TaxTMI 
TaxTMI 
2026 (5) TMI 179
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....visaged in the case of Srinivas Reddy Reddeppagari Vs JCIT WP No.44285/2022, dt: 26.12.2022, by the Jurisdictional High Court of Telangana, therefore, erred in confirming the order of the JCIT levying penalty of Rs. 36,00,000/- u/s. 271D of the IT Act. 3. The learned Commissioner ought to have appreciated that it is a pre-requisite condition to levy penalty u/s. 271D that there must be assessment proceedings in which the violation of 269SS is noticed, in the absence of any assessment proceedings for the assessment year 2017-18, the levy of penalty u/s. 271D is bad in law, therefore, the learned CIT erred in confirming the order of the JCIT levying penalty of Rs. 36,00,000/- u/s. 271D of the IT Act. 4. The learned Commissioner ought to have appreciated that the time limits for levy of penalty starts from the date on which the AO referred the matter to the JCIT, for initiating penalty proceedings u/s. 274 r.w.s 271D for levy of penalty, in the absence of such a reference no time limits can be determined, therefore, the levy of penalty u/s. 271D is bad in law and therefore, the learned Commissioner erred in confirming the order of the JCIT, levying penalty of Rs. 36,....
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.... 3.1. The learned Authorised Representative of the Assessee has further contended that there is no assessment in the case of the assessee and therefore, the initiation of penalty in the absence of any satisfaction recorded by the Assessing Officer in the assessment or other proceedings is also invalid and consequently, the Order passed u/sec. 271D of the Act is not sustainable in law and liable to be deleted. In support of his contention, he has relied upon the Judgments of Hon'ble Jurisdictional High Court dated 26.12.2022 in WP.No.44285 of 2022 in the case of Srinivasa Reddy Reddeppagari, Kadapa, Andhra Pradesh vs. JCIT, Central Circle, Central Range-2, Hyderabad & Anr. as well as Judgment dated 05.03.2026 in WP.No.24403/2025 in the case of M/s. Meghana Avenues Private Limited vs. CIT & Others. Therefore, the penalty levied u/sec. 271D of the Act in the absence of satisfaction recorded by the Assessing Officer in the assessment order is not sustainable and liable to be deleted. 4. On the other hand, the learned DR has submitted that the information was received by the JCIT from the Investigation Wing in the case of the buyers and therefore, the jurisdiction to levy of the p....
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....eipt of the cash before the Sub- Registrar does not fall in the ambit of sec.269SS of the Act. The learned Authorised Representative of the Assessee has relied upon the decision of Chennai Benches of the Tribunal in the case of ITO, Ward-2, Kanchipuram vs. Shri R. Dhinagharan (HUF), Kanchipuram (supra), wherein the Tribunal has held in Para-12 as under: "12. We have heard the rival contentions, and gone through the facts and circumstances of the case. We find that the Revenue has challenged the correctness of the decision rendered by the CIT(A) vide order dated 30.09.2019 in deleting the penalty levied u/s. 271D of the Act vide penalty order dated 12.06.2019. The CIT(A) had deleted the penalty on two counts namely on the non-applicability of the provisions of Section 269SS of the Act to the facts of the present case and on the ground of reasonable cause within the scope of Section 273B of the Act. We noted that the provisions of 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 s....
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....it or such specified sum is twenty thousand rupees or more. It is also proposed to amend section 269T of the Income-tax Act so as 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 transfer takes place. It is further proposed to make consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively. These amendments will take effect from 1st day of June, 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 a....
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.... 54. Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances. 54.1. Provisions contained in section 269SS of the Income-tax Act, before amendment by the Act, provided 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. However, certain exceptions were provided in the section. 54.2. Similarly, the provisions contained in section 269T of the Income-tax Act, before amendment by the Act, provided that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees 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 ....
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.... before the sub-registrar at the time of registration of sale deeds of plots. Hence, in our view, there is no violation of provisions of section 269SS of the Act in the present case in the given facts and circumstances of the case and hence, penalty is not exigible in this case. Hence, we confirm the order of CIT(A) deleting the penalty but on entirely different ground i.e.. on jurisdictional issue only. Accordingly, the appeal of the Revenue is dismissed." 7. Thus, the Tribunal has taken a view that the cash received as part of the sale consideration of immovable property duly mentioned in the registered sale deed is a transaction undertaken before the Sub-Registrar is not in violation of the provisions of sec.269SS of the Act." 5.1. Accordingly, following the earlier decision of this Tribunal (supra), we hold that the transaction of cash received against the transfer of the immovable properties duly mentioned in the registered sale deeds will not fall in the mischief of sec.269SS of the Act and consequently, will not attract the penalty u/sec. 271D of the Act. 6. As regards the initiation of the penalty proceedings without recording of the satisfaction by the Asses....
