Tax Penalties Annulled: ITAT Deletes Unjustified Fines Due to Procedural Lapse in 2016-17 and 2017-18 Assessments.

The ITAT ruled in favor of the assessee, deleting the penalties imposed under section 271D of the Income-tax Act, 1961, for the assessment years 2016-17 and 2017-18. The penalties were deemed unjustified due to the lack of recorded satisfaction by the Assessing Officer in the assessment order under section 143(3) for initiating penalty proceedings for alleged violations under section 269SS. Consequently, the appeals were allowed, and the penalties were annulled.

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Issues:
The judgment involves the levy of penalty u/s 271D of the Income-tax Act, 1961 without valid satisfaction recorded in the assessment order u/s 143(3) for the alleged violation u/s 269SS of the Act.

Summary:
The appeals by the assessee were directed towards two separate orders of the CIT(A) - 3, Noida dated 13.12.2023 pertaining to A.Ys. 2016-17 and 2017-18. The grievance of the assessee was against the penalty u/s 271D amounting to Rs. 93,80,000/- in A.Y 2016-17 and Rs. 44,00,000/- in A.Y 2017-18, as no valid satisfaction was recorded in the order passed u/s 147/143(3) of the Act regarding the alleged violation u/s 269SS. A survey u/s 133A was conducted at the business premises, leading to scrutiny assessment u/s 147 to verify income, investments, and expenses. The assessment was completed, and notice u/s 271D was issued, followed by the imposition of penalties by the JCIT, which was sustained by the CIT(A).

The assessee contended that no valid satisfaction was recorded by the Assessing Officer in the assessment order u/s 143(3) for initiating penalty u/s 271D. The ITAT, after considering relevant judicial pronouncements, noted the absence of satisfaction recorded by the Assessing Officer for initiating penalty proceedings u/s 271D. Citing precedents, including the decision of the Hon'ble Supreme Court, the ITAT concluded that the penalty imposed was without valid assumption of jurisdiction. As per the legal dictum, the Assessing Officer must record satisfaction in the assessment order u/s 143(3) for initiating penalty proceedings u/s 271D for violation of section 269SS. Since no such satisfaction was recorded, the ITAT held that the penalties were not justified and deleted them, allowing both appeals.

In conclusion, the ITAT ruled in favor of the assessee, deleting the penalties imposed u/s 271D in both A.Ys and allowing the appeals.

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