ITAT Delhi Deletes ₹14.96 Lakh Section 271DA Penalty Based on Third-Party Excel Entries

Sanjay Kalsi Vs Central Circle-04 (ITAT Delhi)

Summary: The Income Tax Appellate Tribunal, Delhi Bench ‘C’, in Sanjay Kalsi Vs Central Circle-04, partly allowed the assessee’s appeal and deleted a penalty of ₹14,96,500 imposed under Section 271DA of the Income-tax Act, 1961, for an alleged violation of Section 269ST. The dispute concerned Assessment Year 2020-21 and arose from electronic records recovered during search proceedings involving third parties. The department alleged that the assessee, proprietor of JD Solitaire, had received cash payments against jewellery sales exceeding the statutory threshold of ₹2 lakh.

During a search conducted in the cases of Samir Modi and Shivani Modi, an Excel sheet was recovered from the residential premises of Anil Upreti. The entries referred to payments of ₹8,00,000, ₹1,88,000 and ₹6,96,000 to JD Solitaire, aggregating to ₹16,84,000 as recorded in the sheet. The assessment and penalty proceedings, however, proceeded on alleged cash sales of ₹16,84,500. The assessee disputed the transactions, maintaining that the Excel entries, WhatsApp communications and other third-party electronic materials did not establish actual cash receipts. The Assessing Officer nevertheless computed undisclosed income of ₹2,35,830 by applying a gross profit rate of 14%, on which the assessee paid tax of ₹84,610.

The assessee explained that the income had been offered and tax paid only to buy peace with the department and avoid prolonged litigation, without admitting that the alleged cash transactions had occurred. Accepting this explanation, the Assessing Officer had already dropped separate penalty proceedings under Section 270A through an order dated 24 July 2024. However, the department subsequently imposed a penalty of ₹14,96,500 under Section 271DA, excluding the individual entry of ₹1,88,000 from the alleged cash receipts.

The Commissioner of Income Tax (Appeals) upheld the penalty, relying on the evidentiary value of materials recovered during search proceedings and the statement recorded under Section 132(4). The assessee challenged the penalty before the Tribunal, arguing that payment of tax on estimated gross profit could not be treated as an admission of the alleged cash sales. The assessee also questioned the denial of cross-examination of Anil Upreti, whose statement had been relied upon by the department.

The Tribunal accepted that the assessee’s explanation for offering income to avoid litigation was plausible and could not be rejected outright in the circumstances. It considered particularly relevant that the Assessing Officer had dropped the Section 270A penalty proceedings after examining substantially the same explanation. Accordingly, the Tribunal held that the penalty of ₹14,96,500 under Section 271DA was unsustainable and directed its deletion. Grounds 1 and 2 were allowed, while grounds 3 and 4 were left open as academic. The appeal was consequently partly allowed.

List of Cases Discussed:

1. Bannalal Jat Construction Pvt. Ltd. Vs ACIT, (2019) 106 taxmann.com 128 (SC): Cited by the Assessing Officer while relying upon the evidentiary value of the statement recorded during search proceedings.

2. CIT Vs M.S. Aggarwal, (2018) 93 taxmann.com 247 (Delhi High Court): Relied upon by the Assessing Officer in support of the evidentiary value of search-related statements and materials.

3. Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal (Supreme Court): Referred to in the reproduced penalty order concerning electronic evidence and the certificate requirements under Section 65B of the Indian Evidence Act. The source order uses a variant spelling of the parties’ names.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeal), Delhi-26 [hereinafter referred to as the ‘Ld. CIT(A)] order dated 22.09.2025 arising out of the penalty order dated 19.09.2024 passed under section 271DA of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by JCIT, Central Range-4, New Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2020-21.

2. The AO noted that during the course of search proceedings in the case of Ms. Samir Modi and Ms. Shivani Modi, residential premise of Mr. Anil Upreti, Add- E-60, II Floor, Greater Kailash-II, Delhi was also covered u/s 132 of the Income Tax Act, 1961. On post search analysis, an excel sheet containing the cash details to an entity named J.D Solitaire was found. Relevant extracts of excel sheet is enclosed below:

2.1 The AO noted that the above entries are related to cash payments given to Sh. Sanjay Kalsi Prop., JD Solitaire for the jewellery purchase. In view of the above, the cash paid to Sh. Sanjay Kalsi Prop., JD Solitaire remained unexplained and have a bearing on the determination of the total income of Sh. Sanjay Kalsi Prop., JD Solitaire notice u/s 153C of the Act dated 28.03.2023 was issued to the assessee.

