LAKSHMANA SWAMY VEERANKI,YALAMALKUDURU vs. INCOME TAX OFFICER, WARD-2(3), VIJAYAWADA

PDF · subscribers
ITA 597/VIZ/2025Status: DisposedITAT Visakhapatnam24 April 2026AY 2016-1718 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty imposed under section 271D was invalid because the AO did not record satisfaction in the assessment order for initiating such penalty proceedings. The initiation of penalty proceedings under section 271D was therefore considered bad in law.

What were the facts?

The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) in the assessment order. However, penalty proceedings under section 271D were initiated later by a different officer without recording satisfaction in the original assessment order. The assessee challenged this penalty.

What were the issues?

Whether penalty under Section 271D is valid if the Assessing Officer has not recorded satisfaction for its initiation in the assessment order. Whether the penalty proceedings initiated by a different officer without prior satisfaction are legally sustainable.

Which sections of the Income-tax Act were involved?

Section 271D,Section 271(1)(c),Section 269SS

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM

Before: SHRI S.S. VISWANETHRA RAVI, HON’BLE & SHRI OMKARESHWAR CHIDARA, HON’BLE

For Appellant: Shri C. Subrahmanyam, CA
For Respondent: Shri CVA Rama Rao, Sr.AR
Pronounced: 24.04.2026

आदेश /O R D E R

PER S.S. VISWANETHRA RAVI, JM:

This appeal by the assessee against order dated 04.09.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] for the A.Y. 2016-17.

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki 2. The Learned Authorised Representative, Shri C. Subrahmanyam, CA (hereinafter in short “Ld.AR”), prayed to take up Ground No. 3 raised in Form No. 36 along with the Additional Ground Nos. 3 & 4 as a preliminary issue, as the Ground No. 3 in Form No. 36 was not raised before both the Authorities below. He seeks leave of this Tribunal to admit and adjudicate Ground No. 3 in the interest of justice.

3.

The Learned Departmental Representative, Shri CVA Rama Rao, Sr.AR (hereinafter in short “Ld. DR”) reported no objection.

4.

Ld.AR submits that the Ground No. 3 raised by the assessee challenging the penalty initiated by the A.O under section 271D of Income-tax Act, 1961 (in short “Act”) and consequentially penalty imposed thereon is without jurisdiction and not legally valid in the eyes of law. He refers to the A.O order dated 06.09.2018 and submits that the A.O recorded only initiation of penalty proceedings under section 271(1)(c) of the Act for alleged concealment of particulars of income in Para No.3. He argued vehemently that nowhere in the Assessment Order the A.O recorded his satisfaction relating to initiation of penalty proceedings under section 271D of the Act and further argued the very notice issued under section 271D of the Act and consequential penalty order is not justified in the absence of any satisfaction in the Assessment Order. He drew our attention to the Paper Book consisting of 43 pages and referred to order of

Page. No 2

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki this Tribunal in the case of Kosanam Rama Rao v. ACIT in ITA No. 226/VIZ/2025 dated 18.07.2025 at page No. 16 of the Paper Book. He referred to the Ground No. 3 raised therein in internal Page No. 2 and submits that the said ground is similar to the Ground No. 3 raised in the present case. Further, he drew our attention to Para No. 10 of the said order and submits that this Tribunal by placing reliance on the decision of Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills Ambala City (2015) 379 ITR 521 (SC), Grandhi Sri Venkata Amrendra v. JCIT in CWP No. 32872/2023 dated 04.10.2024 of Hon’ble High Court of Andhra Pradesh; and Shrinivasa Reddy Reddeppagari v. JCIT in WP No. 44285 of 2022 dated 26.12.2022 of Hon’ble High Court of Telangana, quashed the penalty imposed under section 271D of the Act for not recording satisfaction regarding initiation of penalty proceedings under section 271D of the Act. He argued that the facts and circumstances in the present case are similar to the facts in the case of Kosanam Rama Rao v. ACIT (supra) and submits by following the same, quash the penalty imposed by the Addl./JCIT vide order dated 22.02.2022.

5.

