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Facts
The assessee, Reliance Ritu Kumar Pvt. Ltd., was subjected to a penalty under Section 271DA for alleged violations of Section 269ST by receiving cash payments of Rs. 2 lakhs or more through splitting invoices during AY 2018-19 and 2019-20, discovered during a search operation. The quantum assessment orders for these years, however, did not contain any explicit recording of satisfaction by the Assessing Officer regarding the initiation of penalty proceedings under Section 271DA.
Held
The Tribunal, drawing an analogy from a Supreme Court judgment concerning Section 271E, held that the absence of recorded satisfaction by the Assessing Officer in the quantum assessment order is a fatal flaw for the levy of penalty under Section 271DA. It concluded that despite the Revenue's arguments for an automatic penalty, such satisfaction is a prerequisite for penalty initiation.
Key Issues
Whether the non-recording of satisfaction by the Assessing Officer in the quantum assessment order regarding the violation of Section 269ST is fatal to the levy of penalty under Section 271DA of the Income-tax Act.
Sections Cited
271DA, 269ST, 132, 153A, 143(3), 273B, 271(1)(c), 271E, 269T
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2018-19, arises out of the ld. Commissioner of Income Tax (Appeals)-23, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. CIT(A),Delhi-23/10309-2017-18 dated 29.11.2023 against the order of assessment passed u/s 271DA of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.03.2022 by the Assessing Officer, Addl. CIT, Central Range-1, Delhi (hereinafter referred to as ‘ld. AO’). Identical issue is involved in both these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
& 294/Del/2024 Reliance Ritu Kumar Pvt. Ltd
The only identical issue involved in both these appeals is as to whether the learned CITA was justified in confirming the levy of penalty under section 271 DA of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The assessee company is a top brand fashion designer of national and international repute. A search and seizure operation was conducted under section 132 of the Act on 29-05-2018 at the premises of M/s Ritika Private Limited (presently known as Reliance Ritu Kumar Private Limited). During the course of search and seizure operations, it was found from the seized documents that assessee company had grossly violated the provisions of section 269 ST of the Act by way of cash receipts of Rs 2 lakhs or more from a single person by splitting the invoices against sale of goods at its stores. The assessment order for the assessment year 2018-19 was passed on 8-4-2021 and for assessment year 2019-20 on 11-4-2021. In the said assessment order, there was no mention regarding initiation of penalty proceedings under section 271 DA of the Act. A reference for initiating penalty proceedings under section 271 DA of the Act was received from the assessing officer by the Learned Additional Commissioner of Income Tax, Central Range 1, New Delhi vide letter dated 30-9-2019 for violation of provisions of section 269 ST of the Act, thereby warranting levy of penalty under section 271 DA of the Act. It is not in dispute that the assessee had made certain cash sales more than 2 lakhs by splitting the bills during the years under consideration and had violated the provisions of section 269 ST of the Act. However, on perusal of the quantum assessment order framed under section 153A read with section 143(3) of the Act on 8-4-2021 for assessment year 2018-19 and that framed for the assessment year 2019-20 on 11-4-2021, we find that there is absolutely no mention of recording satisfaction by the assessing officer that assessee had violated the provisions of section 269 ST of the Act. Now, the short question that arises for our consideration is as to whether such non-recording of satisfaction in the quantum assessment order would be fatal to the levy of penalty under section 271 DA of the Act.
& 294/Del/2024 Reliance Ritu Kumar Pvt. Ltd
In this regard, the learned DR vehemently submitted that there is no requirement of recording the satisfaction in the quantum assessment order as the section does not prescribe requirement of recording such satisfaction. The learned DR submitted that in the event of no additions made by the assessing officer in the quantum assessment proceedings, there would be no need to record any satisfaction by the assessing officer regarding initiation of penalty under section 271 DA of the Act and more so, this levy of penalty is in violation of provisions of 269ST of the Act, which has got absolutely no relevance to the determination of total income of the assessee. In other words, irrespective of the fact as to whether any addition has been made in the quantum assessment order or not, if there is any violation found in the provisions of section 269 ST of the Act, the levy of penalty under section 271 DA of the Act would be automatic subject to subject to assessee furnishing of reasonable cause in terms of section 273 B of the Act. In fact, the learned DR also submitted that there need not be any assessment proceedings at all for the purpose of levy of penalty under section 271 DA of the Act as the said information could emanate even from the external parties like sub registrar office and that the assessee could have duly disclosed the said transaction in his returns. In that scenario, eventhough there is no need to even take up the return for scrutiny and frame assessment. But if there is some violation of provisions of section 269ST of the Act committed by the assessee, the revenue would be forced to levy penalty under section 271DA of the Act irrespective of the fact whether any assessment is framed or not. The learned DR submitted that unlike penalty provisions under section 271(1)(c ) of the Act, where the statute expressly requires the assessing officer to record satisfaction regarding concealment of income or furnishing of inaccurate particulars of income, section 271DA of the Act does not mandate any such satisfaction being recorded as a condition precedent to the levy of penalty. Further, the learned DR argued that it is the joint commissioner who is levying the penalty who has to be satisfied that no good and sufficient reason has been provided by the assessee for non-levy of penalty under section 271DA of the Act and hence obviously, the assessing officer could not record any such satisfaction in the & 294/Del/2024 Reliance Ritu Kumar Pvt. Ltd quantum assessment proceedings who is subordinate to the joint commissioner. The learned DR submitted that on plain reading of the provisions of section 271DA of the Act, the levy of such penalty is objective, automatic and mechanical in nature unless the person proves that there were good and sufficient reasons for such receipt in cash exceeding Rs 2 lakhs. The learned CIT DR submitted that the object and purpose of section 269ST and 271DA are to discourage large cash transactions and promote a transparent economy through digital payments and are enacted as part of a broader initiative to combat black money and unaccounted transactions. The learned CIT DR also submitted that in the instant case, the assessee has failed to discharge the burden of proving the good and sufficient cost as required by the proviso to section 271DA of the Act and hence the levy of penalty under section 271DA of the Act by the learned Additional Commissioner of Income Tax which stood confirmed by the learned CITA needs to be upheld.
The aforesaid arguments of the learned CIT DR though appears prima facie satisfactory and convincing, but need to be rejected, in view of the decision of the Hon’ble Supreme Court in the case of CIT vs Jai Laxmi Rice Mills reported in 379 ITR 521 (SC) wherein it was held as under:-
“5. 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.”
Though the aforesaid decision was rendered in the context of penalty provisions under section 271E of the Act which is leviable for violation of provisions of section 269T of the Act, the same analogy could be drawn to the facts of the present case levying penalty under section 271DA of the Act.
& 294/Del/2024 Reliance Ritu Kumar Pvt. Ltd
Respectfully following the aforesaid decision, we direct the learned Additional Commissioner of Income Tax, Central Range 1, New Delhi to cancel the levy of penalty under section 271DA of the Act for the Assessment Years 2018-19 and 2019-20. Accordingly, the grounds raised by the assessee for both the years are allowed.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 23/07/2025.