3. During the course of assessment proceedings, the AO asked the assessee to furnish the necessary details regarding the nature, purpose of transaction mentioned in the sheet and how these transactions were recorded in books of account/return of income.

3.1 The assessee denied the above transactions inter-alia stating that the entire case against the Assessee is merely based on the diary entry, entry on excel sheet, copy of alleged whatsapp chats and email conversation which were not sufficient evidence to prove that any cash transactions took place.

3.2. The AO did not accept the above explanation of assessee relying upon the certificate u/s 65B of the Indian evidence Act issued by forensic expert with respect to said seizure of digital data during the search which was available on record. The AO further noted that the contents of the said excel sheets have duly been explained by the author of the excel sheet Sh. Anil Upreti during the course of search while statement recorded under oath in the presence of two independent witness and to the best of his knowledge and belief without any fear, apprehension, pressure and coercion u/s 132(4) of the I. T. Act, 1961 and the same did not lose its evidentiary value in light of the judgements in the case of BannalalJat Construction Pvt. Ltd. vs ACIT(2019) 106 taxmann.com 128(SC)and CIT vs M.S. Aggarwal (2018) 93 taxmann.com 247 (Del). Further, the AO rejected the plea of the assessee for adopting only the net profit on the above undisclosed cash sales of Rs. 16,84,500/- by stating that indirect expenses have already booked in the books of accounts and benefit of the same have already been availed by the assessee company. Accordingly, the AO adopted the GP rage of 14% of Rs. 2,35,830/- and determined an amount of Rs. 84,610/- as tax payable.

3.3 The AO also inititated penalty proceedings u/s 270A of the Act, wherein the assessee submitted the tax amounting to Rs. 84,610/- was paid to buy peace and to avoid litigation and the assessee had not under reported his income. After considering the above explanation of the assessee, the penalty proceedings u/s 270A was dropped vide order dated 24.07.2024. The relevant explanation of the assessee and the dropping of the penalty proceedings by the AO in the penalty order u/s 270A of the Act dated 24.07.2024 is reproduced as under:

“In the above matter we want to let you know that we had offered the income Rs. 235830/- to buy peace and to avoid litigation at the time of assessment proceedings on which we have deposited the Tax amounting to Rs. 84610/- on dated 29-03-2024 with Kotak Mahindra Bank Lajpat Nagar, BSR code number 0180002, challan serial number 07101 and has not filed any appeal before any appellate authority so we may please be granted the immunity from imposing penalty under section 270AA of the Income Tax Act, 1961, we have not under reported income which is in Consequence of misreporting thereof. We would sustain a substantial financial loss if we were forced to pay penalty which would be genuine hardship.”

3.4 Further, the AO in view of the above excel sheet (as reproduced earlier in this order) showing cash sales by M/s JD Solitaire proprietary concern of the assessee in excess of Rs. 2 lakhs noted that the assessee had received cash above Rs. 2 lakhs otherwise than an account payee cheque etc. amounting of Rs. 14,96,500/- (Rs. 16,84,500/- – Rs. 1,88,000/-) in violation of provisions of section 269ST penalty initiated proceedings u/s 271DA of the Act. Accordingly show cause notice dated 04.09.2024 was issued by the AO. The relevant background of the show-cause notice, the show cause notice, the reply of the assessee and the basis of the levy of the penalty order u/s 271DA of the Act is reproduced as under:

“Accordingly, show cause notice u/s 271DA r.w.s. 274 was issued to the assessee company on 04.09.2024 requiring to submit response regarding cash transaction of Rs. 16,84,500/- from Sh. Anil Upreti, found during the search proceedings in the case of Samir Modi and Shivani Modi at the residence of Anil Upreti with Chaney Art Production, accepting in cash exceeding Rs.2,00,000/- from a person in a day in clear violation of section 269ST of I.T. Act, 1961 during the year under assessment latest by 12.09.2024. In response the assessee has filed his reply dated 11.09.2024 reproduced here under:-

