2025 (3) TMI 212 - AT - Income Tax

Penalty Under Section 271E Overturned Due to Lack of Satisfaction Record; Tribunal Cites SC Precedent for Clarity

The Appellate Tribunal allowed the Assessee's appeal, setting aside the penalty imposed under section 271E of the Income Tax Act, 1961, for the assessment ... Penalty imposed u/s 271E - violation of provisions of Section 269T by making repayment of a sum in cash - HELD THAT:- Assessing Officer nowhere recorded satisfaction that it was a case of violation of provisions of section 269T calling for initiation of penalty proceedings u/s 271E of the Act. In Jai Laxmi Rice Mills Ambala City’s case [2015 (11) TMI 1453 - SUPREME COURT] while dealing with penalty order u/s 271E of the Act, observed that in the fresh assessment order, no satisfaction was recorded regarding penalty proceedings u/s 271E of the Act, and that the AO had expressed therein only for initiation of penalty proceedings u/s 271(1)(c). Accordingly, it was held that the penalty levied u/s 271E of the Act could not be levied without recording of satisfaction in the assessment order as regards penalty under section 271E of the Act. Thus, AO having not recorded satisfaction that it was a case calling for initiation of penalty proceedings u/s 271E penalty order deserves to be set aside. Decided in favour of assessee. The Appellate Tribunal considered the appeal of the Assessee against the penalty imposed by the Assessing Officer under section 271E of the Income Tax Act, 1961 for the assessment year 2014-15. The penalty was imposed for violating the provisions of Section 269-T by making a cash repayment of Rs. 24,988. The Assessee argued that the Assessing Officer did not record satisfaction about the violation before passing the penalty order and did not indicate the initiation of penalty proceedings under section 271E in the assessment order. The Assessee relied on the decision in Commissioner of Income Tax v. Jai Laxmi Rice Mills Ambala City, 64 taxmann.com 75, Supreme Court (2015) to support their contention.The Department argued that the appeal should be dismissed as it was a clear case of violating section 269T, attracting penalty under section 271E. The Tribunal observed that the assessment order did not record satisfaction about the violation of section 269T, which is a prerequisite for initiating penalty proceedings under section 271E. Referring to the Jai Laxmi Rice Mills Ambala City case, the Tribunal held that the penalty under section 271E cannot be imposed without recording satisfaction in the assessment order specifically for that penalty provision.Therefore, the Tribunal allowed the appeal and set aside the penalty order under section 271E. The impugned order upholding the penalty was also set aside. The decision was based on the failure of the Assessing Officer to record satisfaction for initiating penalty proceedings under section 271E, as required by law.This judgment highlights the importance of proper documentation and satisfaction by the Assessing Officer before imposing penalties under specific provisions of the Income Tax Act. The decision in Jai Laxmi Rice Mills Ambala City case was crucial in guiding the Tribunal's interpretation and reasoning in this case, emphasizing the necessity of explicit satisfaction for each penalty provision.