DCIT, CENTRAL CIRCLE 3, NEW DELHI, NEW DELHI vs. HARISH KUMAR AGRAWAL, UTTAR PRADESH

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.8900/DEL/2025 Assessment Year: 2020-21 DCIT, Vs. HARISH KUMAR AGRAWAL, Central Circle-3, Room No.333, House No.HKA-1, Gali No.3, Arya E-2, ARA Centre, Nagar, Mathura Road, Kosi Kalan, Jhandewalan Extension, Mathura, Uttar Pradesh 281403. New Delhi, Delhi 110055. PAN No. AAWPA1906F Appellant Respondent Assessee by Shri M.M. Agarwal, CA Revenue by Shri Jitender Singh, CIT DR Date of hearing: 14.07.2026 Pronouncement on 05.08.2026 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. This appeal arises from order of Ld.CIT(A), Delhi-23, u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), order dated 28.10.2025.

1.1 In this case, the facts in brief are that owning to a search conducted on 17.08.2020 in the case of Pranjil Batra Group, the Ld. AO made an addition of Rs.86.50 lakhs towards undisclosed consideration with respect to property on the basis of certain papers found during the course of the said search. It was held that the assessee had received the amount of Rs.86.50 lakhs in cash and thereby it was held that this was violative of the provision of Section 269SS of the Act. Thereafter, the Ld. AO imposed a penalty u/s 271D of the Act on the like amount. 1

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL 1.2 The aggrieved assessee approached the Ld.CIT(A) where he could succeed on the basis of the finding that in the quantum matter the ITAT in the assessee’s own case [ITA 5652/Del/2024, order dated 03.06.2025], had observed as under: -

“5. We adopt the above extracted detailed discussion mutatis mutandis to conclude that the Ld. Assessing Officer’s identical section 153C satisfaction herein is non-est in the eyes of law, which shifts his assessment as well. Quashed accordingly.” Thereafter, the Ld. CIT(A) had relied on the case of Jai Laxmi Rice Mills Ambala City reported in 64 taxmann.com 75 (SC) [2015], to hold that once the quantum matter had been set aside then there was no resultant satisfaction surviving for any levy of penalty u/s 271D of the Act.

1.3 The Revenue is aggrieved with this action and has approached the ITAT with several grounds of appeal which challenge the action of Ld. CIT(A) and raise the issue that penalty u/s 271D of the Act is independent of the quantum addition and therefore should be decided on merits. There is a second challenge to the finding of Ld. CIT(A) to the extent that not only did the Ld. CIT(A) decide the issue in favour of the assessee on the ground that the quantum addition had been deleted, but also on the ground that there was a limitation issue whereby the Department had calculated the limitation from the date on which the Addl./JCIT had initiated the said penalty proceedings and not from the date on which the Ld. AO had recorded his satisfaction.

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL 2. Before us the Ld. DR took us through the Ld. AO’s order to point out that the transaction in cash was still an open issue since the quantum matter had been decided in favour of the assessee on account of a jurisdictional issue, without any decision on merits. The Ld. DR also stated that the limitation for levying the impugned penalty deserved to be calculated form the date on which the Addl./JCIT had initiated the said proceedings. The Ld. DR drew our attention to CBDT Circular No.10/2016 dated 26.04.2016 and another Circular No.9/DV/2016 dated 26.04.2016 to canvass the point that the violation u/s 269SS of the Act was independent of the quantum matter. The Ld. DR also argued and pointed out that Section 275 would indicate that the penalty would be barred by limitation only from the date on which the Addl./JCIT had initiated the same.

2.1 Per contra, the Ld. AR relied on the findings given in the impugned order, from which, for the sake of convenience, the relevant portions deserve to be extracted as under: -

“6.4 Thus, consequent to the order dated 03.06.2025 passed by Appellate Tribunal, the very basis of assessment order dated 01.03.2023 has eroded. Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills (supra) held that:- "3. After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996 Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself it is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original 3

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL assessment order and when that assessment order had been set aside, could still survive. 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 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. 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." 6.5 Reading of the order passed by Hon'ble Supreme Court makes it clear that the recording of satisfaction of the AO regarding violation of statutory provision and consequent warrant of imposition of penalty is sine qua non for the validity of penalty order. In the present case, since the assessment order dated 01.03.2023 itself has been quashed, the satisfaction of the AO recorded therein got obliterated with its quashing order passed by Appellate Tribunal and accordingly, the impugned penalty order becomes unsustainable.” --------- --------

