2024 (2) TMI 277 - AT - Income Tax

Penalty under sections 271D and 271E cannot be sustained without proper satisfaction recorded during reassessment proceedings

DCIT Circle 3 (1), Raipur Versus Bhilai Jaypee Cement Ltd, Bhilai

ITAT Raipur dismissed revenue's appeal challenging penalty deletion under sections 271D and 271E. The tribunal held that penalty proceedings, though ... Validity of Penalty u/s 271D and u/s 271E - Penalty proceeding as independent of the assessment proceeding - absence of satisfaction recorded in the reassessment u/s 147 r.w.s 144 r.w.s. 144B - allegation of acceptance of loans through journal entries as violative of section 269SS - HELD THAT:- Issue before us is no more res-integra in light of the judgment in the case of CIT vs. Jai Laxmi Rice Mills, Ambala City (2015 (11) TMI 1453 - SUPREME COURT] therefore, the penalty imposed by Ld. JCIT u/s 271D of the Act, dehors any satisfaction recorded in the reassessment u/s 147 r.w.s 144 r.w.s. 144B by the concerned AO, is not sustainable, thus, we concur with the findings of Ld. CIT(A) which is on the same line as discussed hereinabove, therefore, we do not find any infirmity in the order of Ld. CIT(A) to be interfered with. In the result, appeal of the revenue stands dismissed. Issues Involved:1. Deletion of Penalty Imposed under Section 271D of the Income Tax Act, 1961.2. Deletion of Penalty Imposed under Section 271E of the Income Tax Act, 1961.Summary:Issue 1: Deletion of Penalty Imposed under Section 271D of the Income Tax Act, 1961The Department's appeal challenged the deletion of a penalty of Rs. 63,58,383/- imposed under Section 271D by the Ld. Commissioner of Income Tax (Appeals), NFAC. The Department argued that the penalty was justified as the acceptance of loans through journal entries violated Section 269SS, and cited precedents from the Kerala High Court and Allahabad High Court to support their stance. However, the Tribunal noted that the Assessing Officer (AO) did not record any satisfaction for initiating penalty proceedings under Section 271D in the reassessment order. The Tribunal referenced the Supreme Court judgment in CIT vs. Jai Laxmi Rice Mills Ambala City, which mandates that satisfaction must be recorded in the assessment order to initiate penalty proceedings. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, deeming the penalty proceedings void due to the lack of recorded satisfaction by the AO.Issue 2: Deletion of Penalty Imposed under Section 271E of the Income Tax Act, 1961Similarly, the Department's appeal against the deletion of a penalty of Rs. 1,53,97,819/- under Section 271E was also addressed. The Department cited the Kerala High Court and Allahabad High Court rulings to argue that the repayment of loans through journal entries violated Section 269T. However, the Tribunal applied the same rationale as in the Section 271D case, noting the absence of recorded satisfaction by the AO in the reassessment order. The Tribunal reiterated the Supreme Court's stance from Jai Laxmi Rice Mills Ambala City, affirming that the penalty under Section 271E could not be sustained without the AO's recorded satisfaction. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the penalty under Section 271E.Conclusion:Both appeals by the Department were dismissed. The Tribunal confirmed that penalties under Sections 271D and 271E could not be imposed without the AO's recorded satisfaction in the assessment order, aligning with the Supreme Court's judgment in CIT vs. Jai Laxmi Rice Mills Ambala City. The orders of the Ld. CIT(A) vacating the penalties were upheld.