Penalty under section 271DA deleted where the assessee's explanation for cash receipt entries was found plausible on the facts.

Penalty under section 271DA for alleged contravention of section 269ST was not sustained because the assessee's explanation for the impugned cash receipt entries was found plausible on the facts. The Tribunal accepted that the income had been offered and tax paid to buy peace without admitting the Revenue's allegation of cash sales or receipt in the manner alleged. It also noted that penalty proceedings under section 270A had been dropped on a similar explanation, which supported the assessee's case. As the Revenue relied mainly on seized electronic material and surrounding search circumstances, the Tribunal held that the statutory precondition for penalty was not established to the required extent and deleted the levy.

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Issues: Whether the penalty levied under section 271DA of the Income-tax Act, 1961 for alleged contravention of section 269ST of the Income-tax Act, 1961 was sustainable on the facts of the case.

Analysis: The assessee's liability to penalty rested on cash receipt entries found in seized electronic material and on the surrounding search proceedings. The explanation offered was that the income was offered and tax was paid to buy peace and avoid litigation, without admitting the alleged cash sales or the cash receipt in the manner alleged by the Revenue. The Tribunal noted that such explanation was plausible in the factual setting and could not be rejected outright. It also considered that penalty proceedings under section 270A of the Income-tax Act, 1961 had been dropped on a similar explanation, which supported the assessee's stand in the present proceedings. On the overall facts, the Tribunal held that the precondition for penalty under section 271DA was not established to the extent required for sustaining the levy.

Conclusion: The penalty under section 271DA of the Income-tax Act, 1961 was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: A penalty for contravention of section 269ST cannot be sustained where the assessee's explanation for the impugned receipt is plausible on the facts and the Revenue fails to justify the levy beyond the seized material.

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