the transaction, rather than an advance covered by Section 269SS," said Pranshu G, Partner at Ashok Pranshu & Co. He noted that while the department could technically consider fresh proceedings under Section 269ST, statutory clocks work against them. "The Income Tax Department cannot use a change in the applicable statutory provision to revive proceedings for which the limitation period under Section 275 has already expired."
Property sellers who accept physical currency still walk a razor-thin tightrope. Tax advisers warn that sellers holding cash proceeds must report the transactions immediately, pay capital gains taxes with accumulated interest, and check whether filing windows for revised returns remain open before the taxman knocks.