Vasavi Developers v. DCIT

Case snapshot

Sections / provisions: 132; 145(3); 269ST; 271DA

Questions before the Court / Tribunal

• Section 271DA penalty; cash receipts; rejected books and penalty satisfaction: The Hyderabad Tribunal deleted section 271DA penalties across the connected years. The full order records that the foundational assessment orders did not identify the transaction/person/event-specific violation required for penalty initiation, while the Revenue also relied selectively on rejected/incomplete data without conclusive proof of the alleged section 269ST contraventions.

Material facts and background

the assessment years. Therefore, for the sake of brevity, grounds of appeal filed for the A.Y. 2019-20 in ITA No.1038/Hyd/2026 are re-produced as under: “1. The order passed by the Ld.CIT(A) is erroneous in law as well as facts of the case. 2. The Ld. CIT(A) ought to have quashed the penalty order as the notice issued u/s. 274 r.w.s 271DA is invalid in the absence of the specific violations in contravention of the provisions of Sec. 269ST. 3. The Ld. CIT(A) has erred in upholding the penalty levied u/s. 271DA of the IT Act by the Ld.AO without appreciating the actual facts involved in the case. 4. The Ld. CIT(A) ought to have deleted the penalty levied u/s. 271DA, as there is no proper satisfaction drawn by the Assessing Officer in the Assessment Order. 5. The Ld. CIT(A) ought to have appreciated that the Ld.AO has not drawn proper satisfaction in the Assessment order as to what is the quantum of amount for which the Appellant is liable for penalty u/s. 271DA.

3 ITA Nos.1038 to 1042/Hyd/2026 Vasavi Developers 6. The Ld.CIT(A) erred in rejecting the contention of the Appellant that the notice issued u/s. 271DA of the IT Act for initiating the penalty proceedings lacks jurisdiction in the absence of recording of a valid satisfaction by the Assessing Officer in his order regarding the violations of provisions of section 269ST of the Act and the penalty order passed in pursuant to the said notice is void ab initio. 7. The Ld.CIT(A) ought to have appreciated that the Ld.AO has erred in rejecting the contention of the Appellant that the burden to establish the contravention of the provisions of sec.269ST is on the revenue and the onus is not on the Appellant to produce verifiable evidence in support of its claim of non-violation of the provisions of section 269ST. 8. The Ld.CIT(A) has erred in invoking the provisions of sec.271DA by merely relying on the loose sheets and rough tally data. Therefore, the penalty levied by the Ld.AO is baseless and void. 9. The Ld.CIT(A) has erred in considering the fact that the Ld.AO has levied the penalty on uncorroborated/ unauthenticated tally data. Therefore, the penalty levied is not tenable. 10. The...

4 ITA Nos.1038 to 1042/Hyd/2026 Vasavi Developers 16. The Appellant craves to add/alter/modify/leave any other grounds at the time of hearing.”

The brief facts of the case are that, a search and seizure

operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of Vasavi Group on 17.08.2022 covering various business premises, residential premises of directors, partners and other connected persons and entities of the Group. During the course of search proceedings, the Investigation Wing found and seized various incriminating materials in physical as well as electronic form including loose sheets, original MOUs, vouchers and tally data maintained in hard disks and pen drives. The electronic devices seized during the course of search were inventorised

A/VG/CORP/ED/3. The Revenue also referred to certificates issued u/s. 65B of the Indian Evidence Act, 1872 in support of the electronic evidence found during the course of search proceedings. On examination of the seized material, the Revenue noticed alleged cash receipts from customers in connection with sale of flats, villas and commercial units relating to various projects belonging to Vasavi Group. Statements u/s. 132(4) of the Act,

5 ITA Nos.1038 to 1042/Hyd/2026 Vasavi Developers

Appellant / assessee submissions

of Income Tax, Central Range-3, Hyderabad issued a show-cause notice under Section 274 r.w.s. 271DA of the Act, dated 22.08.2024, which was duly served on the assessee. During the course of penalty proceedings, the Addl. CIT has obtained information from the A.O. with regard to the violation of provisions of Section 269ST of the Act. The information contained in the seized material, including the accounting data maintained in Tally data seized during the course of search proceedings, has been obtained from the A.O. and the same has been examined. The said accounting data maintained in tally with regard to the cash received by the assessee was confronted to the learned counsel for the assessee and the final show-cause notice dated 14.02.2025 was also issued and served on the assessee. In response to the show-cause notice, the assessee has filed its submissions for initiation of penalty proceedings and submitted that the seized documents lacked credibility and evidentiary value. Further, there was no concrete identification of the parties to the transactions for

as levy of penalty on merits. The assessee submitted that, the A.O. did not record proper satisfaction in the assessment order regarding alleged contravention of provisions of section 269ST of the Act. The assessee further submitted that, the notice issued u/s.274 r.w.s. 271DA of the Act, was vague and did not specify the precise nature of violation alleged against the assessee. The assessee further submitted that, the entire penalty proceedings were initiated only on the basis of loose sheets, rough tally data and uncorroborated electronic entries without any independent evidence to establish actual receipt of cash from identifiable persons. The assessee also submitted that, the Revenue did not establish identity of payer, nature of transaction, date of receipt and actual mode of receipt so as to attract provisions of section 269ST of the Act. The assessee further submitted that, mere admission of additional income or estimation of profit during the course of assessment proceedings would not automatically justify levy of penalty u/s.271DA of the Act. 8. The assessee further submitted that, the burden to establish contravention of provisions of section 269ST lies entirely upon the...

