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 under section 271D requires satisfaction to be recorded in the assessment order, following the SC precedent in Jai Laxmi Rice Mills case. The tribunal relied on decisions from ITAT Indore and Telangana HC, establishing that without proper assessment proceedings and recorded satisfaction in the assessment order, penalty under section 271D is invalid and must be quashed.

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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 order

The 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.

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