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....rwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. In the above section, the words "Specified sum" was introduced w.e.f., 1-6- 2015 by the Finance Act of 2015. "Specified sum" has been defined in explanation (iv) under section 26955 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. Section 271D prescribes penalty for taking or accepting any loan or deposit or specified sum. The penalty shall be equal to the amount so taken. In this matter, as acceptance of cash during the above transaction fits into the definition of "Specified sum", a show cause letter was issued to the assessee vide letter in F. No. Addl. CIT/R-9/Penalty/89/2018-19 dated 13-06- 2019. As there was no response, another notice was issued to the assessee vide notice dated 09-11-2019 granting time till 26-11-2019. There has been no compliance for the said notices till date. In this case, the assessee sold the immovable property for a total consideration of Rs 43,50,00....
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....leted, or six months from the end of the month in which the order of 4 the Deputy Commissioner (Appeals) or] the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later; [Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the "[Principal Chief Commissioner or] Chief Commissioner or "[Principal Commissioner or] Commissioner, whichever is later. (b) In a case where the relevant assessment or other order is the subject- matter of revision under section 263, after the expiry of six months from the end of the month in which such order....
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....ore their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March,1989.] Explanation. - In computing the period of limitation for the purposes of this section, - (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129. (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded. 9. The limitation for passing the order imposing penalty under chapter-XXI has been provided by considering all possible situation where the assessment order or other order is subject matter of appeal of the order is revised under section 263 or assessment order or other orders are subject matter of appeal before the Hon'ble High Court or Hon'ble Supreme Court. Thus, it is clear that section 275, presupposes the existence of assessment proceedings/revision proceedings or appeal proceedings arising from the ass....
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....vied the penalty amounting to Rs. 11,02,6107- which has been deleted by the Tribunal. The Tribunal while deleting the penalty recorded that the return of the assessee was processed as on 31.12.2003 and the notice u/s. 274 read with section 271E of the Act was issued on 12.06.2007. Such notice was issued when there was no proceedings pending before the Assessing Officer. Relying upon Delhi High Court judgment in CIT v. Standard Brands Ltd. [20061 285 ITR 295/155 Taxman 383, the Tribunal further observed that action for penalty may be permissible only after regular assessment has been framed and since no regular assessment order had been passed in this case, the recourse to penalty proceedings under Section 27IE were not justified. The findings recorded by the Tribunal read thus:- "Having heard the parties and having perused the material on record, we find the grievance of the assessee to be correct. In this case, the return of the assessee was processed u/s. 143(l)(a) of the Income- tax Act, on 31.12.2003. Notice u/s. 274 read with 271E of the Act was issued to the assessee on 12.06,2007. It being a case of processing the return of income, there is no finding in the AO'....
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....umstances of the case and following the judgment of Hon'ble Supreme Court as well as Coordinate Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra), we hold that the penalty levied u/s. 271D of the Act without any assessment proceedings in the case of the assessee is not valid and liable to be quashed. We order accordingly." 7. Thus, it is a pre-requisite condition for initiation of the penalty u/sec. 271D/271E of the Act that there must be an assessment proceeding or proceedings arising from assessment order or any other proceedings under the Act. This aspect is also clarified by the CBDT vide Circular No.9/2016 dated 26.04.2016. We further note that recording of satisfaction by the Assessing Officer in the original assessment order for the purpose of initiation of proceedings u/sec. 271D/271E is a mandatory condition as held by the Hon'ble Jurisdictional High Court in the case of Srinivas Reddy Reddappagari vs. JCIT (supra) in Para Nos.21 to 28 as under: "21. Thus, sub-section (1) of Section 271E of the Act provides that if a person repays any loan or deposit or specified advance referred to in Section 269T of the Act otherwise than in accor....
