So what if it receives fiat? You could consider them as an advanced vending machine. The problem does not seem to be the receipt of fiat, but the attitude of the income tax department towards cryptocurrencies. I assume they have the usual concerns over anonymity and tax evasion. It could take some time before they get the hang of cryptocurrencies.
A vending machine doesn't operate on high limits like that. What if there was a vending machine that sells gold bars? Would that require a registration? In a Bitcoin ATM you can easily buy cryptocurrency worth a couple thousand USD and you could be doing that with a credit card and a transaction is difficult to trace and irreversible. I'm pretty sure if a teenager took a credit card belonging to his father and bought Bitcoin the first thing a father would do is try to call the ATM company asking for a refund, yet in cryptocurrency things like that don't exist and the company that owns the ATM is not in control of the accounts.
Cryptocurrency is still a mystery to most of the society. They don't understand that there's no customer support and nobody to complain to and nobody to sue, so I can fully understand the authorities here.