SONIA VERMANI,DELHI vs. INCOME TAX OFFICER, WARD 54(1), DELHI, DELHI

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ITA 3764/DEL/2026Status: DisposedITAT Delhi05 August 2026AY 2017-186 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty proceedings under Section 271D cannot be initiated in the absence of any pending assessment proceedings or a regular assessment order being passed. Therefore, the penalty initiated was unjustified.

What were the facts?

The assessee challenged penalty orders passed under Section 271D of the Income Tax Act. The penalty proceedings were initiated by the Additional Commissioner based on information received from the Assessing Officer, without any regular assessment proceedings being completed.

What were the issues?

Whether penalty under Section 271D can be initiated without a regular assessment order or pending assessment proceedings. Whether the Assessing Officer recorded proper satisfaction for initiating penalty proceedings.

Which sections of the Income-tax Act were involved?

Section 271D,Section 143(3),Section 269SS

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI

Before: SHRI VIMAL KUMAR & SHRI MANISH AGARWAL

For Appellant: Shri S.K. Gupta, CA
For Respondent: Ms. Harpreet Kaur Hansra, Sr. DR
Hearing: 23/07/2026Pronounced: 05/08/2026

PER MANISH AGARWAL, AM:

Both the appeals are filed by the assessee against separate orders of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi both dated 08.07.2025 and 03.03.2025 u/s 250 of the Income Tax Act, 1961 (“the Act” in short) for Assessment Year 2017-18 arising out of the penalty orders passed u/s 271D of the Act both dated 19.12.2029 and 13.03.2020.

2.

Heard both the parties and perused the materials available on record. It is observed that the Ld. CIT(A) has dismissed the appeal of the assessee for non- prosecution, however, the assessee has challenged the initiation of proceedings u/s

2 ITA Nos.3763 &3764/Del/2026 Sonia Vermani vs. ITO 271D of the Act, therefore, this being a legal ground is taken up for hearing and decided first.

3.

Before us, Ld.AR for the assessee submits that in the instant case no assessment proceedings u/s 143(3) were ever taken up and no assessment order was passed thus no satisfaction whatsoever was recorded by the AO for the initiation of the present penalty proceedings. The penalty proceedings were actually initiated by the Addl. CIT on the receipt of the proposal from the Assessing Officer who had information in his possession that the assessee has violated the provisions of section 271D of the Act. As per Ld. AR in absence of any satisfaction recorded in the assessment proceedings, no proceedings u/s D could be initiated. For this reliance is placed on the judgement of the Hon’ble Jurisdictional High Court in case CIT vs. Standard Brands Ltd. reported in 285 ITR 295(Del.) wherein it is held that action for the penalty may be permissible only after regular assessment has been framed, and since in the instant case, no regular assessment order has been passed thus the initiation of penalty proceedings u/s 271D cannot be justified. He further placed reliance on the following judgements:  CIT vs. Jai Laxmi Rice Mills 379 ITR 521 (SC);  CIT vs Manohar Lal Thukral, P&H High Court.  CIT Vs. Saini Medical Store, 277 ITR 420 (P&H);  CIT Vs. Sunil Kumar Goes, 315 ITR 163 (P&H);  Mohd. Atiq vs Income-Tax Officer, 46 ITR 452 (All);  Income-Tax Officer vs Bisheshwar Lal 76 ITR 653 (All);  CIT vs. Padampat Singhaning (HUF) 280 ITR 14 (All);  Vijayaben G. Zalavadia vs. JCIT in ITANos. 458 to 463/Ahd/2020;  Rekha vs JCIT ITA No.815/Del/2022;  T. Shiju, Chennai Vs. JCIT ITA. No. 2829/Chny/2018;

3 ITA Nos.3763 &3764/Del/2026 Sonia Vermani vs. ITO 3. On the other hand, Ld. Sr. DR vehemently supported the orders of the lower authorities and submits that that there was information available with the Assessing Officer that the assessee has violated the provisions of section 271D, therefore the AO has moved the proposal to Addl. CIT who had invoked the proceedings u/s 271D of the Act and thereafter passed the order and levied the penalty. It is therefore, submitted by ld. Sr. DR that proceedings have rightly been initiated u/s 271D of the Act and consequent penalty has rightly been imposed by JCIT which orders deserves to be upheld.

