TaxTMI 
TaxTMI 
2024 (2) TMI 277
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....kshmi Vision v/s Addl. CIT (2015) 63 taxmann.com 196 has held that penalty proceedings under the provision of section 271D are not initiated by AO but only with the issuance of notice by the JCIT. 3. On the facts and in the circumstances of the case, the Ld. CIT(A), NFAC has erred in deleting the penalty-imposed u/s 271D whereas the acceptance of loans through journal entries is also violative of section 269SS as the section 269SS does not provide for any such exception. The hon'ble Allahabad High Court in the case of CIT-I Kanpur v/ s Sunil sugar co 2017 SS taxmann.com 254(Allahabad) has held that where the assessee had received loan/deposit through non banking mode, in contravention of section 269SS but could not provide reasonable cause for such contravention, Tribunal was not justified in deleting penalty. 4. The order of the Id CIT(A), NFAC is erroneous both in law and on facts. 5. Any other ground which may be adduced at the time of hearing. The Grounds of Appeal raised by the department in ITA no. 243/RPR/2023, are as under: 1. On the facts and in the circumstances of the case, the Id CIT(A) NFAC is justified in deleting the penalty of imposed u/s 271 E of....
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....acated in toto. 5. To challenge the findings of Ld. CIT(A) now the department is in appeal before us in the present case. 6. Since the issue involved in the present appeal are identical, interconnected and inextricably interwoven, therefore, we are adjudicating both these appeals under this common order. 7. We shall be first taking ITA No. 242/RPR/2023 regarding penalty u/s 271D of the income tax, 1961, our decision therein shall be mutatis mutandis applicable in the other ITA No. 243/RPR/2023 regarding penalty u/s 271E. 8. At the outset, Ld. AR of the assessee drew our attention to the assessment order passed u/s 147 r.w.s. 144 r.w.s. 144B for the assessment year 2015-16 dated 29.03.2022 and has specifically shown the noting of the Ld. AO w.r.t. initiation of penalties which reads as under: "Penalty u/s 271(1)(c) of the Income Tax Act, 1961 is initiated separately for under reporting of income." 10. In view of aforesaid observation of the Ld. AO in the assessment order regarding initiating the penalty proceedings in the case of assessee, it is the submissions of Ld. AR that there was no satisfaction recoded by the Ld. AO to initiate the penalty proceedings u/s 271D & 271E ....
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.... the question was whether a satisfaction has to be recorded in the assessment order for initiation of penalty u/s 27 IE of the Act. In the said case, after the levy of penalty u/s 27 IE of the Act, the original assessment wherein satisfaction regarding initiation of penalty proceedings was expressed, was set aside on appeal filed by the assessee. In the fresh assessment order, there was no expression of any satisfaction regarding initiation of penalty proceedings u/s 27 IE of the IT Act. Their Lordship held at paras 3-5 as under; "3. After remand, the AO passed a fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings u/s 27 IE of the Act was recorded. It so happened that on the basis of the original assessment order dated February 26,1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated September 23, 1996. Thus, this penalty order was passed before the appeal of the assessee against original assessment order as heard and allowed thereby setting aside the assessment order itself It is in this backdrop, a question 4 has arisen as to whether the penalty order, which was pa....
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....D and 27 IE of the Act. We find from the facts that the assessee has merely collected advances in cash from various dealers for supply of rice and wheat during the course of business. Hence, it can safely be concluded that the said receipts pertained the character of revenue receipts in the hands of the assessee. It is not in dispute that the said advances were duly adjusted by supply of goods by the assessee before the end of previous year. In these circumstances, we hold that the advance receipt on sale of goods from dealers as deposit and invoking the provisions of section 269SS and 269T is not warranted. 5. We also find that the Id.AO has not recorded any satisfaction in the assessment order for violation of provisions of section 269SS and 269T of the Act, which is sine qua non before the [d. JCIT proceeded to initiate penalty proceedings u/s. 27 ID and 27 IE of the Act. In support of our submission we rely on the recent decision of the Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City reported in (2015) 379 [TR taxmann.com 75(SC), wherein it has been held as under:- "4. The Tribunal as well as the High Court has held that it could not be s....