“7. I find that penalty order is liable to be set aside for further reason that it is barred by Imitation, the assessment order contrary to the orders passed by jurisdictional High Court. To recapitulate the order, reference to the Addl. CIT was made by letter dated 26.05 2023. The show cause der was passed on 01.03.2023, according to impugned penalty notice for penalty was issued by the Addl. CIT on 10.01.2024 and impugned order was passed on 29.07.2024. 7.1 several orders passed by jurisdictional High Court, but while passing the impugned penalty The assessee raised the limitation issue during penalty proceedings and relied upon order, the Addl. CIT without dealing with proposition of law laid by jurisdictional High Court, has referred to section 275(1)(c) and stated that it is settled issue that period of limitation for the purpose of section 275 in connection with imposition of penalty u/s 271D and 271E is to be reckoned from the date when penalty proceedings are initiated by the JCIT and not from the when assessment proceedings are completed. 7.2 The view adopted by the Addl. CIT is clearly erroneous and contrary to the law propounded by jurisdictional High Court in series of orders passed which were duly referred before him. In the case of Pr. CIT vs. Rishikesh Buildcon (P) Ltd. reported as (2023) 451 ITR 108 (Delhi), it has been held by jurisdictional High Court that:

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL “7. The relevant admitted facts for determining the controversy in the present appeals are: a. The quantum proceedings with respect to the three Assessee(s) were completed in December, 2008 and the penalty proceedings against the Assessee(s), inter alia under section 271D of the Act for violating the provision of Section 269SS of the Act, had been initiated by the AO at the time of the completion of the said assessment. b. The SCNs under section 271D of the Act were issued by prescribed authority on 24th March, 2009. c. The penalty order(s) were passed on 29th September, 2009 xxx 12. The predecessor bench of this Court in the aforesaid judgments has held that where the AO has initiated the penalty proceedings in his/her assessment order, the said date is to be taken as the relevant date as far as the section 275(1)(c) of the Act is concerned. In these cases, the quantum proceedings were completed by the AO on 17th/18th December, 2008, and the AO initiated the penalty proceedings in December, 2008, thus, the last date by which the penalty order could have been passed is 30th June, 2009. The six months from the end of the month from which action of imposition of penalty was initiated would expire on 30th June, 2009. However, in this case, admittedly, the penalty order(s) were passed on 29th September, 2009, and therefore, the ITAT rightly concluded that the order(s) were barred by limitation. 13. Consequently, we answer the question of law against the Revenue and in favour of the Assessee by holding that, in the facts and circumstances of the present appeals, the ITAT was correct in law in deleting the penalty imposed by the Additional Commissioner of Income Tax, under section 271D of the Act, on the ground that the penalty order(s) dated 29th September, 2009, was passed beyond the time period prescribed by Section 275(1)(c) of the Act, the some having been passed after the lapse of six months from the end of the month in which the penalty proceedings were initiated by the AO." Same principle was adopted by Hon'ble Delhi High Court in the case of Pr. CIT vs. Thapar Homes Ltd. reported as (2024) 159 taxmann.com 450 (Delhi). It is therefore, held that limitation for imposition of penalty cannot be reckoned from the date of issuance of penalty notice issued by the JCIT or Addl., CIT, as the case may be, but from the date of completion of assessment order where satisfaction for initiation of penalty is recorded by the AO. The Impugned order is thus held to be barred by limitation.” 3. We have carefully considered the rival submissions and have gone through the records before us. It is now a settled position after the case of Jai Laxmi Rice Mills (supra) that a penalty u/s 271D of the Act cannot survive in case the quantum addition has been deleted. We are aware

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL that this case law pertains to a penalty u/s 271E of the Act but since the penalties u/s 271D & E are para materia with each other hence the decision for 271E of the Act shall apply for any penalty u/s 271D also. Accordingly, the penalty levied is untenable on this ground alone that the quantum has been deleted. However, we also agree with the Ld. CIT(A)’s finding that the limitation for levy of penalty needs to be calculated from the date on which the Ld. AO records his satisfaction in the assessment order. For this purpose, we support and agree with the reliance placed by Ld. CIT(A) on the case of Rishikesh Buildcon (P) Ltd. reported in 451 ITR 108 (Del.). In result, we do not find any reason to differ with the order of Ld. CIT(A) and there is no hesitation in dismissing the appeal of the Revenue.

Order pronounced in the open court on 05.08.2026

Sd/- Sd/- (ANUBHAV SHARMA) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 05.08.2026 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals)

ITA No.8900/DEL/2025 HARISH KUMAR AGRAWAL 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI