2024 (1) TMI 25 - AT - Income Tax

Penalty under section 271D quashed without recorded satisfaction in assessment order per Jai Laxmi precedent

The ITAT Hyderabad allowed the assessee's appeal against penalty under section 271D for cash receipt contravening section 269SS. The tribunal held that ... Penalty u/s 271D - cash Received in contravention to the provision of section 269SS - mandation of recording satisfaction - whether without satisfaction being recorded in the assessment order, penalty can be levied under section 271D of the Act? - HELD THAT:- In the case of Umakant Sharma Vs JCIT [2023 (8) TMI 1094 - ITAT INDORE] observed that, it is pre-requisite condition that the initiation of penalty under section 271D/271E of the Act, there must be assessment proceedings or proceeding arising from assessment order are pending in the case of the assessee, and, therefore, following case of Vijayaben G. Zalavadia [2022 (5) TMI 1572 - ITAT AHMEDABAD] deleted the penalty levied under section 271D by holding that without any assessment proceedings in the case of the assessee such penalty is not valid and liable to be quashed. Also this question as dealt in the case of Srinivasa Reddy Reddeppagari [2022 (12) TMI 1446 - TELANGANA HIGH COURT] wherein while referring to the decision of the Hon’ble Apex Court in the case of Jai Laxmi Rice Mills [2015 (11) TMI 1453 - SUPREME COURT] the Hon’ble High Court held that the provisions under section 271E and 271D of the Act are in pari materia and since in terms of the decision in Jai Laxmi Rice Mills (supra), satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under section 271E of the Act, the same is equally applicable for initiation of penalty proceedings under section 271D of the Act. Assessee appeal allowed. Issues Involved:1. Validity of penalty under section 271D of the Income Tax Act without recorded satisfaction in the assessment order.Summary:Issue 1: Validity of penalty under section 271D of the Income Tax Act without recorded satisfaction in the assessment orderThe case revolves around the imposition of a penalty under section 271D of the Income Tax Act, 1961, due to the assessee receiving cash exceeding Rs. 20,000 in contravention of section 269SS of the Act. The learned Assessing Officer levied a penalty of Rs. 14 lakhs, which was confirmed by the learned Commissioner of Income Tax (Appeals) (CIT(A)).The assessee contested the penalty, arguing that it was levied without the necessary satisfaction being recorded in the assessment order. The learned Authorized Representative (AR) cited several precedents, including CIT vs. Jai Laxmi Rice Mills and Mohd. Atiq vs. ITO, to support the argument that recorded satisfaction is a prerequisite for initiating penalty proceedings.Conversely, the learned Departmental Representative (DR) contended that the penalty under section 271D is automatic upon violation of section 269SS, and such proceedings are independent of the assessment order.Upon reviewing the records and submissions, the Tribunal noted that a Co-ordinate Bench of the Indore Tribunal in Umakant Sharma Vs JCIT and the jurisdictional High Court in Srinivasa Reddy Reddeppagari had held that satisfaction must be recorded in the original assessment order for initiating penalty proceedings under section 271D. The Tribunal emphasized that it is the duty of adjudicating authorities to comply with Supreme Court decisions, as mandated by Articles 141 and 144 of the Constitution of India.Consequently, the Tribunal found the impugned orders dated 06/10/2023 by the learned CIT(A) and the order dated 19/12/2019 by the Joint Commissioner of Income Tax to be 'bad in law' and quashed them. The appeal of the assessee was allowed.Conclusion:The Tribunal allowed the appeal on the grounds that the penalty under section 271D was levied without the necessary satisfaction being recorded in the assessment order, following the principles laid down by the Supreme Court and the jurisdictional High Court.