Case Law Details
Mool Chand Jain Vs JCIT (ITAT Delhi)
The appeals arose from orders confirming penalties imposed under Section 271DA of the Income-tax Act, 1961, for the assessment years 2018-19, 2019-20 and 2020-21. Since all three appeals involved identical facts and issues, the ITAT heard them together and treated AY 2018-19 as the lead case.
For AY 2018-19, the assessee had filed the return of income declaring income of ₹15,23,210. Subsequently, a search under Section 132 in another group of cases led to the seizure of documents relating to alleged hawala cash transactions. The case was centralised and notice under Section 153C was issued. During the assessment proceedings, the assessee admitted having made cash sales of ₹10,00,000 to M/s Balar Marketing Private Ltd., which had not been disclosed in the return of income. The Assessing Officer (AO) computed the income element at 8% under Section 44AD and added ₹80,000 to the assessee’s income. Simultaneously, penalty proceedings were initiated alleging violation of Section 269ST, and a penalty of ₹10,00,000 was imposed under Section 271DA. The Commissioner of Income Tax (Appeals) upheld the penalty, holding that the assessee had accepted cash of ₹10 lakh during the year in contravention of Section 269ST.
Before the Tribunal, it was undisputed that the assessee had made cash sales amounting to ₹10 lakh and that the assessment had been completed after estimating profit under Section 44AD based on the assessee’s admission. The Tribunal, however, examined the requirements of Section 269ST, which prohibits receipt of ₹2 lakh or more in aggregate from a person in a day, in respect of a single transaction, or in respect of transactions relating to one event or occasion, otherwise than through the prescribed banking modes.
The Tribunal held that before imposing a penalty under Section 271DA, it was necessary for the AO to record a clear finding that the cash receipt exceeded the statutory threshold in any of the specific situations contemplated by Section 269ST, namely receipt in a single day, in relation to a single transaction, or in relation to one event or occasion. It found that the penalty order contained no such findings and had proceeded solely on the basis that the assessee had admitted cash sales of ₹10 lakh during the year. In the absence of findings demonstrating violation of any of the conditions prescribed under Section 269ST, the Tribunal held that the AO was not justified in levying the penalty under Section 271DA. Accordingly, it deleted the penalty of ₹10,00,000 for AY 2018-19.
The Tribunal observed that the facts, circumstances and issues involved in the appeals for AYs 2019-20 and 2020-21 were identical. Applying the same reasoning mutatis mutandis, it allowed those appeals as well and deleted the penalties imposed for those years. Consequently, all three appeals filed by the assessee were allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
These three appeals by the assessee are directed against the order dated 14.10.2025 of the Ld. Commissioner of Income Tax, Appeal, Delhi-26, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Order dated 29.08.2024 passed under section 271D of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Addl. CIT, Central Range-4, New Delhi and DCIT Central Range- 4, New Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Years (A.Y.) 2018-19, 2019-20 and 2020-21 respectively. . Since common issues are involved in these appeals, the same are being disposed off by way of this common order for the sake of convenience and brevity.
2. Ground of appeal filed by the assessee (ITA No.- 7763/Del/2025) are reproduced as under:
“ 01. That on facts and circumstances of the case and as per the provisions of law, the order passed by the Ld. CIT (Appeal) under section 271DA of the act is bad both in the eyes of law and on facts.
02. That on the facts and circumstances of the case and as per the provisions of the law, the Ld. CIT(A) has failed to appreciate that the penalty order passed u/s 271DA is illegal bad in law and without jurisdiction.
03. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law in upholding the penalty levied u/s 271 DA for AY 2018_19 of Rs. 10,00,000 /- ignoring the facts of the case as well as submission of the assessee.
04. That on facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the penalty on the basis of alleged digital data without complying with the conditions laid down in the Evidence Act which is sine qua non for admission of such evidence.
05. That the Ld. Assessing Officer has erred on facts and in law in initiating the penalty proceedings under section 271DA of the Act since the penalty was levied on the statement of 3rd Person and digital data found in form of Whatsapp Chats of Sh. Vimal Jain.
06. On the facts and circumstances of the case, the penalty order passed by the Ld. Assessing Officer is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law.
07. That the Ld. CIT (A) has erred on facts and in law ignoring the well- established judicial pronouncements.
08. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law without giving proper opportunity to being heard.
09. That the impugned Penalty order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
10. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
2.1 Ground of appeal filed by the assessee (ITA No.- 7764/Del/2025) are reproduced as under:
“ 01. That on facts and circumstances of the case and as per the provisions of law, the order passed by the Ld. CIT (Appeal) under section 271DA of the act is bad both in the eyes of law and on facts.
02. That on the facts and circumstances of the case and as per the provisions of the law, the Ld. CIT(A) has failed to appreciate that the penalty order passed u/s 271DA is illegal bad in law and without jurisdiction.
03. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law in upholding the penalty levied u/s 271 DA for AY 2019_20 of Rs 34,64,00/- ignoring the facts of the case as well as submission of the assessee.
04. That on facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the penalty on the basis of alleged digital data without complying with the conditions laid down in the Evidence Act which is sine qua non for admission of such evidence.
05. That the Ld. Assessing Officer has erred on facts and in law in initiating the penalty proceedings under section 271DA of the Act since the penalty was levied on the statement of 3rd Person and digital data found in form of Whatsapp Chats of Sh. Vimal Jain.
