Section 271DA Penalty Invalid Without Proof of Section 269ST Violation | ITAT

Case Details: MSN Laboratories (P.) Ltd. vs. Additional CIT [2026] 185 taxmann.com 655 (Hyderabad-Trib.)

Judiciary and Counsel Details

• Vijay Pal Rao, Vice President & Manjunatha G., Accountant Member
• M.V. Prasad, CA for the Appellant.
• Dr. Sachin Kumar, Sr. AR for the Respondent.

Facts of the Case

A search under section 132 was conducted in the MSN Group. During the search, the AO found an Excel sheet in the possession of the assessee’s cashier. The said Excel sheet contained date-wise details of sales of spent solvents and scraps. In this regard, the AO contended that the assessee received cash of Rs. 2 lakhs or more in a single transaction. Thus, the AO levied a penalty under section 271DA for the violation of section 269ST.

Aggrieved by the order, the assessee filed an appeal to the CIT(A). The CIT(A) upheld the penalty order. The assessee filed an appeal to the Hyderabad Tribunal.

ITAT Held

The Tribunal held that the Excel sheet did not show any details of each sale made to each buyer on said date. Further, the cash proceeds from the sales of spent solvents recorded in the Excel sheet were not received immediately. Except for the entry appearing on a particular date in excess of Rs. 2 lakhs or more, no tangible and cogent material on record to infer the violation of provisions of section 269ST in the case of the assessee. It is a settled law that the burden of establishing the occurrence of default by the assessee under the relevant provision, which makes the assessee liable for a penalty, is on the Revenue.

In the present case, since the AO has alleged a violation of section 269ST, the onus lies on the Revenue to establish the violation. From the material considered for the levy of penalty under section 271DA, no such evidence is forthcoming from the seized material. No evidence has been brought on record by the AO. Although the JCIT observed that it is for the assessee to discharge the burden by furnishing relevant evidence and proving that the cash received is less than the amount specified under section 269ST, once the AO alleges a violation, it is for the AO to prove the allegation with relevant evidence.

In the present case, admittedly, there is no evidence, such as sales bills or cash receipts, for the sale of unaccounted spent solvents and scraps. The only evidence found is the Excel sheet maintained by the Cashier for the entire group, which contains consolidated details for five companies and various plants/units. Only based on consolidated entries in the Excel sheet can it be alleged that the assessee violated Section 269ST and that a penalty under Section 271DA was imposed.

Therefore, the AO has not conclusively proved the violation of section 269ST to levy a penalty under section 271DA, and the penalty is not sustainable on the merits in the facts and in law.

List of Cases Reviewed

• Pr. CIT v. K Umesh Shetty [2025] 170 taxmann.com 748/303 Taxman 318 (Karnataka) (para 15)
• Pr. CIT v. Rishikesh Buildcon (P.) Ltd. [2023] 147 taxmann.com 220/451 ITR 108 (Delhi) (para 15)
• ITO v. Sireesha Pochareddy [IT Appeal No. 1270 (Hyd) of 2024, dated 12-03-2025] (para 20)
• Sait Bansilal & Rangisetti Veeranna v. CIT [1972] 83 ITR 750 (Andhra Pradesh) (para 26) Followed.
• Grihalakshmi Vision v. Addl. CIT [2015] 63 taxmann.com 196/379 ITR 100 (Kerala) (para 17) Distinguished.

List of Cases Referred to

• Pr. CIT v. Rishikesh Buildcon (P.) Ltd. [2023] 147 taxmann.com 220/451 ITR 108 (Delhi) (para 10)
• Pr. CIT v. K Umesh Shetty [2025] 170 taxmann.com 748/303 Taxman 318 (Karnataka) (para 10)
• ITO v. Sireesha Pochareddy [IT Appeal No.1270 (Hyd) of 2024, dated 12-03-2025] (para 10)
• Grihalakshmi Vision v. Addl. CIT [2015] 63 taxmann.com 196/379 ITR 100 (Kerala) (para 13)
• Tvl. Chandro Process v. Dy. CIT [2025] 173 taxmann.com 976/[2026] 486 ITR 33 (Madras) (para 14)
• Sri Sai Balaji Gas Cylinder (P.) Ltd. v. Asstt. CIT (OSD) [2023] 155 taxmann.com 319 (Chennai – Trib.) (para 14)
• CIT v. Khoday Eswarsa & Sons [1972] 83 ITR 369 (SC) (para 26)
• Sait Bansilal & Rangisetti Veeranna v. CIT [1972] 83 ITR 750 (Andhra Pradesh) (para 26).