TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 879
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.... income on 15.10.2016 declaring loss of Rs. (-) 66,45,960/-. The case of the assessee was selected for scrutiny and the assessment was completed on 30.12.2017 after making addition towards unexplained interest paid/unexplained cash expenses. Against the same, Ld. AO initiated penalty proceedings u/s 271(1)(c) of the Act. 3. Subsequently, Ld. AO, vide letter dated 15.03.2021, intimated to the appropriate authority that the assessee received a sum of Rs. 17,00,00,000/- as loan on various dates from Shri Anbuchezhiyan. The receipts of loan by way of cash was in violation of section 269SS of the Act which call for penalty as per the provisions of section 271D of the Act. The appropriate authority was to consider initiation of penalty proceedings u/s 271D of the Act. The reference made by Ld. AO was duly considered and accordingly, the assessee was given a show-cause vide letter dated 02.11.2021 and 27.12.2021 to furnish his reply as to why penalty under section 271D of the Act should not be levied for violation of section 269SS of the Act. The assessee assailed the proposed penalty, inter-alia, on the ground that the initiation of penalty was barred by limitation. However, rejecting t....
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....e decision of the Hon'ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills (2015)379 ITR 521 (SC), wherein it was held that no penalty u/s. 271E could be levied in the absence of recording of satisfaction by the AO in the assessment order. The appellant also placed reliance on the decision of the Hon'ble Telangana High Court in WP No.44285 of 2022 in the case of Srinivas a Reddy Reddeppagari Vs JCIT wherein the Hon'ble High Court followed the decision of the Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills (Supra) while disposing off the writ filed against the penalty order passed u/s 271D of the Act. 18. The legal ground raised by the appellant has been carefully examined. On perusal of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills (2015) 379 ITR 521 (SC) relied on by the appellant, it is seen that it was held therein that no penalty u/s 271E could be levied in the absence of recording of satisfaction by the AO in the assessment order. The relevant portion of the decision of the Hon'ble Supreme Court is reproduced as* under: 5. As pointed out above, insofar as, fresh assessment order is concerned....
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....he 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, 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....
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....he facts of the case are distinguishable. However, we find that firstly, the Id. CIT(A) has not distinguished the applicability of the above judgement of the Hon'ble Supreme Court to the present case. Secondly, in that case, even though in the original ex-parte assessment order, the Assessing Officer has recorded satisfaction that the assessee had contravened the provisions of section 269SS of the Act, but, while framing fresh assessment order, the Assessing Officer has not recorded such satisfaction regarding penalty proceedings under section 271D of the Act and thereby, the Hon'ble Supreme Court quashed the levy of penalty. In the present case in hand, the Assessing Officer has not at all recorded his satisfaction that the assessee has contravened the provisions of section 269SS of the Act warranting levy of penalty under section 271D of the Act, whereas, against various additions including disallowance under section 40(a)(ia) of the Act, the Assessing Officer proposed for initiating penalty proceedings under section 271(1)(c)of the Act, which is an identical provisions, where the income escaped assessment or furnishing of inaccurate particulars of income, attracts penalt....
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....there is no need to decide appeal of the assessee on merits. 22. It is seen that Hon'ble ITAT, Kolkata also expressed the same view in the case of Binod Kumar Agarwal Vs. Jt.CIT (ITA No.238/Kl/2013) vide order dated 04.02.2016 that no penalty could be levied u/s 271D/271E where the AO did not record any satisfaction in the assessment order regarding the violation of the provisions of section 269$$/269T. The relevant portion of the decision of the Hon'ble Tribunal is reproduced as under: 5. We also find that the ld.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 ld. JCIT proceeded to initiate penalty proceedings u/s. 27 lD 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 52J(SC)/64 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 so for the simple reason that when the original assessment order itself was set aside, the satisfaction rec....
