After a search the Additional Commissioner has levied a s.271DA penalty equal to the whole of the cash the Department says we received on flat bookings. Nobody has identified a single payer or a single receipt over Rs 2,00,000. Can the penalty stand?
No. The Tribunal held that s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted — the Revenue must prove the precise statutory violation, person-wise and transaction-wise, and where it has not, the s.271DA penalty cannot survive. It also held that the AO must record a clear satisfaction of the s.269ST violation in the assessment order itself, failing which the foundational jurisdiction to initiate s.271DA is absent.
Decided by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'B' Bench) on 2026-06-24, reported as ITA Nos. 1038 to 1042/Hyd/2026. It bears on section 271DA, section 269ST, section 132, section 274 of the Income Tax Act 1961, in Penalty, Cash Transaction Limits and Search, Survey & Block Assessment matters.
This is the answer to the commonest way s.271DA is now levied — a search throws up tally data or loose sheets, a global figure of cash receipts is arrived at, and a penalty equal to that whole figure follows without anyone matching a rupee to a payer or a date. The decision attacks that on two independent footings, and both are worth taking. The jurisdictional one is that satisfaction of the s.269ST violation must appear in the assessment order, not first surface in the penalty proceeding. The evidentiary one goes to the structure of s.269ST itself: the section forbids receipt of Rs 2,00,000 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, and each of those limbs needs facts — a named person, a date, an amount, or an identified transaction or event. A global admission satisfies none of them. There is a second sting here for the Revenue: where the assessment itself rejected the books as incomplete and unreliable and estimated the income, the Tribunal held the same books cannot then be relied on selectively to found a penalty. Note the practical scale — this reasoning is reproduced across roughly forty orders of the same bench delivered on the same day for the group, so it is a considered position rather than a one-off.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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A search and seizure operation under s.132 was carried out on the Vasavi Group on 17 August 2022. The Investigation Wing found and seized incriminating material in physical and electronic form, including loose sheets, original memoranda of understanding, vouchers and tally data, said to show cash received from customers on the sale of flats and commercial units. The AO recorded that the assessee had received Rs 61,22,43,906 in cash on various occasions. The Additional Commissioner, Central Range-3, Hyderabad, after considering the assessee's submissions, took the figure of actual cash receipts on several occasions as Rs 11,90,09,000, and levied penalty under s.271DA of Rs 11,90,09,000 for AY 2019-20, equal to the amount said to have been received otherwise than through banking channels. No person-wise, date-wise or transaction-wise breakdown of individual receipts of Rs 2,00,000 or more was placed on record. The assessment order itself contained no recorded satisfaction that s.269ST had been violated. The appeals covered AY 2019-20 to AY 2023-24. The search of 17 August 2022 falls in the s.153A/s.153C period (1 June 2003 to 31 August 2024); block assessment under s.158BA to s.158BI was revived only for searches initiated on or after 1 September 2024. Nothing in this penalty appeal turns on which regime applied.
All five appeals allowed (paras 42 and 44). The penalty under s.271DA cannot be sustained. The AO recorded no clear, specific or conscious satisfaction that the assessee had received any amount in violation of s.269ST; the assessment order neither identifies the particular transaction said to contravene s.269ST nor records the statutory ingredients necessary for assuming jurisdiction under s.271DA, and the foundational jurisdictional requirement for initiating the penalty being absent, the penalty order deserves to be quashed. Independently, on the merits, s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted: the precise statutory violation must be proved, and a penalty under s.271DA cannot be sustained where the material does not establish a transaction-wise or person-wise violation.
The Tribunal began with the initiation. Penalty proceedings must be initiated on a clear satisfaction, that satisfaction must be arrived at during the assessment proceedings, and it must be discernible from the assessment order; here the assessment order was completely silent and contained no satisfaction of any kind on the alleged violation of s.269ST, the AO having merely stated that penalty proceedings under s.271DA were being referred where violation of s.269ST is found, without recording satisfaction that the conditions for invoking the section were met. That absence of the foundational jurisdictional requirement was by itself enough to quash the order. The Tribunal then went to the proof. The Revenue had brought on record no independent evidence establishing the name of the person from whom cash was received, the date of receipt, or the exact amount received from each person. It emphasised that penalty proceedings are quasi-criminal in nature, so that although the strict rules of criminal law may not apply the Department must establish the default with cogent material, and a mere admission without corroborative evidence cannot by itself justify a levy, particularly where the statutory conditions have not been independently demonstrated. Reading that against s.269ST, the Tribunal observed that the Revenue's case was not that there were identified cash receipts from named persons exceeding Rs 2,00,000 in a day, or in respect of a single transaction or event, but rather that the penalty was founded on a general admission, and that such an approach is legally insufficient. Finally it took the point that once the Revenue itself holds the books to be incomplete and unreliable, the same books or the alleged entries in them cannot simultaneously be relied on selectively to impose a stringent penalty, and that where income itself is determined on approximation and best judgment a further penal consequence does not follow.
