TaxTMI 
TaxTMI 
2026 (2) TMI 1313
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....er: 3. The brief facts of the case are that, a search & seizure action under section 132 of the Income Tax Act, 1961 was carried out in MSN Group of cases on 24/02/2021. The assessee is one of the companies covered under section 132 of the Act. During the course of search proceedings, at the registered office of the assessee on 24/02/2021, it was found that the used solvents in the form of effluents/recovered waste/spent solvents were sold to vendors in unorganized sector, mostly in cash. The details of unaccounted cash received from the sale of spent solvents and scrap were recorded in excel work sheet and stored in a Pen Drive which was found in the possession of Shri B. Buchi Reddy, Cashier and seized as Annexure A/MSN/OFF/HD1. Based on the evidence found during the course of search, the assessee company had admitted additional income towards sale of spent solvents and scraps for an amount of Rs. 6,77,03,448/- for the year under consideration and also filed return of income in response to notice u/s 153A and declared additional income offered towards sale of spent solvents and scrap. During the course of assessment proceedings, the A.O on the basis of the evidences found duri....
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....of the Act, which warrants notice under section 271DA of the Act. 5. The Ld. JCIT/Addl. CIT, after considering the submissions of the assessee and also taking note of provisions of section 269 ST of the Act, which deals with acceptance of amount for any transaction from a person from a single day in excess of Rs. 2 lakhs observed that, there is no dispute on the fact that the seized material clearly shows recording date-wise sale of spent solvents and scraps by the assessee group companies which were reflected in segment in one of excel sheet. These date-wise transactions of sale of spent solvent by each company of the assessee group fit into clause (b) of section 269 ST of the Act i.e. receipt of Rs. 2 lakhs or more in respect of a single transaction. Though the assessee claimed that date wise amount shown in the segment I relates to sale of spent solvent and pertains to transaction with numerous persons at different units of the company, but the assessee failed to submit any supporting evidence in respect of the same. Since the assessee claims that the cash received towards sale of spent solvents and scraps in respect of a single transaction is not in excess of the specified a....
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....ormation is being forwarded to the Jt. CIT is adequate for administrative satisfaction triggering independent penalty proceedings by the authority. Since the penalty under section 271DA of the Act is not dependent on the assessment findings, it rests on an independent fact of receipt in modes barred by section 269ST; it is enough for the JCIT to arrive at the satisfaction and issue show cause notice for imposing the penalty. Therefore, held that there is no merit in the legal ground taken by the assessee on the issue of limitation and thus, rejected the ground taken by the assessee. 8. In so far as the penalty levied under section 271DA of the Act for violation of section 269ST of the Act is concerned, the Ld. CIT (A) observed that, the seized excel sheets clearly shows date-wise and company/unit-wise cash sales of spent solvents and cash received against the same in many cases in excess of Rs. 2 lakhs contrary to section 269ST of the Act. Further, the JCIT had also independently verified the record and ascertained that in many cases the assessee had received cash in excess of Rs. 2 lakhs for a single transaction for sale of spent solvent and scrape and the same has been confirm....
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.... we consider six months from 1/06/2023, the A.O ought to have passed the order imposing the penalty under section 271DA of the Act on 30/11/2023, whereas the present penalty order under section 271DA of the Act has been passed on 27/09/2024 which is beyond the statutory limitation. In this regard, he relied upon the decision of the Hon'ble Karnataka High Court in the case of Pr. CIT vs. K. Umesh Shetty (2025) 170 Taxmann.com 748 (Kar.) and also the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Rishikesh Buildcon (P) Ltd (2023) 147 Taxmann.com 220 (Del.). The assessee had also relied upon the decision of the ITAT Hyderabad Benches in the case of M/s. Sireesha Pochareddy in ITA No.1270/Hyd/2024, dated 12/093/2025. 11. The learned Counsel for the assessee, referring to ground nos. 6, 7 and 8 of the assessee's appeal submitted that the penalty levied under section 271DA of the Act is not sustainable on merits, because the burden to establish the default under section 269ST not discharged by the Revenue. The learned Counsel for the assessee submitted that the A.O levied penalty under section 271DA of the Act on the basis of excel sheets found during the ....
