TaxTMI 
TaxTMI 
2026 (2) TMI 1232
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.... of the IT Act, wherein, an amount of Rs. 7,82,500/- is levied as penalty for violation of provision of section 269SS of the IT Act. 3. The learned Commissioner erred in confirming the order u/s 271D of the IT Act which does not mention the PAN number of the assessee which is a mandatory requirement. 4. The learned Joint Commissioner levied penalty u/s 271D of the IT Act at Rs. 7,82,500/- in which there is no satisfaction recorded by the AO stating that there is a violation of section 269SS, which caused escapement of income OR concealment of income. in the absence of such a satisfaction by the Assessing Officer in the case of assessee, the learned Commissioner erred in confirming the order u/s 271D of the IT Act. 5. The learned Commissioner ought to have appreciated that the penalty u/s 271D of the IT Act at Rs. 7,82,500/- is levied, wherein, the JCIT/ AO has not initiated penalty proceedings u/s 274 r.w.s 271D and also the CIT has not issued a show cause notice, according an opportunity to the assessee, therefore, there is a violation of principles of natural justice, therefore, the learned CIT erred in confirming penalty order u/s 271D of the IT A....
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....r submitted that when there is no proceedings of assessment or otherwise pending in the case of the assessee then, there cannot be any satisfaction as well as initiation of proceedings u/sec. 271D of the Act. In support of his contention, he has relied upon the decision of ITAT, Hyderabad Tribunal dated 24.12.2025 in the case of Somireddy Sudhakar Reddy, Ibrahimpatnam, RR District vs. ITO, Ward-9(1), Hyderabad in ITA. No. 1505 /Hyd./2025 and submitted that in absence of the satisfaction recorded by the Assessing Officer, the penalty levied u/sec.271D is not sustainable in law. The learned Authorised Representative of the Assessee has also relied upon the Order of ITAT, Indore Bench of the Tribunal dated 19.07.2023 in the case of Shri Umakant Sharma, Jhabua vs. JCIT, Ratlam in ITA. Nos. 364 to 366/Ind/2022 and submitted that the Tribunal has held that initiation of penalty u/sec. 271D of the Act without any assessment proceedings or proceedings arising from assessment order is not valid. Thus, the learned Authorised Representative of the Assessee has submitted that the penalty levied by the JCIT and confirmed by the learned CIT(A) is unjustified and unsustainable in law and liable t....
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....f Section 269SS of the Act was amended w.e.f. 01.06.2015 to include the 'specified sum' within its ambit and the said term was defined in Explanation to the said Section which is reproduced as under: ● "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. The Budget Speech of the Hon'ble Finance Minister while placing the Finance Bill, 2015 highlighting the intention of the amendment relevant for decision making in the present appeal is captured below: 3. A. Measures to curb black money. 3.1. With a view to curbing the generation of black money in real estate, it is proposed to amend the provisions of section 269SS and 269T of the Income-tax Act so as to prohibit acceptance or re-payment of advance in cash of Rs. 20,000 or more for any transaction in immovable property. It is also proposed to provide a penalty of an equal amount in case of contravention of such provisions. The Memorandum forming part of Finance Bill, 201.5 highlighting the intention of the amendment is captured below: B. MEAS....
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....2015. The Notes on Clauses forming part of Finance Bill, 2015 highlighting the intention of the amendment is captured below: Clause 66 of the Bill seeks to substitute section 269SS of the Income-tax Act relating to mode of taking or accepting certain loans and deposits. The existing provision contained in section 269SS provides that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account if the amount of such loan or deposit is twenty thousand rupees or more. It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account if the amount of such loan or deposit or specified sum is twenty thousand rupees or more. It is also proposed to define "specified sum" as any sum of money receivable, whether as advance or otherwise in relation to transfer of an immovable property whether or not the transfer materialises. These amendments will take effe....
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....pees or more. 54.3. In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269SS of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property(specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more. 54.4. Section 269T of the Income-tax Act has also been amended to provide that no 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 or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the tr....
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....dings arising from the assessment order wherein such satisfaction could have been recorded. The learned Authorised Representative of the Assessee has also challenged the order on the ground of limitation. In support of his contention, he has relied upon the Order of this Tribunal in the case of Somireddy Sudhakar Reddy, Ibrahimpatnam, RR Dist. Vs. ITO, Ward- 9(1), Hyderabad (supra), wherein the Tribunal has held in Paras-5 to 8 as under: "5. We have considered the rival submissions as well as relevant material on record. The JCIT, Range Head-9, Hyderabad has levied the penalty u/sec.271D vide order dated 10.12.2019 as under: "GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX RANGE-9, HYDERABAD To Shri SAMREDDY SUDHAKAR REDDY, 4-34, Karnamguda, IBRAHIMPATNAM, Hyderabad. Telangana. India. Dated 10/12/2019 Letter No. ITBA/COM/F/17/2019-20/1022037588(1) Sir/ Madam/M/ satisfaction Subject : Penalty Order u/satisfaction271D of the Income Tax Act, 1961- in the case of Shri SAMREDDY SUDHAKAR REDDY, 4-34, Karnamguda, IBRAHIMPATNAM, HYDERABAD ....