This is to inform you that we are in the receipt of Income Tax notice dated 04-09-2024 under section 274 read with section 271DAof the Income Tax Act, 1961 for the Assessment Year 2020-2021 that we have failed to comply with the provisions of section 269ST of the Income Tax Act, 1961, we have taken cash exceeding Rs. 200000/- in a day from a person amounting to Rs. 1684000 during the year under consideration therefore violated provisions of section 269ST of the Income Tax Act, 1961.A search and seizure action under section 132 of the Income Tax Act, 1961 was conducted on Mr.Samir Modi and Ms. Shivan covering its various entities and directors on 03-02-2021 by investigation wing Delhi. During the post search proceedings an excel sheet containing the cash details to an entity named J.D. Solitaire was found. The relevant details are reproduced below:

In the above matter we want to let you know that we had offered the income Rs. 235830/- as per GP ratio @ 14% on Rs. 1684000/-to buy peace and to avoid litigation at the time of assessment proceedings on which we have deposited the Tax amounting to Rs.84610/-on dated 29-03-2024 with Kotak Mahindra Bank Lajpat Nagar, BSR code number 0180002, challan Sr. number 07101 and has not filed any appeal before any appellate authority so we may please be granted the immunity from imposing penalty.

We would sustain a substantial financial loss if we were forced to pay penalty which would be genuine hardship.

4. The reply of the assessee has duly been perused. However, found not tenable in consideration of evidences unearthed during the course of search action u/s 132 of the Income Tax Act 1961 in the case of Sh. Samir Modi and Smt. Shivani Modi group on 03.02.2021 at residence of Mr. Anil Upreti, E-60, II Floor, Greater Kailash-II, Delhi. It was found that Sanjay Kalsi Prop. JD Solitaire accepted part consideration in cash and suppressed its actual sales. Therefore, the reply of the assessee is not acceptable.

5. Further, the assessee has stated in his reply that “The entire case against the assessee is merely based on the diary entry, entry on the excel sheet copy of Alleged whatsapp chats and email conversation. This is not sufficient evidence to prove that any cash Transactions took place.” In this regard, it is pertinent to mention here that the excel sheets founds and seized wherein day to day cash transactions were recorded and whatapp chats wherein discussion on cash transactions were made cannot be insufficient evidence, ignoring the fact the said digital data was duly seized by the forensic experts in presence of independent witnesses. Further, certificate u/s 65B of the Indian evidence Act also issued by forensic expert with respect to said seizure of digital data during the search which is available on record. The contents of the said excel sheets have duly been explained by the author of the excel sheet Sh. Anil Upreti during the course of search while statement recorded under oath in the presence of two independent witness and to the best of his knowledge and belief without any fear, apprehension, pressure and coercion u/s 132(4) of the I.T. Act, 1961 and the same did not lose its evidentiary value in light of the judgements in the case of Bannalal Jat Construction Pvt. Ltd. Vs ACIT(2019) 106 taxmann.com 128(SC) and CIT vs M.S. Aggarwal (2018) 93 taxmann.com 247 (Del). Hon’ble Supreme Court in the landmark judgment of Arjun Pandit rao Kotakar v. Kailash Kishan rao Kotkar wherein the Hon’ble Court upheld the view that if the device itself, along with the owner/authorized user of the device on which the original information is stored, is produced before the court, the “certificate” is not required. A three-judge bench of the Supreme Court clarified that a “certificate” is mandatory from the “authority” that has control or ownership of the device during the time when the electronic communication was created. Further, certificate u/s 65B of the Indian evidence Act also issued by forensic expert with respect to said seizure of digital data during the search which is available on record. In view of the above discussion, it is evident that the documents found and seized during the course of search pertains to the assessee. Therefore, the contention of the assessee is not accepted.

6. I have gone through the assessment order and seized materials and I am satisfied that the assessee had accepted cash amounting to Rs. 16.84.500/-against out of book transactions during the year under consideration It is imperative to mention that the provisions of Section 269ST are unequivocal and stringent. These provisions explicitly prohibits the receipt of an amount equal to or exceeding Rs. 2 lacs in aggregate from a person in a day, or in respect of a single transaction, or in relation to transactions associated with one event or occasion, from a person other than the specified modes. From above it is evident that the assessee has accepted the cash exceeding Rs. 2,00,000/-. Hence, penalties of section 271DA of the Act is imposed in response to the contravention of the provisions articulated in Section 269ST of the Act.