Ld. DR, Shri CVA Rama Rao, Sr.AR, submits that Respondent-Revenue (Department) did not accept the order passed by the Tribunal in the case of Kosanam Rama Rao v. ACIT (supra) and preferred an appeal before Hon’ble High Court of Andhra Pradesh. Further, the Respondent-Revenue (Department) is also not satisfied with the decision of the Hon’ble High Court of Andhra Pradesh in the case of Grandhi Sri Venkata Amrendra v. JCIT (supra) and filed

Page. No 3

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki an appeal (SLP) before the Hon’ble Supreme Court. The decision of the Hon’ble High Court of Andhra Pradesh and order of this Tribunal are not binding on Respondent-Revenue (Department) as same were not acceptable. Further, he submits that the facts and circumstances in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) are distinguishable. Further, he submits that in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) the Hon’ble Supreme Court quashed the penalty proceedings as not maintainable as there was no satisfaction by the A.O in the set-aside proceedings. In the original assessment proceedings, there was clear satisfaction by the A.O in initiation the penalty proceedings under section 271D of the Act and the facts and circumstances in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) are not similar to the facts in the hand and the ratio laid down by the Hon’ble Supreme Court in the said case is not applicable. Further, since the Hon’ble High Court of Andhra Pradesh, Hon’ble High Court of Telangana and ITAT Visakhapatnam benches followed the Hon’ble Supreme Court decision in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) which is distinguishable and is not applicable to the present case the same. He prayed to dismiss Ground No. 3 raised by the assessee.

6.

Heard both the parties and perused the material available on record. On perusal of the Assessment Order dated 06.09.2018, we note the facts therein are the assessee is an individual filed return of income admitting a total income of

Page. No 4

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki Rs.3,78,340/-. According to A.O, the assessee derives salary income from M/s.Ushodaya Enterprises Private Limited and the said return was processed under section 143(1) of the Act. Further, the case of the assessee was selected for limited scrutiny to examine whether the interest income has been correctly shown in the return of income. By issuing notice under section 143(2) of the Act and 142(1) of the Act, the A.O determined the total income of the assessee inter alia making an addition under the head “Capital Gains” and “income from other sources” to an extent of Rs.7,54,633/-. It is noted that the assessee accepted the A.O’s order and preferred no appeal before the First Appellate Authority.

7.

As matter stood thus, the Additional / Joint / Deputy / Assistant Commissioner of Income tax, initiated penalty proceedings under section 271D of the Act by issuing notice dated 23.03.2021 by JCIT, Range-2, Vijayawada. In response to the notice under section 271D of the Act, the assessee replied that the said cash was received towards consideration at the time of registration of the property but not as an advance / loan / deposit and requested to drop the penalty proceedings. The Joint Commissioner of Income Tax, found the said reply not acceptable and imposed penalty of Rs.8,20,000/- under section 271D of the Act. The said penalty order was challenged before the CIT(A), wherein, the CIT(A) confirmed the penalty order by recording his reasons from Para No. 8.1 to 9 of the impugned order.

Page. No 5

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki 8. Before us, the moot point raised by the Ld.AR is that as to whether or not, penalty imposed on the assessee by the Joint Commissioner of Income Tax under section 271D of the Act in the absence of recording of satisfaction by the A.O for initiating penalty in the Assessment Order dated 06.09.2018 is valid in the eyes of law?

9.

We find this Tribunal in the case of Kosanam Rama Rao v. ACIT in ITA No. 226/VIZ/2025 for the A.Y. 2017-18 which is at Page No. 16 of the Paper Book, the relevant findings of the ITAT, Visakhapatnam Bench of the Tribunal in the case of Kosanam Rama Rao v. ACIT (supra) are reproduced below: -

“10 We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 11. Before proceeding any further, it would be relevant to cull out the provisions of Section 269SS of the Act, which contemplates that no loan/deposit/specified sum exceeding the amount therein prescribed is to be received by an assessee otherwise than as per the modes therein contemplated, which reads as under: “269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account 11[or through such other electronic mode as may be prescribed], if,— (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

Page. No 6

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),

is twenty thousand rupees or more:

Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,—

(a) the Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013);

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Explanation.—For the purposes of this section,—

"(i) banking company" means a company to which the provisions of the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;

"(ii) co-operative bank" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ;

"(iii) loan or deposit" means loan or deposit of money;

"(iv) 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.”

Page. No 7

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki As the failure to comply with the provisions of Section 269SS of the Act results in saddling an assessee with the penalty u/s. 271D of the Act; therefore, it will be apposite to cull out the same as under:

“271D. (1) If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.”

12.

Controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the penalty imposed on the assessee by the Addl/Joint Commissioner of Income Tax, NFAC under Section 271D of the Act, in the absence of the recording of satisfaction by the A.O for initiating the said penalty proceedings in the body of the assessment order under Section 143(3) dated 28.12.2019 is sustainable in the eyes of law?

