Limitation on penalty proceedings: AO reference triggers limitation, and aggregated records cannot sustain a cash receipt penalty.

Whether the penalty is time barred: the Assessing Officer's reference to the competent authority on 25/05/2023 constitutes the triggering event for limitation under the applicable provision, making the penalty order dated 27/09/2024 time barred and quashed in favour of the assessee. Whether penalty merits sustain: penal liability requires tangible, transaction wise evidence that the assessee received cash in contravention of the cash receipt prohibition; consolidated week wise aggregated excel entries and admissions without date wise, buyer wise transaction particulars did not establish contravention, so the penalty was deleted in favour of the assessee.

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Issues: (i) Whether the penalty order dated 27/09/2024 under section 271DA of the Income tax Act, 1961 is barred by limitation under section 275(1)(c) of the Income tax Act, 1961; (ii) Whether the penalty under section 271DA of the Income tax Act, 1961 for alleged contravention of section 269ST of the Income tax Act, 1961 is sustainable on merits based on the seized excel worksheets.

Issue (i): Whether the penalty order dated 27/09/2024 under section 271DA is time barred under section 275(1)(c) of the Income tax Act, 1961.

Analysis: Section 275(1)(c) prescribes either the financial year in which the proceedings in the course of which action for imposition of penalty is initiated are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever is later. The seized-material chronology shows the Assessing Officer sent a reference to the Joint Commissioner (competent authority) on 25/05/2023 and the Joint Commissioner issued a show cause notice on 07/03/2024, with the penalty order dated 27/09/2024. Authorities and decisions considered include High Court and Tribunal precedents holding that a reference by the AO to the competent authority constitutes the triggering event for initiation of penalty proceedings for limitation purposes; CBDT Circular No.9/2016 and contrary precedents were considered and distinguished on facts. Applying the above legal framework, the triggering event is the AO's reference dated 25/05/2023, making six months from end of May 2023 the relevant limitation period.

Conclusion: The penalty order dated 27/09/2024 is barred by limitation under section 275(1)(c) of the Income tax Act, 1961 and is quashed in favour of the assessee.

Issue (ii): Whether the penalty under section 271DA for alleged violation of section 269ST is sustainable on merits based on the seized excel worksheets.

Analysis: Section 269ST prohibits receipt of specified amounts otherwise than by prescribed banking or electronic modes; section 271DA prescribes penalty for contravention. The seized excel workbook contained consolidated, week wise aggregated entries for multiple group companies and plants without transaction wise or buyer wise cash receipt particulars attributable to the assessee. The material does not record date wise receipt amounts from individual buyers nor contemporaneous cash receipts linked to specific single transactions for the assessee. Penal liability being penal in character places the primary burden on Revenue to prove contravention with cogent, tangible evidence; admissions or assessment findings alone are not decisive for independent penalty proceedings. On the seized record the Revenue failed to establish that the assessee received Rs.2 lakhs or more in respect of a single transaction in violation of section 269ST.

Conclusion: The penalty under section 271DA of the Income tax Act, 1961 is unsustainable on merits and is deleted in favour of the assessee.

Final Conclusion: The combined effect is that the penalty orders under section 271DA for the assessment years before the Tribunal are quashed and the appeals are allowed in favour of the assessee.

Ratio Decidendi: For limitation under section 275(1)(c) of the Income tax Act, 1961 the initiation of penalty proceedings is triggered by the Assessing Officer's reference to the competent authority; and for levying penalty under section 271DA the Revenue must prove contravention of section 269ST with tangible, transaction wise evidence-consolidated aggregate entries and admissions alone are insufficient.

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