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.... the Hon'ble Telangana High Court and various Hon'ble Tribunals mentioned above, it is held that recording of satisfaction by the AO in the assessment order regarding the violation of the provisions of section 269SS is a mandatory requirement for valid initiation of penalty proceedings us 271D of the Act and no penalty could be levied if the AO failed to record such satisfaction in the assessment order. In the present case, on perusal of the assessment order u/s 143(3) r.w.s 153A dated 30.12.2017, it is seen that no such satisfaction has been recorded by the AO in the said assessment order. Hence, having regard to the failure of the AO to record his satisfaction in the assessment order with regard to the violation of the provisions of Sec. 269SS, it is held that the penalty proceedings u/s. 271D of the Act have not been validly initiated and consequently, the penalty order passed by the Addl. CIT is bad in Law 25. Another legal ground raised by the appellant by way of Additional Ground No.1 is that the penalty order is barred by limitation of time as the said order has not been passed within 6 months from the end of the month in which the reference was made by the AO to t....
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....enalty order was passed on 30.05.2022. It is therefore evident that the penalty order has not been passed within the statutory time limit which lapsed on 30.09.2021. In view of this reason, it is held that the penalty order is time barred and the same is legally unsustainable. 28. In view of the aforesaid discussion, the penalty of Rs. 17,00,00,000/- levied u/s. 271D of the Act is directed to be deleted. The Additional Grounds of appeal Nos.1 and 2 are accordingly allowed. 7. Aggrieved, the Revenue is in appeal before the Tribunal for the assessment years under consideration. 8. The assessee, in support of the order passed by the ld. CIT(A), has filed Cross Objections for the assessment years under consideration. 9. We have heard both the sides, perused the materials available on record and gone through the orders of the authorities below. In this case, the assessee has raised two important legal grounds before the ld. CIT(A). The first ground raised by the assessee is that the Assessing Officer has not recorded satisfaction before initiating penalty under section 271D of the Act and in support of the same, the assessee relied upon various decisions before the ld. CIT(A). The ....
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.... passed fresh assessment order but in said assessment order, no satisfaction regarding initiation of penalty proceedings under section 271E was recorded - Tribunal as well as High Court held that when original assessment order itself was set aside, satisfaction recorded therein for purpose of initiation of penalty proceeding under section 271E would also not survive - Accordingly, impugned penalty order was set aside - Whether since impugned penalty order was passed under section 271E without recording any satisfaction, same was rightly set aside by authorities below - Held, yes [In favour of assessee] 11.2 This decision has been followed in the case of Srinivasa Reddy Reddeppagari v. JCIT (supra) by the Hon'ble High Court of Telengana has observed and held as under: 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,....
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....on 269SS of the Act. Against the additions/disallowances, it is an admitted fact that the Assessing Officer proposed for initiating penalty proceedings under section 271(1)(c) of the Act. Thus, it is a clear cut case that on perusal of the assessment order, the Assessing Officer has not recorded any satisfaction recorded regarding penalty proceedings under section 271D of the Act. 6. On perusal of the appellate order, we find that by reproducing the headnotes and held-portion, the ld. CIT(A) has held that the decision of the Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills reported in 379 ITR 521 is not applicable since the facts of the case are distinguishable. However, we find that firstly, the Id. CIT(A) has not distinguished the applicability of the above judgement of the Hon'ble Supreme Court to the present case. Secondly, in that case, even though in the original ex-parte assessment order, the Assessing Officer has recorded satisfaction that the assessee had contravened the provisions of section 269SS of the Act, but, while framing fresh assessment order, the Assessing Officer has not recorded such satisfaction regarding penalty proceedings under se....
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...., and because of this the Assessing Officer was satisfied that penalty proceedings under section 271D of the Act were to be initiated. On appeal, the Commissioner (Appeals) by order dated December 5, 1996, set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. Meanwhile penalty under section 271D was levied by order dated September 23, 1996, i.e., before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. After remand, the Assessing Office passed afresh assessment order but in this assessment order, no satisfaction regarding initiation of penalty proceedings under section 271D of the Act was recorded. The Tribunal as well as the High Court held that the penalty order passed on the basis of the original assessment order could not still survive when that assessment order had been set aside because the satisfaction recorded therein for the purpose of initiation of the penalty proceedings would also not survive. On further appeals: Held, dismissing the appeals, that in the fresh assessment order there was no satisfaction ....