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.... 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 the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act. However, this aspect of the matter was not considered by respondent No.1 while passing the impugned order. Respondent No.1 relying upon the Kerala High Court decision in Grihalaxmi Vision (2 supra) noted that competent authority to levy penalty is the Joint Commissioner. He has also referred to an earlier decision of the Supreme Court in CIT V. Mac Data Ltd. wherein it was observed that assessing officer has to satisfy himself as to w....
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.... of Hon'ble Jurisdictional High Court as well as the decisions of various Coordinate Benches of the Tribunal including the decision of ITAT, Indore Bench in the case of Shri Umakant Sharma vs., JCIT, Ratlam (supra), we hold that the penalty levied by JCIT u/sec. 271D without recording the satisfaction in assessment proceedings or any other proceedings under the Act, is not valid and liable to be quashed. We Order accordingly." 9. Thus, the Tribunal by following the Judgment of Hon'ble Jurisdictional High Court in the case of Srinivas Reddy Reddappagari vs. JCIT (supra) has deleted the penalty levied u/sec. 271D of the Act for want of satisfaction in the assessment proceedings by the Assessing Officer whereas the learned DR has relied upon the Judgment of Hon'ble Kerala High Court in the case of M/s. Vee Ess Hardwares, Ambalapuzha vs. ACIT, Alappuzha (supra), wherein the Hon'ble High Court has observed in Paras-13 to 18 as under: "13. However, it is significant to note that even within the two timelines given, the proceeding for imposition of penalty ought to be completed within a reasonable time. The latter part of section 275(1)(c) of the Act, providing for a per....
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....ssessment order in the instant case does not refer to any proceeding for imposition of penalty under section 271B, the time limit cannot be said to have emanated from the assessment order. However, as the assessment proceedings itself would have revealed the absence of an audit report, as contemplated under sections 44A and 44B, the show cause notice should have been issued within a reasonable time of the assessment order. By applying the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the end date for passing orders was extended till 31.03.2022, and the respondents were entitled to issue a notice within a reasonable time of the expiry of the said period. Taking into reckoning the aforesaid statute, the respondents ought to have issued a show cause notice at least in the year 2022. Instead of initiating any proceedings either in 2022 or 2023, they have proceeded to issue the show cause notice only on 21.03.2024. Such a period is beyond the statutory contemplation. The show cause notice in the instant case is hence time-barred under section 275(1)(c) of the Act. 18. Accordingly, I find that the impugned order imposing pe....
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....d that during the assessment year, the assessee had accepted an amount of Rs. 40,00,000/- in cash from its customers on sale of plots/residential house as advance/initial payment. The details of cash received were enumerated in the form of a chart, which showed that such amounts were received from various persons exceeding Rs. 20,000/- during the assessment year in violation of Section 269SS of the Act. The assessee took the plea that the assessee had sold its land to various persons who are farmers. They were unable to make the payment in cheque and gave the money in cash. The accountant unknowingly collected cash and deposited in the bank. The amount collected from its customers was below Rs. 2 lakhs from every individual. The deposited amount is in the form of cash receipt for sale of individual plots. According to the assessee, under Section 269ST of the Act, a person should not receive an amount of Rs. 2 lakhs or more except by way of an account payee cheque, bank draft or electronic clearing system through a bank account or any other electronic mode in respect of a single transaction. Therefore, the question of applying Section 269SS and levying the penalty under Section 271D....
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.... proceedings (or any other proceedings under the Act). The Assessing Officer, (below the rank of Joint Commissioner of Income Tax) shall not issue the notice in this regard. The Range Head will issue the penalty notice and shall dispose/complete the proceedings within the limitation prescribed u/s. 275(1)(c) of the Act." 14. A perusal thereof would show that the Joint Commissioner can initiate proceedings for levy of penalty. Such initiation of proceedings should not be done by the assessing officer. The statement in the assessment order that the proceedings under Sections 271D and 271E of the Act initiated are inconsequential. On the other hand, if the assessment order is taken as the initiation of penalty proceedings, such initiation is by an authority who is incompetent and the proceedings thereafter would be the proceedings without jurisdiction. If that be so, the initiation of the penalty proceedings is only with the issuance of the notice by the Joint Commissioner to the assessee to which he has filed his reply. This observation of the Kerala High Court in the case of Grihalakshmi Vision (supra), has been adopted as 'the departmental view. 15. From the d....