13.

As is discernible from the assessment order, the A.O., while framing the assessment, had not recorded his satisfaction regarding the initiation of the penalty proceedings under Section 271D of the Act. We find that the issue involved in the present appeal, i.e., the sustainability of the penalty imposed under Section 271D of the Act in the absence of any satisfaction for initiating the said penalty proceedings in the body of the assessment order by the A.O., is no more res- integra, pursuant to the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City, (2015) 379 ITR 521 (SC). The A.O., in the case before the Hon’ble Apex Court, had framed the original assessment vide an ex-parte order dated 26.02.1996, determining the income of the assessee at Rs. 18.34 lacs (approx.). The A.O., while framing the assessment, had in the body of the assessment order taken cognizance of the fact that the assessee had contravened the provisions of Section 269SS of the Act and recorded his satisfaction for initiating penalty proceedings u/s. 271D of the Act. On appeal, the CIT(Appeals) set-aside the assessment order with a direction to frame the assessment de-novo after affording an adequate opportunity to the assessee. After remand, the A.O. passed a fresh assessment order but failed to record his satisfaction regarding the initiation of the penalty proceedings u/s. 271D of the Act. During the pendency of the assessee’s quantum appeal, which had not yet come up before the CIT(Appeals), the Jt. CIT, based on the original assessment order dated 26.02.1996, issued a “Show cause notice” (“SCN”) to the assessee and imposed the penalty under Section 271D of the Act dated 23.09.1996. It was, thus, in the backdrop of the aforesaid facts that the sustainability of the penalty imposed under Section 271D of the Act, based on the original assessment order that no more survived had surfaced. On being tested on the touchstone of the fact that the original assessment order, wherein satisfaction for initiating penalty proceedings under Section 271D of the Act was recorded, having been set-aside, thus, did no more survive, the Tribunal and the High Court concluded that the penalty imposed under Section 271D of the Act could not be sustained.

Page. No 8

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki 14. On further appeal, the Hon’ble Apex Court concluded that as the A.O. in the fresh assessment order had not recorded his satisfaction regarding penalty under Section 271D of the Act, therefore, in the absence of recording of the requisite satisfaction, the penalty imposed under Section 271D of the Act could not be sustained and was liable to be quashed. For the sake of clarity, the relevant observation of the Hon’ble Apex Court is culled out as under:

“6. 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.”

We find that the aforesaid view taken by the Hon’ble Supreme Court had, thereafter, been followed by the Hon’ble High Court of Andhra Pradesh in the case of Grandhi Sri Venkata Amrendra Vs. Joint Commissioner of Income-tax, CWP No. 32872/2023, dated 04.10.2024. The Hon'ble High Court, drawing support from the order of the Hon'ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills (supra), had held as under:

“9. In our view, the satisfaction of the Assessing Officer is required to be recorded because the officer, who passed the assessment order would not be levying the penalty under Sec. 271D of the Act. unless it is recorded in the assessment order, he cannot refer the file to superior officer i.e., Joint Commissioner, for initiating levy of penalty. Unless the Assessing Officer, who is the primary authority, based on the material before it, during assessment proceedings, arrives at a finding that there has been a violation of the provisions, like in the present case, of Section 269SS, there will not be any occasion to the Joint Commissioner, who is not the Assessing Officer, to exercise his jurisdiction to levy Penalty under Section 271D. Following the decision of the Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills referred supra, we set aside the order passed by the 1" respondent dated 23.11.2023 under Sec.271D of the Act.”

We find that the aforesaid view taken by the Hon’ble Supreme Court, had, thereafter, been followed by the Hon’ble High Court of Telangana in the case of Shrinivasa Reddy Reddeppagari Vs. JCIT, WP No.44285 of 2022 dated 26.12.2022, wherein the question, for which, the indulgence of the Hon’ble High Court was sought, read as under:

“14. Issue raised in the writ petition is whether without satisfaction being recorded in the assessment order, penalty can be levied by the Jt. CIT under S. 271D of the Act?”

Answering the aforesaid question, the Hon’ble High Court, after drawing support from the judgment of the Hon’ble Apex Court in the case of CIT Vs. Jai Laxmi Rice Mills Ambala City (supra), had held as under:

Page. No 9

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki “15. Insofar the present case is concerned, we find that in the assessment order dated 24.03.2022 passed under Section 153A of the Act, return of income filed by the petitioner was accepted by the assessing officer and accordingly, the total income was assessed. In the return of income, petitioner had admitted receiving total income of Rs. 80,84,180.00 which was also accepted by the assessing officer.

