Purchase of immovable property

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CA Harshit Rathi (Querist)
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13 September 2016 one of my client have purchased immovable property after 01.06.2015 and have paid the consideration in cash. will it attract any penalty for my client ?

CA Harshit Rathi

CA Harshit Rathi (Querist)
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14 September 2016 please reply experts

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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10 August 2024 Yes, purchasing immovable property and paying the consideration in cash after June 1, 2015, may attract penalties due to non-compliance with the legal provisions under the Income Tax Act, 1961 and the Indian Stamp Act, 1899. Here’s a detailed explanation:

### **1. Legal Provisions Regarding Cash Transactions**

**a. **Income Tax Act, 1961:**
- **Section 269SS:** According to Section 269SS of the Income Tax Act, 1961, no person should accept an amount of ₹20,000 or more in cash for the purchase of property. The amount should be paid through banking channels or other prescribed modes. If the payment is made in cash, it will attract penalties.
- **Penalty Under Section 271D:** If the cash transaction exceeds ₹20,000, the person accepting such cash can be penalized under Section 271D of the Income Tax Act. The penalty can be equal to the amount of the loan or deposit accepted in cash.

**b. **Indian Stamp Act, 1899:**
- **Stamp Duty:** The payment of cash in a transaction doesn’t impact stamp duty obligations directly. However, the transaction itself must be properly documented and stamped as per the Indian Stamp Act. Non-compliance with stamp duty requirements can result in additional penalties and interest on unpaid stamp duty.

### **2. Consequences and Penalties**

**a. **Income Tax Penalty:**
- **Penalty Calculation:** Under Section 271D, the penalty can be up to the amount of the cash transaction, which in this case is the amount of consideration paid in cash.
- **Disclosures and Assessments:** During tax assessments, if the transaction is discovered, the assessing officer may impose a penalty. Additionally, the transaction might be scrutinized to determine if there were attempts to evade taxes or if there are discrepancies in reporting.

**b. **Stamp Duty Penalties:**
- **Late Payment:** If the property transaction was not properly stamped or the stamp duty was not paid in time, there can be penalties and interest charges as per the provisions of the Indian Stamp Act.
- **Corrective Action:** It is advisable to rectify any non-compliance with the stamp duty requirements promptly to avoid additional penalties.

### **3. Recommended Actions**

**a. **Consult with a Tax Professional:**
- Engage a tax professional or a chartered accountant to assess the situation and provide guidance on how to address the penalties and compliance issues.

**b. **Documentation and Rectification:**
- Ensure that all transactions are properly documented. If cash transactions have already occurred, consider making necessary disclosures and rectifications in tax returns and to the relevant authorities.

**c. **Adherence to Legal Requirements:**
- For future transactions, ensure compliance with all relevant legal requirements, including making payments through banking channels and maintaining proper documentation to avoid penalties.

**d. **Filing and Reporting:**
- Make sure to report the property purchase accurately in income tax returns and comply with all regulatory requirements related to cash transactions.

By addressing the issue proactively and adhering to the prescribed legal frameworks, you can manage the compliance and avoid further penalties.

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