The Revenue's case is not that there are identified cash receipts from named persons exceeding Rs. 2,00,000/- in a day; or in respect of a single transaction or event. Rather, the penalty is found on a general admission. Such an approach is legally insufficient, because section 269ST of the Act, is not attracted merely because cash exists or because cash receipt is broadly admitted. The precise statutory violation must be proved.
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal held that s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted — the Revenue must prove the precise statutory violation, person-wise and transaction-wise, and where it has not, the s.271DA penalty cannot survive. It also held that the AO must record a clear satisfaction of the s.269ST violation in the assessment order itself, failing which the foundational jurisdiction to initiate s.271DA is absent. This was decided by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'B' Bench) and bears on section 271DA, section 269ST, section 132, section 274 of the Income Tax Act 1961. It is reported as ITA Nos. 1038 to 1042/Hyd/2026. This is the answer to the commonest way s.271DA is now levied — a search throws up tally data or loose sheets, a global figure of cash receipts is arrived at, and a penalty equal to that whole figure follows without anyone matching a rupee to a payer or a date. The decision attacks that on two independent footings, and both are worth taking. The jurisdictional one is that satisfaction of the s.269ST violation must appear in the assessment order, not first surface in the penalty proceeding. The evidentiary one goes to the structure of s.269ST itself: the section forbids receipt of Rs 2,00,000 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, and each of those limbs needs facts — a named person, a date, an amount, or an identified transaction or event. A global admission satisfies none of them. There is a second sting here for the Revenue: where the assessment itself rejected the books as incomplete and unreliable and estimated the income, the Tribunal held the same books cannot then be relied on selectively to found a penalty. Note the practical scale — this reasoning is reproduced across roughly forty orders of the same bench delivered on the same day for the group, so it is a considered position rather than a one-off. If it applies to you, the first step is this: Read the assessment order first and look for a recorded satisfaction on s.269ST. A bare line referring the matter for penalty where violation is found is not satisfaction, and this decision says so.
A search and seizure operation under s.132 was carried out on the Vasavi Group on 17 August 2022. The Investigation Wing found and seized incriminating material in physical and electronic form, including loose sheets, original memoranda of understanding, vouchers and tally data, said to show cash received from customers on the sale of flats and commercial units. The AO recorded that the assessee had received Rs 61,22,43,906 in cash on various occasions. The Additional Commissioner, Central Range-3, Hyderabad, after considering the assessee's submissions, took the figure of actual cash receipts on several occasions as Rs 11,90,09,000, and levied penalty under s.271DA of Rs 11,90,09,000 for AY 2019-20, equal to the amount said to have been received otherwise than through banking channels. No person-wise, date-wise or transaction-wise breakdown of individual receipts of Rs 2,00,000 or more was placed on record. The assessment order itself contained no recorded satisfaction that s.269ST had been violated. The appeals covered AY 2019-20 to AY 2023-24. The search of 17 August 2022 falls in the s.153A/s.153C period (1 June 2003 to 31 August 2024); block assessment under s.158BA to s.158BI was revived only for searches initiated on or after 1 September 2024. Nothing in this penalty appeal turns on which regime applied. The matter was decided on 2026-06-24 by the ITAT (Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'B' Bench). On those facts the ITAT held as follows. All five appeals allowed (paras 42 and 44). The penalty under s.271DA cannot be sustained. The AO recorded no clear, specific or conscious satisfaction that the assessee had received any amount in violation of s.269ST; the assessment order neither identifies the particular transaction said to contravene s.269ST nor records the statutory ingredients necessary for assuming jurisdiction under s.271DA, and the foundational jurisdictional requirement for initiating the penalty being absent, the penalty order deserves to be quashed. Independently, on the merits, s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted: the precise statutory violation must be proved, and a penalty under s.271DA cannot be sustained where the material does not establish a transaction-wise or person-wise violation.
The Tribunal began with the initiation. Penalty proceedings must be initiated on a clear satisfaction, that satisfaction must be arrived at during the assessment proceedings, and it must be discernible from the assessment order; here the assessment order was completely silent and contained no satisfaction of any kind on the alleged violation of s.269ST, the AO having merely stated that penalty proceedings under s.271DA were being referred where violation of s.269ST is found, without recording satisfaction that the conditions for invoking the section were met. That absence of the foundational jurisdictional requirement was by itself enough to quash the order. The Tribunal then went to the proof. The Revenue had brought on record no independent evidence establishing the name of the person from whom cash was received, the date of receipt, or the exact amount received from each person. It emphasised that penalty proceedings are quasi-criminal in nature, so that although the strict rules of criminal law may not apply the Department must establish the default with cogent material, and a mere admission without corroborative evidence cannot by itself justify a levy, particularly where the statutory conditions have not been independently demonstrated. Reading that against s.269ST, the Tribunal observed that the Revenue's case was not that there were identified cash receipts from named persons exceeding Rs 2,00,000 in a day, or in respect of a single transaction or event, but rather that the penalty was founded on a general admission, and that such an approach is legally insufficient. Finally it took the point that once the Revenue itself holds the books to be incomplete and unreliable, the same books or the alleged entries in them cannot simultaneously be relied on selectively to impose a stringent penalty, and that where income itself is determined on approximation and best judgment a further penal consequence does not follow. In the words reproduced by the source cited on this page: "The Revenue's case is not that there are identified cash receipts from named persons exceeding Rs. 2,00,000/- in a day; or in respect of a single transaction or event. Rather, the penalty is found on a general admission. Such an approach is legally insufficient, because section 269ST of the Act, is not attracted merely because cash exists or because cash receipt is broadly admitted. The precise statutory violation must be proved."
