TaxTMI 
TaxTMI 
2024 (2) TMI 277
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....eas the Hon'ble Kerala High Court in the case of Grihlakshmi 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 ca....
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....d. CIT(A) thereby the appeal of the assessee is partly allowed, but the penalty imposed on assessee u/s 271D & 271E are vacated 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, ....
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....n of penalty proceedings for violation of sec. 269SS and 269T of the IT Act, 1961. In the case of Jai Laxmi Rice Mills decided by the Hon'ble Apex Court 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....
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....d perused the material available on record. Though the assessee has raised several grounds in respect of aforesaid appeals, we find that the central ground revolves only on levy of penalty u/s. 27 ID 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 ....
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....y the coordinate bench of the ITAT, Raipur in the case of Shri Bhowmik Raj Singh in ITA no. 128/RPR/2016 dated 02.01.2024 wherein a penalty u/s 271D imposed on the assessee have been quashed on account of no satisfaction regarding initiation 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....
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....9 (10 of 1949) ; (iii) "loan or deposit" means loan or deposit of money; (iv) "specified sum" means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place." As the failure to comply with the provisions of Section 269SS of the Act 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 a....
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....ded his satisfaction regarding penalty u/s. 271D of the Act, therefore, de-hors recording of requisite satisfaction the penalty imposed u/s. 271D of the Act could not be sustained and was liable to be quashed. For the sake of clarity, the relevant observation of the Hon'ble Apex Court is culled out as under: "6. 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." 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 o....
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....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.] 19. Thus, what sub-section (1) of Section 271D provides for is that if a person takes or accepts any loan or deposit or specified amount 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. 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 deposi....
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.... fresh assessment order, no satisfaction was recorded by the assessing officer regarding initiation of penalty proceedings under Section 271E of the Act. It was noticed that the penalty order was passed before the appeal of the assessee was allowed by the Commissioner of Income Tax (Appeals). It was in that context that Supreme Court held as follows: The Tribunal as well as the High Court has held that it could not be so for the simple reason that when the 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, accordingl....
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.... in Article 144, which says that all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. We are therefore, of the unhesitant view that respondent No.1 overlooked the relevant considerations while passing the impugned order dated.29.11.2022. 27. Further, issue in the present writ petition is not the competence of the Joint Commissioner in issuing the order of penalty. Therefore, reference to Grihalaxmi Vision (2 supra) was wholly 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, t....