An additional bar was put on cash transactions in excess of Rs 20,000 in Section 269SS of the Income Tax Act, 1961 (the IT Act) vide Finance Act, 2015, with effect from 1 June 2015. Prior to that date, transactions in loans and deposits in excess of Rs 20,000 in cash were barred. From 1 June 2015, transactions in immovable properties for cash in excess of Rs 20,000 were also barred.
It is significant to note that agricultural land is as much hit as any other immovable property but the proviso to Section 269SS makes a volte face by saying if both the purchaser and seller are having only agricultural income and no other income taxable under the IT law they would be spared from the compliance of the whole Section. Be that as it may, others flouting this Section would be punishable with a penalty equal to the amount of cash transaction even if the excess over Rs 20,000 is just Rs 100. Section 271D makes it mandatory on the joint commissioner of income tax to slap this penalty without any leeway or exemptions.
In 2017, Section 269ST was ushered in which prohibited non-immovable property, non-loans and non-deposits cash transactions in excess of Rs 2 lakh but the corresponding penalty regime introduced vide fresh Section 271DA gives latitude to the joint commissioner to condone the 100 percent penalty on the seller for good and sufficient reasons. Thus, if a jeweller accepts cash payment of Rs 3 lakh from a temple trustee, perhaps he would not be subjected to the 100 percent penalty, i.e. Rs 3 lakh for violation of Section 269ST on the ground that the temple in any case is not a tax payer under Section 11 of the IT law. Also, perhaps if the jeweller has disclosed the cash receipts in his books of accounts and is thus offering the same to income tax. No such latitude for transactions in immovable property.
Pray why this discrimination? What makes a householder-seller of immovable property a greater criminal? Shouldn’t he also be allowed in all fairness to explain the extenuating circumstances as in the case of a businessman-jeweller who is more apt to indulge in black money deals?
The following are the cash receipts that should be allowed to pass muster insofar as the sellers of immovable properties are concerned:
1) Where the sale deed mentions the receipt of cash as one of the modes of payment and the seller has made no secret of it in his income tax return. Thus if a seller has shown Rs 1 crore as the sale consideration including Rs 1 lakh as cash in the sale deed and files his return showing the entire amount of Rs 1 crore, where is the tax evasion, foiling of which is the object of Section 269SS?
2) Where the seller has invested the requisite amount including the cash for buying a replacement house under Section 54 of the Income-tax Act or invested the same in specified bonds under Section 54EC of the Income-tax Act.
3) Where the buyer and seller are in a hurry to seal the transaction but a small upfront payment is offered as cash in earnest of going through with the deal. This is a genuine enough reason. A buyer, keen to convince the seller, might withdraw some Rs 50,000 from ATM after banking hours and give it to the seller who otherwise might prove difficult. And for good measure, the seller might also reflect this in his income tax return. In all fairness, both must beget the income tax law’s indulgence.
It is surprising that the IT sleuths in Delhi are gunning after all the transactions of cash right from 2015 to 2018 on the basis of examination of registered sale deeds at all the 21 sub-registrars offices. This is just plain foolish. If a seller is having a devious intent, will he declare the cash portion in the sale deed? He can very well collude with the buyer and show a lesser consideration in the sale deed by withholding the information on cash.
Whether cash outside the sale deed changed hands is what must exercise the minds of the tax authorities. For this, they have to go through the AIR (annual information report), which every sub-registrar is required to file by 31 August of the relevant assessment year for the previous financial year with a fine-toothcomb and catch hold of both buyers and sellers–buyers for the source and sellers for knowing if they have paid capital gains tax or made use of tax shelters like Section 54 or 54EC.
(The author is a senior columnist and tweets @smurlidharan)
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Updated Date: Jan 21, 2019 15:54:59 IST