Applicability of section 269ST/271DA to 23.05.2016 cash transaction - penalty held inapplicable; appeal allowed as penal tax not retrospective.

Whether provisions of section 269ST and penalty under section 271DA apply to a transaction dated 23.05.2016. The tribunal held that section 269ST and section 271DA were introduced by the Finance Act, 2017 effective 1.4.2017; penal tax provisions are not retrospective absent express statutory language, and no such retrospective intention exists. The CIT(A)'s invocation/upholding of penalty under section 271DA (for alleged contravention of section 269SS) was therefore legally untenable; the claim that this was a typographical error was rejected insofar as the record shows deliberate reliance on the post-enactment provisions. Consequence: penalty under 271DA/269ST could not be sustained and the appeal was allowed.

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Issues: Whether the CIT(A) was correct in holding that the assessee violated section 269ST and imposing penalty under section 271DA for a transaction dated 23.05.2016, when sections 269ST and 271DA came into force w.e.f. 01.04.2017 (i.e., whether those provisions could be applied retrospectively and whether the penalty upheld is legally valid).

Analysis: The Finance Act, 2017 introduced sections 269ST and 271DA with effect from 01.04.2017. The transaction in question occurred on 23.05.2016, prior to the statutory commencement of those provisions. It is a settled principle that penal tax provisions are not to be applied retrospectively unless the statute expressly provides for retrospective operation. There is no indication in the Finance Act, 2017 that sections 269ST or 271DA were intended to apply to transactions prior to their commencement. The CIT(A)'s invocation of section 269ST/271DA to uphold penalty therefore amounts to applying a penal provision to a period before it existed; the recharacterisation cannot stand. The Tribunal also rejected the contention that the use of sections 269ST/271DA was merely a typographical error by the CIT(A), noting the acknowledgement of appeal against penalty under section 271D for alleged contravention of section 269SS.

Conclusion: The invocation of sections 269ST and 271DA in respect of the transaction dated 23.05.2016 is legally untenable; the appeal is allowed in favour of the assessee and the penalty is deleted.

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