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....I.T. Act for the A. Yr. 2017-18 for violating the provisions of section 269SS of the I.T. Act i.e., accepting cash of Rs. 43,50,000/- for sale of immovable property. This should be paid as per demand notice u/s. 156 enclosed Sd/- MOHAN KUMAR R RANGE-9, HYDERABAD Addl. Commr. of Income Tax, Range-9, Hyderabad." 6. Thus, it is clear from the impugned order u/sec. 271D that there was no Reference by the Assessing Officer and also there were no assessment proceedings or any other proceedings in the case of the assessee prior to issuing the show cause notice u/sec. 271D r.w.s. 274 of the Act. An identical issue has been considered by the Indore Bench of the Tribunal and one of us is the Judicial Member/Vice President is party to the Order in the case of Shri Umakant Sharma vs. JCIT, Ratlam in ITA. No. 364 to 366/Ind/2022 dated 19.07.2023 wherein the Tribunal has held in Para Nos. 8 to 11 as under: "8. We have considered rival submissions and carefully perused the relevant material on record. There is no dispute that the assessee has not filed any return of income for the assessment year under consideration. The penalty u/s 271D of the Act has been ....
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....eal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the "Principal Chief Commissioner or] Chief Commissioner or the "[Principal Commissioner or] Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of....
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....pra) has held as under: "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 Sec. 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, In so far as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied." 10. Thus, the Hon'ble Supreme Court has affirmed the view of the Hon'ble High Court that in absence of satisfaction recorded regarding the penalty proceedings u/s 271E of the Act the order of levy of penalty is not valid. The Ahmedabad Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra) has considered an iden....
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....s imposed on the basis of the finding in the case of assessee's wife." 6. No error or perversity could be shown in the aforesaid findings recorded by the Tribunal. Moreover, the assessee had taken a plea before the Assessing Officer that there was a reasonable cause for the assessee to have made direct payment of Rs. 14,02,600/- to M/s. Babyloan Builders Private Ltd., Gurgaon. It was pleaded that some of the repayments made by the assessee were intercompany transfer for group housing and purchase of flat and at times payments were made after closure of banking hours. It was further submitted that the payments made were genuine and no tax evasion was involved and the default, if any, was of technical nature. The explanation being plausible one, it cannot be said that there was no reasonable cause within the meaning of Section 273B of the Act. No substantial question of law arises in this appeal. 8. We find substances in the submissions made by the Ld. A.R. particularly after considering the order passed by the Hon'ble Punjab and Haryana High Court as cited hereinabove. In fact, on the identical set of facts the penalty under Section 271E was deleted by the ....
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....eria to each other. While Section 271D of the Act would be attracted on a person accepting loan or deposit or specified sum in contravention of Section 269SS of the Act, penalty under Section 271E of the Act would be imposable on a person who makes or repays the loan or deposit or specified advance in contravention of Section 269T. Therefore, in a way, the two provisions are complimentary to each other. 23. In Jai Laxmi Rice Mills Ambala City (supra), Supreme Court considered the question as to whether penalty proceedings under Section 271D of the Act is independent of the assessment proceeding? In the facts of that case, it was found that the penalty order was issued following the assessment order. However, in appeal, Commissioner of Income Tax (Appeals) had set aside the original assessment order with a direction to frame assessment de novo. In the 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....
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....aid decision as extracted above, Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under Section 271E of the Act. We have already discussed above that provisions of Section 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court. 26. Article 141 of the Constitution of India is clear that law declared by the Supreme Court shall be binding on all courts within the territory of India. This is further clarified 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 ....
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....assessment. Though penalty proceeding under section 271B of the Act is independent of the assessment, as far as the time limit is concerned, it cannot be wholly extricated from the assessment order. Once an assessment is completed, it will act as a leash, compelling the Officers to act within a reasonable time from its completion, for the purpose of imposing a penalty. 14. It needs no elaborate discussion that if no period of time is prescribed by a statute, it must be exercised within a reasonable period which would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. The reasonable period, must, no doubt, be found out from the scheme of the statute and in particular the tenor of the provision under consideration. Reference to the decision in State of Punjab and Others v. Bhatinda District Cooperative Milk Producers Union Ltd [(2007) 11 SCC 363] is relevant in this context. 15. The penalty under section 271B is imposed for failure to attach an audit report. The absence of an audit report along with the return will become evident during the assessment proceedings. Bearing in mind the nature of violation for which pen....