Cash acceptance penalty canceled due to Assessing Officer's failure to record satisfaction, leading to penalty quashing.

The penalty imposed under section 271D for accepting cash in violation of section 269SS was canceled as the Assessing Officer did not record satisfaction for initiating penalty proceedings in the assessment order. The Tribunal found this omission to be fatal, following the precedent that recording satisfaction is mandatory for such penalty proceedings. As a result, the penalty was quashed, and the appeals by the assessee were allowed.

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Issues Involved:
1. Legality of penalty u/s 271D for accepting cash in violation of Section 269SS.
2. Whether the Assessing Officer recorded satisfaction for initiating penalty proceedings u/s 271D.

Summary:

Issue 1: Legality of Penalty u/s 271D

The assessee was subject to a search and seizure operation u/s 132, revealing that he received Rs. 40,00,000 in cash as part of the sale of immovable property, violating Section 269SS which prohibits accepting cash above Rs. 20,000. Consequently, penalty proceedings u/s 271D were initiated, and a penalty of Rs. 40,00,000 was levied. The CIT (A) confirmed the penalty, stating that the assessee admitted to receiving the cash and that ignorance of law is not an excuse. The CIT (A) emphasized that the transaction was unearthed during the search, and the cash portion was not disclosed in the sale deed, indicating an intent to evade the law.

Issue 2: Recording of Satisfaction by Assessing Officer

The assessee raised an additional ground, arguing that the penalty u/s 271D is unsustainable as the Assessing Officer did not record satisfaction for initiating penalty proceedings in the assessment order. The Tribunal admitted this ground, noting that it was purely legal and all material facts were on record. The Tribunal referred to the jurisdictional High Court's decision in Srinivasa Reddy Reddeppagari vs. Jt. CIT, which held that recording satisfaction in the assessment order is mandatory for penalty proceedings u/s 271D. The Tribunal found no such satisfaction recorded in the assessee's case and thus quashed the penalty. Consequently, the grounds challenging the penalty on merits were deemed academic and not adjudicated.

Conclusion:

The appeals filed by the assessee were allowed, and the penalty u/s 271D was directed to be canceled due to the absence of recorded satisfaction by the Assessing Officer in the assessment order.

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