It was decided by the ITAT on 2026-06-24 and is reported as ITA Nos. 1038 to 1042/Hyd/2026. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271DA, section 269ST, section 132, section 274, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All five appeals allowed (paras 42 and 44). The penalty under s.271DA cannot be sustained. The AO recorded no clear, specific or conscious satisfaction that the assessee had received any amount in violation of s.269ST; the assessment order neither identifies the particular transaction said to contravene s.269ST nor records the statutory ingredients necessary for assuming jurisdiction under s.271DA, and the foundational jurisdictional requirement for initiating the penalty being absent, the penalty order deserves to be quashed. Independently, on the merits, s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted: the precise statutory violation must be proved, and a penalty under s.271DA cannot be sustained where the material does not establish a transaction-wise or person-wise violation. It arises in Penalty, Cash Transaction Limits and Search, Survey & Block Assessment matters, on section 271DA, section 269ST, section 132, section 274 of the Income Tax Act 1961, and was decided by Shri Vijay Pal Rao, Vice President and Shri Manjunatha G, Accountant Member — Income Tax Appellate Tribunal, Hyderabad 'B' Bench. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Ask the AO, in writing, to identify the limb of s.269ST relied on — aggregate from a person in a day, a single transaction, or transactions relating to one event or occasion — and to give the name, date and amount for each alleged contravention. Where the penalty is computed on a global or estimated figure, say so expressly and make the Revenue tie the figure to identified receipts; an approximation cannot found a penal consequence. If the assessment rejected the books or estimated the income, take the inconsistency point: the Revenue cannot call the books unreliable for assessment and reliable for penalty. Do not let a statement recorded in the search stand as the whole case against you — the Tribunal treated a mere admission without corroborative evidence as insufficient in a quasi-criminal proceeding. Check limitation and the authority who initiated, separately: the Karnataka High Court decision of 7 July 2026 on when s.271DA proceedings are initiated is a distinct line of attack and is already in the library.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 24 June 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. The only hits are the seven companion orders in ITA Nos. 1038 to 1042/Hyd/2026 pronounced the same day. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a June 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The quoted paragraph 35 was retrieved as a single unbroken passage and was independently confirmed by exact-phrase retrieval: the phrase "merely because cash exists or because cash receipt is broadly admitted" returned 41 documents on indiankanoon, all orders of this bench of the same date for this group, including this one. The phrase "there is no iota of any kind of satisfaction from the assessing officer" from paragraph 30 returned the same 41 documents. Every ?type=print render truncated at paragraph 37, but the disposal was subsequently recovered by fragment retrieval on this document: para 42 reads "In the result, the appeal of the assessee in ITA No.1038/Hyd/2026 for A.Y. 2019-20 is allowed" and para 44 reads "In the result, the appeals of the assessee firm in ITA Nos.1039 to 1042/Hyd/2026 for A.Ys. 2020-21 to 2023-24 are allowed". All five appeals were allowed. The reasoning quoted below is from paragraphs 30, 31 and 35 of the text as read. The order records paragraph 35 as referring to "Recent judicial precedents" without naming them in the passage I could read, so no authority is attributed here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All five appeals allowed (paras 42 and 44). The penalty under s.271DA cannot be sustained. The AO recorded no clear, specific or conscious satisfaction that the assessee had received any amount in violation of s.269ST; the assessment order neither identifies the particular transaction said to contravene s.269ST nor records the statutory ingredients necessary for assuming jurisdiction under s.271DA, and the foundational jurisdictional requirement for initiating the penalty being absent, the penalty order deserves to be quashed. Independently, on the merits, s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted: the precise statutory violation must be proved, and a penalty under s.271DA cannot be sustained where the material does not establish a transaction-wise or person-wise violation.
TaxSphere, “Vasavi Developers v ACIT, Central Circle 3(2), Hyderabad”, https://taxnotice.vittsphere.com/caselaw/case/vasavi-developers-v-acit-271da-violation-must-be-proved-transaction-wise/ (validity last checked 2026-09-08)
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The Assessing Officer sent a proposal to the Joint Commissioner for penalty on my cash receipts. Does the six month limitation run from that proposal or from the notice the Joint Commissioner later issued?
The section 269ST penalty falls on the person who receives the cash. If I am the buyer paying cash for property, am I exposed at all?
We paid Rs 1.5 crore in cash under an agreement. The other side says s.269ST makes the agreement void and our recovery suit is not maintainable. Is it?
I sell tractors to farmers who pay in cash instalments, and the officer has levied penalty equal to the whole of the cash received for breaching the two lakh limit. Is there any defence?