16.

Subsequently, respondent No.1 took the view that petitioner had sold immovable properties for a total sale consideration of Rs. 92,13,000.00 out of which he had accepted cash to the tune of Rs. 87,80,000.00 which was in violation of Section 269SS of the Act, attracting penalty under Section 271D of the Act.

17.

Before we advert to the reply submitted by the petitioner, we may mention that under Section 269SS of the Act, no person shall take or accept from any other person (referred to as a depositor) any loan or deposit or any specified sum otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if the amount of such loan or deposit or specified sum is twenty thousand rupees or more. However, as per the first proviso, the rigor of Section 269SS is not applicable to the Government, banking company, post office savings bank or cooperative bank etc. As per the second proviso, this provision would also not be applicable where both the depositor and the receiver are having agricultural income and neither of them has any income chargeable to tax under the Act.

18.

Section 271D of the Act deals with penalty for failure to comply with the provisions of Section 269SS of the Act. Section 271D of the Act being relevant is extracted hereunder:

Penalty for failure to comply with the provisions of section 269SS.

271D. (1) If a person takes or accepts any loan or deposit [or specified sum] in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit [or specified sum] so taken or accepted.]

[(2) Any penalty imposable under sub-section (1) shall be imposed by the [Joint] Commissioner.]

19.

Thus, what sub-section (1) of Section 271D provides for is that if a person takes or accepts any loan or deposit or specified amount in contravention of the provisions of Section 269SS, he shall be liable to pay by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. Sub-section (2) clarifies that any

Page. No 10

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

20.

It would be useful to refer to Section 271E of the Act also at this stage which deals with penalty for failure to comply with the provisions of Section 269T of the Act. Be it stated that Section 269T of the Act provides that no branch of a banking company or a cooperative bank and no other company or cooperative society and no firm or other 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 drawn in the name of the person who had made the loan or deposit or who had paid the specified advance or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if such an amount is twenty thousand rupees or more. As in the case of Section 269SS, Section 269T of the Act also does not apply to the Government, banking company, post office savings bank etc.

Section 271E of the Act reads as under:

Penalty for failure to comply with the provisions of section 269T.

271E. [(1)] If a person repays any [loan or] deposit [or specified advance] referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the [loan or] deposit [or specified advance] so repaid.]

[(2) Any penalty imposable under sub-section (1) shall be imposed by the [Joint] Commissioner.]

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 accordance with the provisions of that section, he shall be liable to pay by way of penalty a sum equal to the amount of the loan or deposit or specified advance so repaid.

(2) any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

22.

From an analysis of Sections 271D and 271E of the Act, it is seen that both the provisions are pari materia to each other. While Section 271D of the Act would be attracted on a person accepting loan or deposit or specified sum in contravention of Section 269SS of the Act, penalty under Section 271E of the Act would be imposable on a person who makes or repays the loan or deposit or specified advance in contravention of Section 269T. Therefore, in a way, the two provisions are complimentary to each other.

Page. No 11

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki 23. In Jai Laxmi Rice Mills Ambala City (supra), Supreme Court considered the question as to whether penalty proceedings under Section 271D of the Act is independent of the assessment proceeding?

In the facts of that case, it was found that the penalty order was issued following the assessment order. However in appeal, Commissioner of Income Tax (Appeals) had set aside the original assessment order with a direction to frame assessment de novo. In the fresh assessment order, no satisfaction was recorded by the assessing officer regarding initiation of penalty proceedings under Section 271E of the Act. It was noticed that the penalty order was passed before the appeal of the assessee was allowed by the Commissioner of Income Tax (Appeals). It was in that context that Supreme Court held as follows:

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.

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.

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.3 wherein it was observed that assessing officer has to satisfy himself as to whether penalty proceedings should be initiated or not. Assessing officer is not required to record his satisfaction in a particular manner or reduce

Page. No 12

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki it into writing. Therefore, respondent No.1 imposed the penalty under Section 271D of the Act.

25.