06. On the facts and circumstances of the case, the penalty order passed by the Ld. Assessing Officer is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law.
07. That the Ld. CIT (A) has erred on facts and in law ignoring the well- established judicial pronouncements.
08. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law without giving proper opportunity to being heard.
09. That the impugned Penalty order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
10. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
2.2 Ground of appeal filed by the assessee (ITA No.- 7765/Del/2025) are reproduced as under:
“01. That on facts and circumstances of the case and as per the provisions of law, the order passed by the Ld. CIT (Appeal) under section 271DA of the act is bad both in the eyes of law and on facts.
02. That on the facts and circumstances of the case and as per the provisions of the law, the Ld. CIT(A) has failed to appreciate that the penalty order passed u/s 271DA is illegal bad in law and without jurisdiction.
03. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law in upholding the penalty levied u/s 271 DA for AY 2020-21 of Rs 20,27,000/- ignoring the facts of the case as well as submission of the assessee.
04. That on facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the penalty on the basis of alleged digital data without complying with the conditions laid down in the Evidence Act which is sine qua non for admission of such evidence.
05. That the Ld. Assessing Officer has erred on facts and in law in initiating the penalty proceedings under section 271DA of the Act since the penalty was levied on the statement of 3rd Person and digital data found in form of Whatsapp Chats of Sh. Vimal Jain.
06. On the facts and circumstances of the case, the penalty order passed by the Ld. Assessing Officer is bad and liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law.
07. That the Ld. CIT (A) has erred on facts and in law ignoring the well-established judicial pronouncements.
08. On the facts and circumstances of the case, the Ld. CIT (A) has erred, both on the facts and in law without giving proper opportunity to being heard. 09. That the impugned Penalty order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
09. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
Firstly, we take up ITA No.- 7763/Del/2025 for A.Y. 2018-19 as a lead case.
3. Brief facts of the case are that the assessee filed his return of income for A.Y. 2018-19 on 25.07.2018, declaring income of Rs. 15,23,210/-. Subsequently, a search action u/s 132 was conducted on 23.03.2021 in Shri. Parasmal Jain & Balar Marketing Group of cases, during the course of which documents relating to Hawala cash transactions were found and seized. It was seen that the assessee had received cash of Rs. 10,00,000/- through hawala cash token from a group entity. Accordingly, the case of the assessee was centralised and notice u/s 153C was issued on 1.11.2023. In response, the assessee admitted having made cash sales to M/s Balar Marketing Private Ltd. which was not shown in the ITR. After considering the assessee’s contentions, the AO added Rs. 80,000/- computed @ 8% of Rs. 10,00,000/- as profit on presumptive basis u/s 44AD and added the same to his income. Penalty proceedings were also initiated u/s 269ST for receiving cash on account of sales of Rs. 10,00,000/- in contravention of the provision of this section. Subsequently, vide order u/s 271DA dated 29.08.2024, penalty of Rs. 10,00,000/- was imposed for receiving cash in violation of provisions of section 269ST of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). However, vide order dated 14.10.2025, Ld. CIT(A) dismissed the assessee’s appeal holding that the assessee had violated the provisions of Section 269ST by accepting cash of Rs. 10 lakhs during the year.
4. Further aggrieved, the assessee has filed appeal before the Tribunal.
5. We have heard the rival submissions and perused the material available on record. Admittedly, the assessee had made cash sales to M/s Balar Marketing Private Ltd. amounting to Rs. 10 lakhs during the year. Based on assessee’s admission, an income element was computed @ 8% u/s 44AD and assessment was finalised.
Penalty proceedings u/s 269ST were also initiated based on assessee’s admission. However, before levying penalty u/s 271DA, it had to be ascertained whether the cash exceeding Rs. 2 lakhs was paid on any one day in relation to single transaction by the assessee so as to attract the penal provisions. In this regard, relevant provisions of section 269ST are reproduced as under:
“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.
Explanation.—For the purposes of this section,—
(a) “banking company” shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;
(b) “co-operative bank” shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.”
5.1 From the above, it is clear that the provisions of section 269ST are violated only if cash of Rs. 2 lakhs or more is received in a day, or in respect of a single transaction or in respect of transactions relating to one event/ occasion. However, the AO has failed to record any findings to this effect in the penalty order and has imposed the penalty simply because the assessee had admitted to making cash sales to M/s Baler Marketing during the year amounting to Rs. 10,00,000/-. In the absence of relevant facts demonstrating violation of above provisions, we hold that the AO was not justified in levying the impugned penalty. Accordingly, we hereby delete the penalty of Rs. 10,00,000/- imposed u/s 271DA by the AO.
6. Assessee’s appeal in ITA No.- 7763/Del/2025 is accordingly allowed.
7. Since facts and circumstances and the issue involved in the other two appeals i.e. ITA No. –7764/Del/2025 for A.Y. 2019-20 and ITA No.- 7765/Del/2025 for A.Y. 2020-21 are identical, the above order in ITA No.- 7763/Del/20205 will apply mutatis mutandis to these appeals also.
8. In the result, all the three appeals of the assessee are allowed.
Order pronounced in the open court on 22.06.2026.
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