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....a single transaction and claimed that the case of the assessee fit into clause (b) of section 269ST of the Act while initiating penalty proceedings under section 271DA of the Act, however, the fact remains that neither the A.O nor the Add. CIT has made out a case of violation of section 269ST of the I.T. Act from the seized material so as to allege that the assessee had received Rs. 2 lakhs or more in respect of a single transaction which attracts provisions of section 271DA of the Act. In absence of any evidences in the excel sheets, the quantum of cash in respect of single transaction of unaccounted sale of spent solvent is not ascertainable in order to arrive at a conclusion so as to allege that the assessee had violated the provisions of section 269 ST of the Act. Therefore, he submitted that the Add. CIT is erred in levying penalty under section 271DA of the I.T. Act, 1961 12. The learned Counsel for the assessee further submitted that the Ld. JCIT although observed that the date-wise transaction of sale of spent solvent by each company of the assessee group fit into clause (b) of section 269ST of the Act, but there is no such violation or details in excel sheet. Although t....
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....me up to 27/09/2024 for passing the order, therefore, the order passed by the A.O under section 271DA of the I.T. Act on 27/09/2024 is well within the limitation provided under the Act. The Ld. Sr. AR further submitted that although the learned Counsel for the assessee claimed that it is the date on which the A.O sent a proposal to the Range Head should be considered for the purpose of reckoning the limitation, but the fact remains that as per the circular No.9 of 2016, dated 26/04/2016, the Board has clarified in the light of the decision of the Hon'ble Kerala High Court in the case of Grihalakshmi Vision vs. Assistant Commissioner of Income Tax (2015) 379 ITR 100 (Kerala) that the competent authority for imposition of penalty under section 271DA of the Act for violation of section 269ST is the Jt. Commissioner of Income Tax and therefore, it is the date on which the authority imposing penalty issued a show cause notice under section 274 r.w.s. 271DA of the Act is relevant for the purpose of computing the limitation for imposing penalty under section 271DA of the Act. Therefore, he submitted that there is no merit in the argument of the learned Counsel for the assessee and thu....
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....enalty order is invalid in law as the same is time barred. Admittedly, in the present case, the penalty proceedings were triggered from the A.O with a reference to the Jt. CIT for taking necessary action for imposition of penalty under section 271DA of the Act. The A.O had sent information regarding the violation of provisions of section 269ST of the Act for the A.Ys 2018-19 and 2019-20 on 25/05/2023. Based on the reference received from the A.O, the Addl. CIT, Central Range-2 issued a show cause notice under section 274 r.w.s. 271DA of the Act, on 7/3/2024 and passed the order under section 271DA of the Act on 27/09/2024. Therefore, it is necessary for us to examine, whether the penalty order passed by the A.O under section 271DA of the Act dated 27/09/2024 is within the limitation provided under section 275(1)(c) of the Act or is barred by limitation. 16. The provisions of section 275(1)(c) of the Act, deals with time limit for passing the penalty orders. As per the provisions of section 275(1)(c) of the Act, no penalty order shall be passed after the expiry of (a) financial year in which the proceedings, in the course of which action for imposition of the penalty has been ini....
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....e. date on which the authority issued show cause notice under section 274 r.w.s. 271DA of the Act. Since the A.O sent reference to Jt. CIT on 25/05/2023, in our considered view, Six months period should be considered from the end of May 2023 i.e. 31/05/2023 and if, we consider the starting point from 1/06/2023, then the A.O ought to have passed the order under section 271DA of the Act on 30/11/2023. In the present case, since the A.O has passed the order under section 271DA of the Act on 27/09/2024, in our considered view, it is barred by limitation and the same is non-est in the eyes of law. 17. Coming back to the argument of the Ld. Sr. AR for the Revenue in light of CBDT Circular No.9 of 2016 dated 26/04/2016 and also the decision of the Hon'ble Kerala High Court in the case of Grihalakshmi Vision vs. Assistant Commissioner of Income Tax (Supra) that for commencement of limitation for penalty proceedings under section 271DA of the Act, it is the date on which the JCIT issued a show cause notice under section 274 r.w.s. 271DA of the Act is to be considered, but not on the date on which the A.O sent a proposal to the JCIT for taking action for imposition of penalty under se....
