Section 269ST Penalty Deleted as Seized Excel Sheets Did Not Prove Single Cash Transaction Above ₹2 Lakh

MSN Laboratories (P) Ltd Vs Additional CIT (ITAT Hyderabad)

The appeals before the Income Tax Appellate Tribunal (ITAT), Hyderabad Bench, concerned Assessment Years 2018-19 to 2021-22 and involved levy of penalty under Section 271DA for alleged violation of Section 269ST of the Income-tax Act.

A search and seizure action under Section 132 was conducted in the assessee group on 24 February 2021. During the search, the department found that used solvents in the form of effluents, recovered waste, spent solvents, and scrap were sold in the unorganized sector, mostly in cash. Details of unaccounted cash receipts from sale of spent solvents and scrap were recorded in Excel worksheets stored in a pen drive seized from the cashier of the group. Based on the material found during search, the assessee admitted additional income of ₹6.77 crore towards sale of spent solvents and scrap and disclosed that amount in its return filed in response to notice under Section 153A.

During assessment proceedings, the Assessing Officer formed a view that the assessee had received cash of ₹2 lakh or more in single transactions, allegedly violating Section 269ST, which restricts receipt of specified sums in cash. The matter was referred to the Additional Commissioner for action under Section 271DA, which provides for penalty for such violation. The Joint/Additional Commissioner quantified cash receipts exceeding ₹2 lakh in single transactions at ₹1.07 crore for AY 2018-19 and levied equivalent penalty. Similar penalties were imposed for subsequent years. The Commissioner (Appeals) upheld the levy.

Before the Tribunal, the assessee challenged the penalty both on limitation and on merits.