The learned counsel for the assessee, Shri C. Maheswar

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

section 271DA of the Act, the Addl. CIT observed that, the amount in excess of specified sum is at Rs. 11,90,09,000/-. From the above, it is very clear that, the A.O. had failed to identify transactions that fall within the scope of section 269ST of the Act, and transactions that are outside the scope of section 269ST of the Act. Therefore, he submitted that since the A.O. had clearly erred in not identifying the transactions which fall within the scope of section 269ST of the Act, from the tally data and therefore, merely on the basis of admission of the assessee during the course of assessment proceedings, he cannot come to the conclusion that, the assessee has admitted violation of provisions of 269ST of the Act. The learned counsel for the assessee further submitted that, the evidence considered by the A.O. for the purpose of estimation of income and levy of penalty under section 271DA of the Act, is a dumb document without any details as to the nature of transaction and the purpose of transaction. Although the assessee has admitted additional income on estimation basis on total receipts quantified as per seized tally data, the admission made by the assessee is only to settle...

income on estimation basis cannot be considered as admission of violation of provisions of section 269ST of the Act. Therefore, levying penalty on the ground of assessee's admission of additional income on cash receipt proceeds from sale of flats and commercial spaces and claiming that, the assessee has violated the provisions of section 269ST of the Act, is totally nonapplication of mind by the A.O. without any reason as to how the penalty under Section 271DA of the Act, is applicable in the given facts of the present case. 20.

section 271DA of the Act, submitted that penalty under section 271DA of the Act, is not mandatory. As per section 271DA of the Act, no penalty shall be imposed on a person, if he, proves that there were good and sufficient reasons for the contravention. Penalty proceedings are quasi-judicial in nature and therefore, the burden lies on the Revenue to establish that the assessee acted with guilty mind or deliberate defiance of law and in the present case, no such findings have been made by the A.O. Further, the primary objective of section 271DA of the Act, is to curb black money and tax evasion. In the present case, there is no iota of

evidence in the assessment order or in the penalty order that the assessee has evaded tax by employing modus operandi in receipt of on-money. Therefore, levying penalty under Section 271DA of the Act, equal to the amount of cash receipts in excess of Rs. 2,00,000/- is contrary to the purpose of insertion of section 271DA by the legislation into the statute book going by the provisions of Section 271DA and the purpose of its insertion. The learned counsel for the assessee further, referring to the provisions of Section 158BFA(2) of the Act, which is applicable to cases where search has been initiated on or after 01.04.2024, submitted that the Finance Act, 2024 has reintroduced the block assessment scheme under Chapter XIV-B of the Act, and has simultaneously introduced Section 158BFA which provides for the rate of tax on undisclosed income for the block period. As per Section 158BFA(2) of the Act, no penalty is leviable under sections 271AAB, 271AAC, 271AAD or 271DA of the Act, in respect of undisclosed income for the block period where the tax payable on the income returned for the block period has been paid. The legislative intent behind this proviso is very clear, as per which...

prompt disclosure is made towards undisclosed income and payment of tax on the said income. In the present case, the assessee has disclosed unaccounted receipts as per the tally data found during the course of search and also paid taxes on additional income offered during the course of search. Therefore, once again levying penalty under Section 271DA of the Act, that too equal to the amount of transaction, is totally incorrect and against the principles of fair taxation as enshrined in Article 265 of the Constitution of India. Therefore, it was submitted that, the Department having accepted the income declared by the assessee on estimation basis, erred in levying 100% penalty on cash transactions in excess of Rs. 2,00,000/- under section 271DA of the Act. The learned counsel for the assessee further, referring to the principles of Wednesbury reasonableness, submitted that various Courts, including the Hon'ble Supreme Court have referred to the principles of Wednesbury reasonableness and going by the said principles, the action of the A.O. in levying penalty equal to 100% of the cash transactions is quite opposed to the principles of Wednesbury reasonableness and therefore, once...

Operative decision and relief

Hyderabad, dated 24.06.2026. TYNM/sps आदे शकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:1.

Vasavi Developers, C/o. B. Narasing Rao and Co LLP, Plot No.554, Road No.92, Jubilee Hills, Hyderabad – 500096, Telangana. : 1. The Deputy Commissioner of Income Tax, रधजस्व/ The Revenue Central Circle – 3(2), Hyderabad. 2. The Assistant Commissioner of Income Tax, Central Circle – 3(2), Hyderabad. The Principal Commissioner of Income Tax (Central), Hyderabad.

TIRUPATI YAMINI YAMINI NAGA MALLESWARI NAGA MALLESWARI Date: 2026.06.25 11:27:01 +05'30'

Authorities and precedents appearing in the judgment

• Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills reported in (2015) 64 taxmann.com 75 (SC)
• CIT vs. Jai Laxmi Rice Mills (supra). Further

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Section 271DA penalty; cash receipts; rejected books and penalty satisfaction. The operative result is classified as Quashed / set aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Section 271DA penalty; cash receipts; rejected books and penalty satisfaction. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Check the exact penalty charge in the show-cause notice, the assessment finding and the final penalty order; ambiguity or a changed statutory limb can be material.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the authenticated official judgment PDF

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