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....iation of penalties in the assessment order based on which the penalty proceedings have been initiated and the penalty was imposed. The relevant findings of the ITAT, Raipur in the case of Bhowmik Raj Singh (supra), for sake of completeness are culled out as under: 10. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 11. Before proceeding any further, it would be relevant to cull out the provisions of Section 269SS of the Act, i.e., the mandate of law which contemplates that no loan/deposit in excess of a specified amount is to be received by an assessee otherwise than as per the prescribed modes, which reads as under: "269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account 11[or through such other electronic mode as may be prescribed....
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....t results in saddling the assessee with penalty u/s. 271D of the Act; therefore, it would be relevant to cull out the same as under: 14 Shri Bhowmick Raj Singh Vs. Jt. CIT, Bhilai-Range, Bhilai ITA No. 128/RPR/2016 "271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner." 12. Controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not penalty imposed by the JCIT u/s. 271D of the Act de-hors recording of satisfaction by the A.O for initiating the said penalty proceedings in the body of the assessment order passed u/s. 143(3) dated 25.03.2013 is sustainable in the eyes of law? As is discernible from the assessment order, the A.O in the body of the said order had only initiated penalty u/s. 271(1)(c) of the Act. The issue involved in the present appeal, i.e., sustainability of the penalty imposed u/s. 271D of the Act in absence of any satisfaction fo....
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....ent order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied." We find that the aforesaid view taken by the Hon'ble Supreme Court, had, thereafter, been followed by the Hon'ble High Court of Telangana in the case of Shrinivasa Reddy Reddeppagari Vs. JCIT, WP No.44285 of 2022 dated 26.12.2022 wherein the question, for which, indulgence of the Hon'ble High Court was sought, read as under: "14. Issue raised in the writ petition is whether without satisfaction being recorded in the assessment order, penalty can be levied by the Jt. CIT under S. 271D of the Act?" Answering the aforesaid question, the Hon'ble High Court after drawing support from the judgment of the Hon'ble Apex Court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City (supra), had held as under: "15. Insofar the present case is concerned, we find that in the assessment order dated 24.03.2022 p....
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.... amount of the loan or deposit or specified sum so taken or accepted. Sub-section (2) clarifies that any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. 20. It would be useful to refer to Section 271E of the Act also at this stage which deals with penalty for failure to comply with the provisions of Section 269T of the Act. Be it stated that Section 269T of the Act provides that no branch of a banking company or a cooperative bank and no other company or cooperative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the loan or deposit or who had paid the specified advance or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if such an amount is twenty thousand rupees or more. As in the case of Section 269SS, Section 269T of the Act also does not apply to the Government, banking company, post office savings bank etc. Section 271E of the Act reads as under: Penalty for failure to comply with....
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.... original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceeding under Section 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed. 24. Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on 02.06.2022. In his reply, petitioner mentioned that no satisfaction was recorded by the assessing officer in the assessment order as to infraction of Section 269SS of the Act. Therefore, no penalty could be levied under Section 271D of the Act without recorded satisfaction. In this connection, reference was made to t....
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....lly unnecessary. 28. Consequently, we set aside the impugned order dated 29.11.2022 and remand the matter back to the file of respondent No.1 to pass a fresh order in accordance with law after giving a reasonable opportunity of hearing to the petitioner. 29. Writ Petition is accordingly allowed. No costs." 14. Also, a similar view had been taken by the Hon'ble High Court of Gujarat in the case of Pr. CIT Vs. Parivar Television, Tax Appeal No.674/2023 dated 09.10.2023, wherein the Hon'ble High Court had approved the view taken by the Tribunal and observed that as no satisfaction regarding initiation of penalty proceedings u/s. 271E of the Act was recorded in the assessment order, therefore, no penalty under the said statutory provision could be levied. Apart from that, we find that similar view had been taken by the ITAT, Hyderabad in the case of ACIT Vs. Bapu Reddy Jala Nizamabad, ITA No.606/Hyd/2022 dated 15.06.2023 and Raja Reddy Nalla Vs. Addl. CIT, ITA No.520/Hyd/2022 dated 31.05.2023 and also by the ITAT, Surat in the case of Parivar Television P. Ltd. Vs. DCIT, ITA No.1738/Ahd/2016 dated 03.01.2023 and by the ITAT, Amritsar in the case of Ram Lubhaya Jassal Vs. Addl.....