ITAT Clarifies Pre-2015 Cash Property Sale Case, Rejects Section 69A Addition

November 15, 2025 : A recent decision of the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), widely circulated on social media as permitting cash receipts of ₹38 lakh in a property transaction without tax consequences, has been widely misunderstood. While the factual outcome reported is correct, the ruling does not legitimise cash dealings in property transactions under the current law and is strictly confined to the legal position prevailing before June 2015.

The case arose from Assessment Year 2015–16 and related to a property sale undertaken during Financial Year 2014–15. The assessee, Shalaka Chandrahas Chavan, had sold an immovable property for a total consideration of ₹94.06 lakh. During scrutiny, the Income Tax Department noted cash deposits of ₹13,00,500 in her ICICI Bank account, which formed part of total cash receipts of ₹38.15 lakh from the sale. The Assessing Officer treated the cash deposit as unexplained money under Section 69A of the Income-tax Act and added it to income.

The reassessment was triggered through information flagged by the AIMS module of the ITBA system, as the assessee had not originally filed a return under Section 139. A notice under Section 148 was issued after following the procedure under Section 148A. In response, the assessee filed a return declaring income of ₹6.95 lakh, though the return was treated as invalid due to a system-generated defect. Proceeding on this technical ground, the Assessing Officer completed the assessment under Sections 147 read with 144 and made the addition under Section 69A, refusing to examine the source of cash despite extensive documentation being placed on record.

During assessment, the assessee produced the registered sale deed, an annexed receipt acknowledging the mode of payment, bank statements, and detailed written explanations. These documents clearly showed that out of ₹61 lakh received during the year, ₹38.15 lakh had been paid in cash by the purchaser and subsequently deposited in the bank. The genuineness of the sale deed, receipt, and bank entries was never disputed by the Revenue.

On appeal, the Commissioner (Appeals) granted partial relief on the computation of capital gains but sustained the addition of ₹13,00,500 without dealing with the evidentiary value of the registered documents. The matter then reached the ITAT.

Allowing the appeal, the Tribunal held that Section 69A can be invoked only where the assessee offers no explanation for the source of money or where the explanation is found to be unsatisfactory. In the present case, the explanation was supported by primary documentary evidence in the form of a registered sale deed and an annexed receipt, which explicitly recorded receipt of cash consideration. These figures also matched the cash deposits reflected in the bank statement. Since the Revenue had not challenged the authenticity of these documents, the statutory conditions for making an addition under Section 69A were not satisfied.

The Tribunal also observed that rejection of a return due to a system-generated technical defect does not absolve the Assessing Officer of the duty to examine material evidence placed on record. Automated alerts may trigger scrutiny, but they cannot override documentary evidence emanating from a registered instrument of transfer. Finding no material to suggest that the cash deposits represented anything other than disclosed sale consideration, the ITAT directed deletion of the addition of ₹13,00,500.

Crucially, the Tribunal’s ruling is limited to the legal framework applicable before 1 June 2015. At the time of the transaction, Section 269SS did not prohibit receipt of cash consideration in connection with the transfer of immovable property. The law was amended with effect from 1 June 2015 to expressly bar acceptance of cash of ₹20,000 or more for such transactions. Under the post-amendment regime, even fully disclosed cash receipts recorded in registered documents can attract penalty under Section 271D, equal to the amount of cash received.

The decision, therefore, does not endorse cash dealings in property transactions under the current law. It merely clarifies that for pre-amendment years, where cash receipts were not statutorily prohibited and the source of funds is clearly explained and supported by credible evidence, an addition under Section 69A cannot be sustained.