ITAT Chandigarh Rules Section 269SS Not Applicable to One-Time Cash Sale Payments
Tribunal deletes penalty, clarifies law on property transactions
Ruling strengthens taxpayer rights in real estate cash deals
By Our Legal Reporter
New Delhi: January 12, 2026:
In a significant judgment, the Income Tax Appellate Tribunal (ITAT) Chandigarh Bench (SMC) has held that Section 269SS of the Income Tax Act, 1961—which prohibits acceptance of certain sums in cash beyond ₹20,000—does not apply to one-time cash payments made at the time of registering a property sale deed.
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The ruling came in the case of Surjit Kaur v. ITO (Assessment Year 2017–18), where the assessee had received the entire sale consideration of ₹7.41 lakh in cash during the execution of a registered sale deed. The Tribunal deleted the penalty imposed under Section 271D, clarifying that Section 269SS targets advances, loans, or deposits, not final sale consideration.
Background of the Case
- Assessee: Surjit Kaur
- Transaction: Sale of a plot in FY 2016–17, receiving ₹7.41 lakh in cash at registration.
- Penalty: The Assessing Officer levied penalty under Section 271D, claiming violation of Section 269SS.
- Appeal: The Commissioner of Income Tax (Appeals) upheld the penalty.
- ITAT Decision: Tribunal allowed the appeal, deleting the penalty.
Court’s Observations
The Tribunal made several important observations:
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- Section 269SS applies only to loans, deposits, or advances in relation to immovable property transactions.
- The expression “otherwise” in Section 269SS refers to advances, not completed sale transactions.
- Since the assessee received the entire consideration in one go at registration, there was no violation.
- The Tribunal relied on:
- Chennai ITAT ruling in ITO v. R. Dhinagharan (HUF)
- CBDT Circular No. 19/2015 clarifying that Section 269SS was intended to curb black money in property transactions by prohibiting cash advances, not final sale payments.
Wider Legal Context
This ruling aligns with other judicial interpretations:
- ITAT Mumbai recently held that cash received from property sales cannot be treated as unexplained income if backed by proper records.
- The Tax Talk also reported that ITAT Chandigarh clarified Section 269SS does not apply to one-time cash sale consideration.
Together, these rulings strengthen taxpayer protections and prevent misuse of Section 269SS against genuine property transactions.
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Implications of the Judgment
- Relief for taxpayers: Genuine property transactions involving cash payments at registration will not attract penalties.
- Clarity for tax authorities: Distinction between advances and final consideration is now judicially settled.
- Impact on real estate: Provides certainty for buyers and sellers in semi-urban and rural areas where cash transactions remain common.
- Compliance focus: Taxpayers must still comply with Section 269ST, which restricts cash transactions above ₹2 lakh in general.
Case Details
- Case Title: Surjit Kaur v. ITO
- Assessment Year: 2017–18
- Penalty Amount: ₹7.41 lakh under Section 271D
- Tribunal Bench: ITAT Chandigarh (SMC)
- Order Date: January 6, 2026
Conclusion
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The ITAT Chandigarh’s ruling is a landmark in income tax jurisprudence, clarifying that Section 269SS does not apply to one-time cash payments made at the time of registering a property sale deed. By deleting the penalty, the Tribunal has reinforced the principle that tax laws must be interpreted in line with legislative intent, ensuring fairness for taxpayers.
This judgment will serve as a precedent in similar cases across India, especially in property transactions where cash payments are still prevalent.
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