# ITAT Ruling on Cash Property Transactions and Penalty Relief Tribunal cancels penalty for cash advance during demonetisation citing reasonable financial cause. - **Source:** [mint - money](https://www.livemint.com/rss/money) - **Published:** 2026-10-29 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/eb4b4860-77d8-475b-9c10-6f64d1575712 ## Tribunal Overturns Penalty Ruling The Chennai bench of the Income Tax Appellate Tribunal deleted a ₹26 lakh penalty imposed on a salaried taxpayer. The individual had accepted a cash advance for a house sale during the 2016 demonetisation period. The tribunal ruled that the taxpayer's financial circumstances provided a reasonable cause for this specific transaction. ## Context of the Dispute Murugesan Thulasimani, earning ₹3.41 lakh annually, faced a ₹25.38 lakh housing loan liability with Axis Bank. To discharge this debt, he attempted to sell his residential property. On November 24, 2016, he accepted a ₹26 lakh cash advance, which was later deposited into his bank account during the demonetisation window. ## Regulatory Conflict and Penalties The tax department invoked Section 271D of the Income-tax Act, penalizing the taxpayer for violating Section 269SS. This section restricts cash transactions for immovable property transfers. Despite the sale being genuine and confirmed by both parties, the assessing officer questioned the source of the ₹24.13 lakh cash deposit made by the seller. ## Applying Section 273B Relief The tribunal focused on Section 273B, which allows relief if a taxpayer demonstrates reasonable cause for non-compliance. The bench noted that the tax department failed to prove the transaction was fictitious or designed for tax evasion. Consequently, the tribunal set aside the earlier appellate order that had upheld the heavy financial penalty. ## Evidence of Bona Fide Intent Key factors in the decision included the existence of the outstanding housing loan and the subsequent completion of the property sale on February 6, 2017. The tribunal found no evidence that the cash was used to introduce undisclosed income. These elements collectively established the taxpayer's genuine financial necessity during that period. ## Limits of the Precedent This ruling does not grant blanket permission for cash-based property transactions. Section 269SS remains strictly enforced, and taxpayers are still required to utilize banking channels for property advances. The decision is highly fact-specific, relying on the unique circumstances of the taxpayer's loan repayment efforts and the specific timing of the sale. ## Compliance for Property Sellers Property sellers must continue prioritizing formal banking channels for all sale considerations and advances. It is essential to maintain comprehensive records, including signed sale agreements, payment receipts, and relevant loan documents. These records serve as primary evidence if tax authorities challenge the legitimacy of a transaction or the source of funds. ## Implications for Future Disputes The case underscores that while statutory violations carry penalties, the judiciary considers the intent and financial reality of the taxpayer. Future outcomes for similar cash transactions will depend heavily on the availability of supporting evidence. Taxpayers must proactively document their financial exigencies to leverage potential relief under Section 273B in legal proceedings. ## Sources covering this story - https://www.livemint.com/money/personal-finance/selling-a-house-to-clear-your-home-loan-what-an-itat-ruling-on-a-26-lakh-cash-advance-means-for-property-sellers-11793275750591.html — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._