7. The provisions of section 269ST and section 271DA are being produced below:

Mode of undertaking transactions.

269ST No person shall receive an amount of two lakh rupees or more-

(a) in aggregate from a person in a day, or

(b) in respect of a single transaction, or

(c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed

Provided that the provisions of this section shall not apply to-

(i) any receipt by-

(a) Government;

(b) any banking company, post office savings bank or co-operative bank

(ii) transactions of the nature referred to in section 269SS

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify Penalty for failure to comply with provisions of section 269ST.

271DA (1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty a sum equal to the amount of such receipt

Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner

8. In view of the facts stated above, it is held that the assessee had received cash above Rs. 2 lakhs otherwise than an account payee cheque etc. amounting of Rs. 14,96,500/- (Rs. 16,84.500/- Rs. 1,88,000/-) in violation of provisions of section 269ST of the Act. I, therefore, impose a penalty u/s 271DA of the IT Act, 1961 of Rs. 14,96,500/- upon the assessee which is a sum equal to the amount of cash received by the assessee in contravention to the provisions of section 269ST of the Income Tax Act, 1961 for AY 2020-21.

4. Aggrieved with the same, the assessee filed an appeal before the Ld. CIT(A).

5. The Ld. AR submitted before the Ld. CIT(A) that the assessee, during the course of assessment proceedings vehemently submitted that the he had not sold jewellery in cash nor had he received any cash against such alleged cash sale but under the pressure and the instructions of the authorities the assessee, with a view to buying peace with the department, agreed to pay tax at the average G.P. rate on the impugned alleged cash sale. The Ld. AR reiterated its submissions made before the AO including that assessee was not allowed to cross- examination Sri Anil Upreti and submitted that the impugned penalty u/s 271DA was not eligible in the case of the assessee.

5.1 The Ld. CIT(A) noted that as a general rule, the right of cross-examination should be given to the assessee to uphold the principle of natural justice under the Income Tax proceedings. However, the Ld. CIT(A) further noted that it was also a settled position of law that the technical rules of Indian Evidence Act are not applicable to Income-tax proceedings. Further, he noted that according to Section 56 of the Indian Evidence Act, 1872, the facts of which the Court will take judicial notice need not be prove and simply put, any judicially noticeable fact does not require to be proven before the Court. The Ld. CIT(A) further observed that this position, therefore, is required to be understood in the light of the facts of the case. Thereafter, the Ld. CIT(A) observed that in view of the facts available on record, there was no requirement for cross-examination in this case. The Ld. CIT(A) further held in this case, the assessee had not able to explain his contention of accepting cash of more than 2 lakhs and confirmed the penalty order. The relevant extracts of the order of the Ld. CIT(A) are reproduced as under:

In this case, a search and seizure action had taken place which unearthed several incriminating documents. Based on these documents, a statement on oath was recorded under section 132(4) of the Act. It is settled position of law that the statement recorded during the Search & Seizure action u/s 132(4) has substantial evidentiary value. Therefore, the evidence so gathered is judicially noticeable. Accordingly, as per section 56 of the India Evidence Act, there is no legal requirement for providing further opportunities to the appellant. Accordingly, the contention of the appellant is legally untenable.

4.4 Further, requirement of opportunities for cross- examination is to ascertain the real facts. Then it goes back to ascertain who has the primary onus to establish or bring out the facts, especially in proceedings relating to Search and Seizure action. Further, in a Search and Seizure case, Section 132(4A) of the Act creates a presumption that all the books of accounts. search belongs to person found in documents and valuables found during the possession or control of such items and the contents thereof are true and properly stamped. Basically, it provides the presumptions of ownership of books of accounts, documents, assets found during the course of Search. Accordingly, in respect of the details found out/ascertained during the Search in the case of the appellant, the presumption is against the appellant. In brief, under Section 132(4A), presumption, albeit rebuttable, is that the books of account and other documents belong to the person searched, the contents are true and accurate, the signatures and attestations on documents are genuine. Accordingly, as per section 132(4A) of the Act, the burden is on the appellant on whose case the Search action has taken place to establish that the presumptions are untrue. However, apparently, the appellant has not discharged the onus. Accordingly, the Department is not duty bound to provide the cross examination as the burden is not on the Department. Hence, the contention of not providing cross-examination by the Department is misleading and accordingly, dismissed.

