The Income Tax Appellate Tribunal (ITAT), Jaipur, has deleted an ₹11 lakh penalty imposed on an agriculturist for accepting part of his residential property’s sale consideration in cash. The tribunal held that the taxpayer had demonstrated reasonable cause for violating the prescribed cash transaction rules, considering his rural background, lack of awareness of the relevant tax provision and the transparent disclosure of the property sale.
In its order dated 6 November 2026, in Omprakash vs ITO, Ward 2(1), Kota (ITA No. 439/JPR/2026) for assessment year 2019-20, the tribunal ruled that the taxpayer’s bona fide belief and circumstances justified relief under Section 273B of the Income-tax Act, 1961. It consequently directed the deletion of the ₹11 lakh penalty imposed under Section 271D.
Why did the income-tax department impose an ₹11 lakh penalty?
According to the tribunal’s order, Omprakash, an agriculturist living in the village of Saloniya in Rajasthan’s Kota district, sold a residential property in Santoshi Nagar, Kota, for ₹22.50 lakh.
Of the total sale consideration, he received ₹11 lakh in cash and the remaining ₹11.50 lakh through a demand draft. The income-tax department treated the cash receipt as a violation of Section 269SS, which restricts the acceptance of specified sums of ₹20,000 or more in cash in connection with the transfer of immovable property.
Under Section 271D, a person violating this provision can face a penalty equivalent to the amount received in cash. Consequently, the assessing officer imposed an ₹11 lakh penalty on the taxpayer.
The National Faceless Appeal Centre (NFAC), Delhi, upheld the penalty in January 2026, prompting the taxpayer to approach the Jaipur ITAT.
What did the taxpayer tell the ITAT?
Omprakash argued that he was an agriculturist from a remote village and had never been assessed to income tax before the year under consideration. He said he was unaware of the legal restriction on accepting cash against the sale of immovable property.
He also submitted that the buyer, who was from a neighbouring village, insisted on making part of the payment in cash after selling agricultural land.
The taxpayer argued that he had no intention of concealing the transaction or evading taxes. The registered sale deed disclosed the entire consideration of ₹22.50 lakh, even though the property’s stamp duty value was only ₹8.20 lakh.
He further pointed out that the income-tax department had examined the property transaction during reassessment proceedings but had not made any addition on account of unexplained money.
The taxpayer relied on Section 273B, which provides relief from certain penalties where a person establishes reasonable cause for the failure to comply with the relevant provisions.
Why did ITAT delete the penalty?
The tribunal observed that the taxpayer’s explanation about his rural background, agricultural occupation and lack of previous exposure to income-tax proceedings had not been disputed by the department.
It also noted that the taxpayer had disclosed the complete property sale consideration in the registered deed, despite receiving part of it in cash. This supported his argument that he had not intended to conceal the transaction or evade taxes.
The bench also referred to the Supreme Court’s judgment in Motilal Padampat Sugar Mills Co. Ltd. vs State of Uttar Pradesh (1979), which observed that there is no presumption that every person knows the law. The tribunal disagreed with the appellate authority’s conclusion that ignorance of the law could not constitute a valid defence.
It held that the taxpayer had established a bona fide belief and reasonable cause for accepting the cash payment. Accordingly, the breach of Section 269SS was covered by the protection under Section 273B.
The ITAT set aside the appellate order and directed the deletion of the entire ₹11 lakh penalty under Section 271D. It allowed the taxpayer’s appeal.
What does this mean for property sellers?
The ruling does not give property sellers a general exemption from restrictions on cash transactions. Section 269SS continues to apply to specified sums received in connection with the transfer of immovable property, including advances, and violations can attract a penalty equivalent to the amount received.
However, Section 273B provides an opportunity to seek relief where a taxpayer can demonstrate reasonable cause for the violation.
The Jaipur ITAT’s decision highlights the importance of the circumstances surrounding a transaction, including whether the property sale was genuine, whether the full consideration was disclosed in the registered deed and whether there was any intention to evade taxes.
Property sellers should use banking channels for advances and sale consideration and retain relevant agreements, payment records and bank statements. A genuine property transaction does not automatically protect a seller from penalties if cash restrictions are violated.