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....e Assessee. Even otherwise, the concept of delay & latches would crop in; no explanation whatsoever has been offered by the Revenue for the laxity shown in belatedly issuing the show cause notice/proposition notice which they claim, amounted to initiation of penalty proceedings. This view has animated the reasoning of the impugned order of the Tribunal, may be a bit inarticulately. 6.8. The reliance of Panel Counsel for the Revenue on the Coordinate Bench decision in COMMISSIONER OF INCOME TAX vs. TAM TAM PEDDA GURUVA REDDY does not come to his aid since the same has been rendered largely fact-specific. The other decision namely GRIHALAKSHMI VISION vs. ADDITIONAL COMMISSIONER OF INCOME TAX-7 at para 10 observed as under: "Question to be considered is whether proceedings for levy of penalty, are initiated with the passing of the order of assessment by the Assessing Officer or whether such proceedings have commenced with the issuance of the notice issued by the Joint Commissioner. From statutory provision, it is clear that the competent authority to levy penalty being the Joint Commissioner. Therefore, only the Joint Commissioner can initiate proceedings for levy of....
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....ral Technical Committee. The CTC shall examine the said judgment on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for." Therefore, much reliance cannot be placed on this Circular. In the above circumstances, the questions of law framed by us have to be answered in favour of the respondent assessee and as a consequence, appeal is liable to be and accordingly dismissed, costs having been made easy". 19. The assessee had also relied upon the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. Rishikesh Buildcon (P) Ltd (Supra). The Hon'ble Delhi High Court, in light of penalty levied u/s 271D of the Act and the limitation provided u/s 275(1)(c) of the Act, held as under: "12. The predecessor bench of this Court in the aforesaid judgments has held that where the AO has initiated the penalty proceedings in his/her assessment order, the said date is to be taken as the relevant date as far as the section 275(1)(c) of the Act is concerned. In these cases, the quantum proceedings were completed by the AO on 17th/18th December 2008, and ....
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..../sec.271D of the Act ought to have been passed on or before 30.09.2021, whereas, in the present case, the Assessing Officer passed the order imposing penalty u/sec.271D of the Act on 25.01.2022. Therefore, in our considered view, the order passed by the Assessing Officer is beyond the time limit provided under the provisions of sec.275(1)(c) of the Income Tax Act, 1961 and thus, it is invalid, void abinitio, barred by limitation and liable to be quashed. This legal principle is supported by the Judgment of Hon'ble Delhi High Court in the case of PCIT vs., Mahesh Wood Products Pvt. Ltd., (supra) and decision of ITAT, Chennai in the case of DCIT vs. Shri Subramaniam Thanu (supra), wherein it has been clearly held that in terms of sec.275(1)(c) of the Act, it would be the date on which the Assessing Officer wrote a letter to the PCIT recommending to issue show cause notice and if the Competent Authority decide to issue a show cause notice, the limitation would begin to run from the date of letter of the Assessing Officer recommending 'initiation' of the penalty proceedings. In the instant case, if we go by the said 'initiation' date i.e., 30.03.2021, any order pass....