4.

Heard both the parties at length and perused the materials available on record. From the perusal of the penalty order passed by the JCIT dated 19.12.2019, it is observed that there was no assessment order u/s 143(3) of the Act was ever passed in the instant case and on the basis of information available with the AO that assessee has received cash in contravention to the provisions of section 269SS of the Act, the JCIT has proceeded to initiate the penalty proceedings and levied the penalty u/s 271D of the Act. Since, no assessment order was passed nor any proceedings were pending before the AO thus no satisfaction was recorded by the Assessing Officer of violation of provisions of section 266SS of the Act and therefore penalty proceedings u/s 271D of the Act could not be initiated. The Hon’ble Punjab and Haryana High Court in the case of CIT vs. Mohan Lal Thakral reported in [2011] (1) TMI 538 (P&H) by following the order of hon’ble Dlhi high court in the case of CIT vs. Standard Brands Ltd. (supra) has held that in absence of any regular assessment recourse to the penalty proceedings u/s 271E is not justified. The Relevant observations of the Hon’ble High Court as contended in para 4 to 6 are reproduced hereunder:-

4 ITA Nos.3763 &3764/Del/2026 Sonia Vermani vs. ITO “4. We have heard learned counsel for the appellant. 5. The only point for consideration in this appeal is whether the assessee had contravened the provisions of Section 269T of the Act by making repayment of loan/deposits of Smt. Kusum Lata Thakral, through account payee cheque or account payee drafts to M/s Babyloan Builders Pvt. Ltd., Gurgaon and, therefore, penalty under Section 271E was leviable. 6. The Assessing Officer had levied the penalty amounting to Rs.11,02,610/- 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 Commissioner of income Tax v. Standard Brands Ltd. (2006) 285 ITR 295, 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 271E 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(1)(a) of the Income-tax Act, on $1.12.2003. 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's order with regard to the applicability or otherwise of section 269T of the IT Act to the assessee's case. It was within the purview of the AO to bring the assessee's case to scrutiny and to make regular assessment u/s 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings u/s 147 of the Act against the assessee. No Such action was taken. Rather, the penalty was 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 inter company 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.”

5 ITA Nos.3763 &3764/Del/2026 Sonia Vermani vs. ITO 5. Considering the facts in the instant case, no regular scrutiny assessment order was passed u/s 143(3) nor any reassessment proceeding u/s 147 of the Act was initiated, and when the notice u/s 271D was issued, no proceedings were pending before the AO. Therefore, penalty proceeding initiated by the JCIT u/s 271D of the Act is not justified, thus, by following the aforesaid judgments of the Hon’ble Punjab & Haryana High Court and Hon’ble Jurisdictional High Court, we hold that the penalty proceedings initiated u/s 271D of the Act in absence of any pending assessment proceedings is unjustified and the same is hereby, quashed. Accordingly, Ground of appeal No.1 of the assessee is hereby, allowed.

6.

Since we have already allowed Ground of appeal No.1 raised by the assessee, the other Grounds of appeal became academic hence, not adjudicated.

7.

In the result, appeal of the assessee is allowed.

ITA No. 3764/Del/2026 [Assessment Year 2017-18]

8.

Facts being identical as has been admitted by both the parties during the course of hearing, therefore, by following the observations made in ITA No.3763/Del/2026 [Assessment Year 2017-18] in the case of the assessee itself in respect of the penalty proceedings initiated u/s 271D of the Act which are mutatis mutandis applied to the facts of present case. Thus, the proceedings initiated u/s 271D of the Act are hereby, quashed.

9.

In the result, the appeal filed by the assessee is allowed.

6 ITA Nos.3763 &3764/Del/2026 Sonia Vermani vs. ITO 10. In the final result, both appeals of the assessee in ITA Nos. 3763 & 3764/Del/2026 for Assessment Year 2017-18, are allowed.

Order pronounced in the open court on 05.08. 2026.

Sd/- Sd/- (VIMAL KUMAR) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 05.08.2026 *PK, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

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