We are afraid respondent No.1 had completely overlooked the decision of the Supreme Court in Jai Laxmi Rice Mills Ambala City (1 supra). In the said decision as extracted above, Supreme Court had concurred with the view taken by the High Court holding that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under Section 271E of the Act. We have already discussed above that provisions of Section 271E and 271D of the Act are in pari materia. When there is a decision of the Supreme Court, it is the bounden duty of an adjudicating authority, be it an income tax authority or any other civil authority or for that matter any court in the country, to comply with the decision of the Supreme Court.

26.

Article 141 of the Constitution of India is clear that law declared by the Supreme Court shall be binding on all courts within the territory of India. This is further clarified in Article 144, which says that all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court. We are therefore, of the unhesitant view that respondent No.1 overlooked the relevant considerations while passing the impugned order dated.29.11.2022.

27 Further, issue in the present writ petition is not the competence of the Joint Commissioner in issuing the order of penalty. Therefore, reference to Grihalaxmi Vision (2 supra) was wholly unnecessary.

28.

Consequently, we set aside the impugned order dated 29.11.2022 and remand the matter back to the file of respondent No.1 to pass a fresh order in accordance with law after giving a reasonable opportunity of hearing to the petitioner. Writ Petition is accordingly allowed. No costs.”

15.

Also, a similar view had been taken by the Hon’ble High Court of Gujarat in the case of Pr. CIT Vs. Parivar Television, Tax Appeal No.674/2023 dated 09.10.2023, wherein the Hon’ble High Court had approved the view taken by the Tribunal and observed that as no satisfaction regarding initiation of penalty proceedings u/s. 271E of the Act was recorded in the assessment order, therefore, no penalty under the said statutory provision could have been levied. Apart from that, we find that a similar view had been taken by the ITAT, Hyderabad Bench in the case of ACIT Vs. Bapu Reddy Jala Nizamabad, ITA No.606/Hyd/2022 dated 15.06.2023 and Raja Reddy Nalla Vs. Addl. CIT, ITA No.520/Hyd/2022 dated 31.05.2023 and also by the ITAT, Raipur in the case of Shri Bhowmick Raj Singh Vs. Jt. CIT, Bhilai-Range, Bhilai ITA No. 128/RPR/2016 29 and the ITAT, Amritsar in the case of Ram Lubhaya Jassal Vs. Addl. CIT, ITA No.747/Asr/2017 dated 24.09.2021.

16.

Considering that the issue before us is no more res-integra in light of the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice

Page. No 13

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki Mills Ambala City (supra), therefore, in the backdrop of our aforesaid deliberations, the penalty of Rs. 46.76 lacs (supra) imposed by the Addl/Joint Commissioner of Income Tax, NFAC under Section 271D of the Act cannot be sustained and is liable to be struck down for want of valid assumption of jurisdiction. 17. As we have in terms of our aforesaid observations quashed the penalty imposed under Section 271D of the Act by the Addl/Joint Commissioner of Income Tax, NFAC; therefore, we refrain from adverting to and dealing with the other contentions advanced by the Ld. AR regarding the validity of the penalty order, which, thus, are left open.”

10.

On perusal of the above, we find that the issue raised in Ground No.3 is similar to the Ground raised before us. Further the Tribunal formed an issue in Para No. 12 and proceeded to consider the decision of the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra), in the case of Grandhi Sri Venkata Amrendra v. JCIT (supra) of Hon’ble High Court of Andhra Pradesh and in the case of Shrinivasa Reddy Reddeppagari v. JCIT (supra) of Hon’ble High Court of Telangana, held no penalty under statutory provision under section 271E of the Act could have been levied in the absence of satisfaction regarding initiation of penalty proceedings under section 271E of the Act vide Para No. 15 of the said order.

11.

Further on plain reading of the Para No. 13 of the said order, the Tribunal discussed the facts in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) and following the same, vide Para No. 14 of the said order held that the penalty imposed under section 271D of the Act could not be sustained and the penalty imposed thereon was liable to be quashed. Further, the Tribunal considered the

Page. No 14

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki facts and circumstances before the Hon’ble High Court of Andhra Pradesh and following the same having satisfied the facts and circumstances therein are similar to the facts and circumstances in the case of Kosanam Rama Rao v. ACIT (supra) held the imposition of penalty under section 271D of the Act is not maintainable as there was no satisfaction by the Assessing Officer in the Assessment Order. The Tribunal reproduced the relevant Para No. 9 of Hon’ble High Court of Andhra Pradesh wherein the Hon’ble High Court of Andhra Pradesh was pleased to observe that the satisfaction of the Assessing Officer is required to be recorded because the officer, who passed the Assessment Order would not be levying the penalty under section 271D of the Act. Unless it is recorded in the Assessment Order, he cannot refer the file to superior officer i.e., Joint commissioner, for initiating levy of penalty. Further, the Hon’ble High Court of Andhra Pradesh was pleased to observe that the Assessing Officer who is a primary authority, based on the material before it, during the assessment proceedings arrives at a finding that there has been a violation of the provisions of section 269SS, there will not be any occasion to the Joint Commissioner, who is not the Assessing Officer, to exercise his jurisdiction to levy penalty under section 271D of the Act.