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....ected. 8. In this view of the matter, considering the facts of the case and also by following the Judgment of Hon'ble Delhi High Court in the case of PCIT vs., Mahesh Wood Products Pvt. Ltd., (supra) and decision of ITAT, Chennai in the case of DCIT vs. Shri Subramaniam Thanu (supra), we are of the considered view that there is no error in the reasons given by the learned CIT(A) to quash the penalty order passed by the Assessing Officer u/sec.271D of the Act, dated 25.01.2022. We, accordingly, uphold the order of the learned CIT(A) and dismiss the appeal filed by the Revenue. Consequently, the cross objections raised by the assessee are allowed." 21. In this view of the matter and considering the facts and circumstances of the case and also by following the ratios of case laws discussed herein above, we are of the considered view that the order passed by the Ld. AO u/s 271DA of the Act dated 27/09/2024 is clearly barred by limitation in terms of sec 275(1)(c) of the Act. Therefore, we quash the order passed by the Ld. AO, u/s 271DA of the Act dated 27/09/2024 for AY. 2018-19. 22. A similar issue is involved in the appeal filed by the assessee the A.Y 2009-10 in I....
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....ssessee in respect of unaccounted sales of spent solvent and scraps. As explained therein, the entries in the excel sheets are found to be made in five distinct data segments. The entries in all the five segments are usually bunched together for a period of one week. Segment-1, which appears at the extreme left of the excel sheet, pertains to sales of spent solvents and it contains the details of date of sale, amount and the name of the company/plant of the company which made the sales. This segment is found separately for each period and the total of such sales for the concerned period of one week is drawn at the bottom of the segment-1 for each period. Segment 2, which appears to the immediate right of segment (1) for each period, contains the details of the opening balance of net receivables/payables at the beginning of the period, sales made for the relevant period, aggregate cash received from the buyers during the period and closing balance of net receivables/payables at the end of the period. Segment (3) which appears to the immediate right of segment (2) for each period contains the buyer-wise break-up of the closing balance of net receivables/payables. Segment (4) which ap....
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....gle entry for the entire period of one week in segment (2) and segment (5) of excel sheet. The details of buyers from whom such cash was received during the relevant period of one week, the date of such receipts and the amount of such receipts from each buyers and the names of the companies/plant in respect of whose unaccounted sales of spent solvents, and such cash was received have not been recorded by the cashier in the excel sheet. As a result of the said manner of recording the unaccounted sale of spent solvents and cash receipts by the cashier in the excel sheet, it is abundantly clear that the date-wise information recorded in segment (1) only reveals the aggregate amount of cash sales of spent solvents on each particular date by different companies/divisions/plants of the group but not the amount of sales achieved by the assessee company alone on a particular date as claimed by the A.O. In the absence of recording such details in the excel sheets, the quantum of cash sales in respect of each single transaction of unaccounted sale of spent solvent is not ascertainable in order to arrive any conclusion as to whether the amount received in respect of a single transaction is Rs....
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....s for sale of unaccounted spent solvents and scraps. The only evidence which was found during the course of search was one excel sheet maintained purpose by the Cashier for the entire group and as explained by the assessee, the above document contains details of sales made for a particular period by the group as a whole in respect of all the five companies and from different plants/units. Since the assessee group is consisting of five companies and further have multiple units/plants which generates spent solvents and scraps and also assessee discharges the spent solvents and scraps from different units/plants to different buyers, in our considered view, only on the basis of consolidated entries appearing in segment (1) of excel sheet, it cannot be alleged that the assessee violated clause (b) of section 269ST of the Act for imposing penalty under section 271DA of the Act. Therefore, in our considered view, the A.O has not conclusively prove for the violation of provisions of section 269ST of the Act so as to levy penalty under section 271DA of the Act, and thus, in our considered view penalty levied by the AO is not sustainable on merits on the facts of the case and in law. 26. ....
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....sioner of Income Tax Officer Vs Khoday Eswarsa and sons [1972] 83 ITR 369, where it was held that "Penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the Assessee, the department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt, the original assessment proceedings for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment". Therefore, in our considered view the materials considered by the AO for the purpose of levy of penalty u/s 271DA for violation of section 269ST does not show any evidence of violation of clause (b) of section 269ST of the Act, and thus, penalty levied by the AO u/s 271DA is unsustainable under law. 27. In this view of t....