4.5 The JCIT Central Range-4, New Delhi was right to hold that appellant had violated the provisions of Section 269ST of the Act being in receipt of cash (in equal to or in excess of Rs. 2 lakhs). Now, the appellant has not able to explain his contention of accepting cash of more than Rs. 2 lakhs. In view of the above, and in absence of any explanation, I find no reason to interfere with the order for imposing penalty u/s 271DA of the Act amounting to Rs. 14,96,500/- for AY 2020-21. Therefore, considering the facts of the case, the grounds taken by the appellant are dismissed.

5.2. Aggrieved with the said order, the assesse is in appeal before the Tribunal on the following grounds of appeal:

“1. That the appellant denies to pay the penalty of Rs 14,96,500/- u/s 271DA of the Act or any interest thereon.

2. That the order dated 19.09.2024 passed u/s 271DA of the Act by the learned Additional Commissioner of Income Tax Central Range-4, New Delhi for contravention of the provisions of Section 2695T of the Act is wrong and bad in law and on facts of the case.

3. That the learned Additional Commissioner of Income Tax Central Range-4, New Delhi has erred in law and on facts of the case in imposing a penalty of Rs. 14,96,500/- u/s 271DA of the Act for contravention of the provisions articulated in Section 2695T of the Act when the learned AO had already charged tax under normal provisions of the Act on the same alleged cash receipt of Rs. 16,84,500/- and had also already recovered the said charged tax

4. That the order dated 19.09.2024 passed u/s 271DA of the Act by the learned Additional Commissioner of Income Tax Central Range-4, New Delhi is wrong and bad in law and on facts of the case inasmuch as it suffers from legal infirmities that if tax under the normal provisions of the Act has been charged and recovered on the alleged cash receipts, penalty u/s 271DA of the Act cannot be imposed on the same alleged cash receipts.

5. That the appellant craves for leave to change, modify, add and/or alter the above grounds of appeal during or before the hearing of the case if warranted.”

6. The Ld. AR submitted that the assessee never accepted the above cash sales of Rs. 16,84,000/- based on the said excel sheet but to buy peace and protracted litigation accepted the above transactions and paid the due taxes of Rs. 84,610/- on it. The Ld. AR further submitted that considering the explanation of the assessee, the penalty proceedings u/s 270A of the Act was dropped by AO vide penalty order dated 24.07.2024. The Ld. AR further submitted that since the assessee had not accepted the above transactions sales of Rs. 16,84,000/- and just because the assessee had paid the due taxes on it cannot be accepted as its acceptance of having made the above cash sales of Rs. 16,84,000/- in violation of section 271DA of the Act.

7. On the other hand, the Ld. Sr. DR supported the order of the authorities below.

8. We have heard both the parties and perused the material available on record. In this case as discussed above, the assessee paid taxes of Rs. 84,610/- on Rs. 2,35,830/- being determined as undisclosed income as 14% of as GP on the cash sales of Rs. 16,84,500/- recorded in the above excel sheet. However, in this regard, the explanation of the assessee that despite not accepting the contents of the said excel sheet accepted the above income of Rs. 2,35,830/- and paying the due taxes of Rs. 84,610/- on cash sales of Rs. 16,84,500/- was an effort to have peace for himself and to avoid the protracted litigation is also a plausible explanation and it cannot be outrightly rejected in the given facts of the case. Further, as noted above, the penalty proceedings u/s 270A of the Act after considering the explanation of the assessee on similar lines has been dropped by the AO which is relevant to the present proceedings also. Therefore, considering the facts in its entirely, we are of the considered view that the impugned penalty order levying a penalty of Rs. 14,96,500/- u/s 271DA of the Act is not sustainable in this case and the same is deleted. Ground no. 1 and 2 of the appeal is allowed. In view of the fact of ground no. 1 and 2 of the appeal being allowed, the other grounds of appeal nos. 3 and 4 become academic and are left open in this case.

9. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 25th March, 2026.