SHREE AGRAWAL LOGISTICS,GANDHIDHAM vs. THE ITO WARD 2 GANDHIDHAM, GANDHIDHAM

Brief facts of the case are that the assessee had declared total business income as NIL for Assessment Year 2017–18. The case of the assessee was selected for scrutiny and assessment under Section 143(3) of the Act was completed by accepting the returned income. Subsequently, an order under Section 154 read with Section 143(3) of the Act was passed determining the total income at ₹22,500. During penalty proceedings, it was noticed that the assessee had allegedly made repayment of loans amounting to ₹60,00,000 otherwise than by account-payee cheque, account-payee bank draft, Electronic Clearing System (ECS), or through prescribed banking channels, thereby allegedly violating the provisions of Section 269T of the Act. Accordingly, penalty proceedings under Section 271E of the Act were initiated by the Joint Commissioner of Income Tax, Range-1, Rajkot, by issuing notice under Section 274 read with Section 271E of the Act. Thereafter, penalty order dated 26.09.2024 was passed imposing penalty of ₹60,00,000 upon the assessee.

Aggrieved by the same, the assessee preferred an appeal before the CIT(A). However, the appellate authority sustained the penalty imposed under Section 271E of the Act by rejecting the appeal of the assessee.

Being aggrieved by the above order, the assessee is in appeal before this Tribunal. During the course of hearing, the Ld. AR submitted that the Assessing Officer while passing the assessment order dated 07.12.2019 under Section 143(3) of the Act had accepted the returned income without making any addition. It was argued that no satisfaction regarding initiation of penalty proceedings under Section 271E had been recorded in the assessment order. The Ld. AR further drew our attention to the assessment order and submitted that nowhere had the Assessing Officer recorded any finding that the assessee had violated the provisions of Section 269T of the Act, nor was there any mention regarding initiation of penalty proceedings under Section 271E of the Act. It was contended that the issue is squarely covered by the decision of the Hon’ble Supreme Court in CIT vs. Jai Laxmi Rice Mills, Ambala City (2015) 64 taxman.com.75(SC), wherein it has been held that in the absence of satisfaction recorded regarding initiation of penalty proceedings in the body of the assessment order, such proceedings cannot survive.

On the other hand, the Ld. DR relied upon the orders of the lower authorities. However, the Ld. DR could not controvert the applicability of the judgment relied upon by the Ld. AR

We have heard the rival submissions and perused the material available on record. We find that the assessment order passed under Section 143(3) of the Act accepted the returned income and does not contain any satisfaction recorded by the Assessing Officer regarding initiation of penalty proceedings under Section 271E of the Act. Further, there is no finding recorded in the assessment order with respect to violation of Section 269T of the Act. The Hon’ble Supreme Court as in CIT vs. Jai Laxmi Rice Mills, Ambala City has held that where no satisfaction is recorded regarding initiation of penalty proceedings in the assessment order, such proceedings cannot survive. We, respectfully following the aforesaid decision of the Hon’ble Supreme Court, as in CIT vs. Jai Laxmi Rice Mills (Supra). We hold that penalty proceedings initiated under Section 271E of the Act in the present case are not sustainable in law.

Accordingly, we direct the Assessing Officer to delete the penalty of ₹60,00,000 imposed under Section 271E of the Act.

In the result, the appeal of the assessee is allowed.