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....sing Officer is sine qua non for initiating the penalty u/s 271D of the Act. The Assessing Officer in Para 3 of his order, though had mentioned that the Assessing Officer has proposed the imposition of penalty u/s 271D for violation of the provisions of section 269SS of the Act, however, after looking into the assessment order reproduced herein below, it is abundantly clear that neither such proposal for imposition of penalty u/s 271D was proposed by the Assessing Officer nor any satisfaction for initiation of penalty was recorded in the assessment order vide Para 4.0 & 5 are reproduced herein below: "4.0 In his defense, the AR of the assessee claimed that the sale transaction of the agricultural land was entered after the banking hours. However, as per the assessee, by depositing the cash in the day bank, the purchaser agreed to give DD on the next day. On the same was theft took place from the assessee's house and later, the cash recovered by the police. As per direction of the court, the Police Department handed over the cash to the Income Tax Department. According to the assessee, in these circumstances the said transaction could not be routed through the bank. 5.0 The ....
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....inivasa Reddy Reddeppagari vs. Jt. CIT vide writ petition No.44285 of 2022 dated 26.12.2022. In that case penalty proceedings were initiated by issue of a show-cause notice u/s 274 r.w.s. 271D on the ground that the assessee has violated the provisions of section 269SS of the I.T. Act which attracts levy of penalty u/s 271D of the I.T. Act. Before the Hon'ble High Court, the assessee, through the writ petition challenged the penalty levied u/s 271D on the ground that no satisfaction was recorded by the Assessing Officer in the assessment order as to imposition of penalty. It was argued that non-recording of satisfaction is fatal. The decision of the Hon'ble Supreme Court in the case of CIT vs. Jayalakshmi Rice Mills Ambalacity, reported in (2015) 64 Taxmann.com 75 (S.C), was relied upon. Accordingly, the Hon'ble jurisdictional High Court held that provisions of section 271D and 271E are pari materia to each other and the recording of satisfaction is a must. The relevant observation of the Hon'ble High Court reads as under: "13. We have considered the rival submissions made at the bar. 14. Issue raised in the writ petition is whether without satisfaction being re....
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....ed 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 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....
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....see 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, 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 ....
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....e 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. Since admittedly there is no recording of satisfaction by the Assessing Officer in the body of the assessment order for initiating penalty proceedings u/s 271D of the I.T.Act, therefore, respectfully following the decision of the Hon'ble jurisdictional High Court in the case of Srinivas Reddy Reddeppagari vs. Jt. CIT (Supra) the penalty levied by the Assessing Officer and sustained by the CIT (A) is liable to be quashed. We hold accordingly and direct the Assessing Officer to cancel the penalty levied u/s 271D of the I.T. Act, 1961. Since the assessee succeeds on this legal ground, the grounds challenging the levy of penalty of Rs. 40.00 lakhs u/s 271D on merit become academic in nature and therefore, not....
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....CIT (supra), the ground raised by the Department is liable to be dismissed. 12. In so far as another legal ground raised by the assessee before the ld. CIT(A) with regard to the limitation, by following the judgement of the Hon'ble Delhi High Court in the case of PCIT v. Mahesh Wood Products P Ltd. (2017) 394 ITR 312(Delhi), the ld. CIT(A) has considered this legal ground and passed a detailed order, which is reproduced as under: 25. Another legal ground raised by the appellant by way of Additional Ground No.1 is that the penalty order is barred by limitation of time as the said order has not been passed within 6 months from the end of the month in which the reference was made by the AO to the Addl. CIT for initiation of penalty proceedings u/s 271D. In support of this contention, the appellant placed reliance on the decision of Hon'ble Delhi High Court in the case of Principal CIT Vs Mahesh Wood Products P Ltd (2017) 394 ITR 312 (Delhi). 26. The legal ground raised by the appellant has been carefully examined. In the said decision, the Hon'ble Delhi High Court held that the date on which reference was made by the AO to the Addl. CIT requesting for initiation of penalt....