12.

Further, the Tribunal also discussed the facts and circumstances and the issue raised before the Hon’ble High Court of Telangana in the case of Shrinivasa Reddy Reddeppagari v. JCIT (supra) in Page No. 11 of the Tribunal order,

Page. No 15

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki wherein the Hon’ble High Court of Telangana formed an issue in Para No. 14 “Issue raised in the Writ Petition is whether without satisfaction being recorded in the Assessment Order, penalty can be levied by the Jt. CIT under S. 271D of the Act?”. On a plain reading of the order of the Tribunal, the Hon’ble High Court of Telangana was pleased to hold that the provisions of section 271E & 271D of the Act are in Para Materia and by following the decision of the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra) held that satisfaction must be recorded in the original Assessment Order for the purposes of initiation of penalty proceedings under section 271E of the Act.

13.

Considering the decision of Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills Ambala City (supra), Grandhi Sri Venkata Amrendra v. JCIT (supra) of Hon’ble High Court of Andhra Pradesh and Shrinivasa Reddy Reddeppagari v. JCIT (supra) of Hon’ble High Court of Telangana, we find the facts and circumstances in the present case are similar to the facts before the Hon’ble Supreme Court, Hon’ble High Court of Andhra Pradesh and Hon’ble High Court of Telangana. We find that the Coordinate Bench in the case of Kosanam Rama Rao v. ACIT (supra), by following decisions of Hon’ble Supreme Court, Hon’ble High Court of Andhra Pradesh and Hon’ble High Court of Telangana held that the penalty imposed by the Additional/Joint Commissioner of Income Tax, NFAC under section 271D of the Act cannot be sustained and is liable to be struck down for want of valid assumption of jurisdiction vide Para

Page. No 16

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki No. 16 of the said order which is binding on us. In the present case admittedly, assessment dated 06.09.2018 does not contain the satisfaction with reference to initiation of penalty proceedings under section 271D of the Act and there is only finding with reference to initiation of penalty proceedings under section 271(1)(c) of the Act but not penalty proceedings under section 271D of the Act. Therefore, following the order of the Tribunal in the case of Kosanam Rama Rao v. ACIT (supra), we hold the very initiation of penalty proceedings under section 271D of the Act in the absence of recording of satisfaction by the A.O in the body of the Assessment Order dated 06.09.2018 is bad under law and consequently penalty imposed vide order dated 22.02.2022 is invalid. Thus, the order of CIT(A) is not justified and set-aside. Ground No.3 raised by the assessee is allowed.

14.

In view of our decision in Ground No. 3 in favor of assessee in quashing the penalty order dated 22.02.2022 the remaining grounds raised by the assessee in Form No. 36 become academic requiring no adjudication.

15.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 24th April, 2026.

Sd/- Sd/- (ओंकारेश्वर धिदारा) (एस.एस.धिश्वनेत्र रधि) (OMKARESHWAR CHIDARA) (S.S. VISWANETHRA RAVI) लेखा सदस्य /ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated:24.04.2026 Giridhar, Sr.PS

Page. No 17

I.T.A.No.597/VIZ/2025 Lakshmana Swamy Veeranki आदेश की प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Lakshmana Swamy Veeranki 13-152, Durga Nagar Yalamalkuduru- 520007 Andhra Pradesh, India 2. रधजस्व/ The Revenue : Income Tax Officer – Ward 2(3) C.R. Building, Vijayawada 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax गधर्ाफ़धईल / Guard file 6. आदेशधिुसधर / BY ORDER Digitally signed V S S by V S S GIRIDHAR GIRIDHAR BABU MEKALA Date: 2026.04.24 BABU MEKALA 14:39:39 +05'30' Sr. Private Secretary ITAT, Visakhapatnam

Page. No 18

More judgments on Section 271D

All 1,725 judgments and leading authorities on Section 271D →

Recent GST High Court judgments

Search GST case law →