BALAJI KANNAN,CHITTOOR vs. ITO, WARD-1, CHITTOOR

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad �ी �वजय पाल राव, उपा� य� एवं �ी मधुसूदन साव�डया, लेखा सद� य के सम� । Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 1850 & 1851/Hyd/2025 (िनधा�रण वष�/Assessment Years: 2015-16 & 2016-17) Shri Balaji Kannan Vs. Income Tax Officer Chittoor Ward-1 PAN: AJFPK1349G Chittoor (Appellant) (Respondent) िनधा�रती �ारा/Assessee by: Advocate S. Sandhya राज� व �ारा/Revenue by: Shri Abhinav Pitta, Sr. AR सुनवाई की तारीख/Date of hearing: 23/04/2026 घोषणा की तारीख/Pronouncement: 06/05/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

These two appeals are filed by Shri Balaji Kannan (“the assessee”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) both dated 01.08.2015 for the A.Ys. 2015-16 & 2016-17. Since both the appeals are filed by the same assessee and identical issues are involved, for the sake of convenience, these were heard together and are being disposed of by this common and consolidated order.

2 At the outset, we find that there is a delay of 2. four days in filing both the appeals by the assessee. The assessee has filed separate petitions for condonation of delay along with separate copies of affidavits explaining the reasons for such delay. The Ld. AR submitted that during the relevant period, the assessee was suffering from viral fever and was under medical treatment and was advised complete rest by the doctor. Due to the said circumstances, the assessee was not in a position to travel and meet his counsel for the purpose of filing the appeals within the prescribed time. In support of the said contention, the assessee has also placed on record the medical certificate issued by the doctor. It has been further submitted that the delay was neither intentional nor deliberate but occurred due to circumstances beyond the control of the assessee. Accordingly, the Ld. AR prayed before the Bench to condone the delay and admit the appeals for adjudication on merits. 3. Per contra, the Ld. DR did not raise any serious objection to the condonation of delay. 4. We have considered the rival submission and perused the materials available on record. On perusal of the same, we find that the assessee was prevented by reasonable cause from filing the appeals within the prescribed time. The delay involved is marginal and properly explained. It is a settled principle that matters should be decided on merits rather than on technicalities, particularly when the delay is short and there is no mala

3 fide intention attributable to the assessee. In view of the present facts and circumstances, we are satisfied that there was sufficient cause for the delay in filing the appeals. Accordingly, the delay of four days in filing the appeals is hereby condoned, and the appeals are admitted for adjudication on merits.

ITA No 1850/Hyd/2025 for A.Y 2015-16:

“1) The order of the learned CIT (A) is erroneous both on facts and in law; 2) The learned CIT (A) erred in confirming the penalty levied u/s 271E of the I.T. Act of Rs.2,00,000/- without considering the facts on record; 3) The learned CIT (A) ought to have seen that the assessment year involved is 2015-16 and the penalty order was passed on 22.08.2024 after a period of 8 years ; 4) The learned CIT (A) ought to have found that no assessment is made against the appellant in respect of the assessment year 2015- 16 and, therefore, no penalty is leviable; 5) The learned CIT (A) ought to have considered the fact that the transaction is genuine and the facts on record show that the appellant is prevented by sufficient reason in not receiving the amount through banking channels; 6) Any other ground/grounds that may be urged at the time of hearing;” 6. The brief facts of the case are that the assessee is an individual engaged in the business of trading in pipes and other hardware materials. During the course of assessment proceedings in the case of another person, namely Shri Bhaskara Siddaiah Chetty, it was observed by the Learned Assessing Officer (“Ld. A.O”) of that person that the assessee had repaid a loan of Rs.2 lakhs in cash to the said person

4 during the Assessment Year 2015–16. Based on the said information, penalty proceedings under section 271E of the Income Tax Act, 1961 (“the Act”) were initiated by the Learned Joint Commissioner of Income Tax (“Ld. JCIT”) in the case of the assessee. After considering the submissions of the assessee, the Ld. JCIT levied a penalty of Rs.2 lakhs under section 271E of the Act vide order dated 22.08.2024. 7. Aggrieved by the penalty order of the Ld. JCIT, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT (A) dismissed the appeal of the assessee and confirmed the penalty levied by the Ld. AO. 8. Aggrieved by the order of the Ld. CIT (A), the assessee is in further appeal before this Tribunal. The Learned Authorized Representative (“Ld. AR”) inviting our attention to the acknowledgement of return of income submitted that the assessee had filed the return of income for the Assessment Year 2015–16 on 06.10.2015 declaring total income of Rs.3,53,210/- (page No.1 of the paper book). It was contended that no assessment proceedings were pending in the case of the assessee for the year under consideration at the time of initiation of penalty proceedings. The Ld. AR further submitted that it is a settled legal position that penalty proceedings under section 271E of the Act must be initiated during the course of any proceedings pending before the Ld. AO, and satisfaction regarding such initiation must be recorded in the order passed in such proceedings. It was argued that in the present case, since no proceedings were pending in the case of the assessee, there was no occasion for the Ld. AO to record satisfaction prior to initiation of penalty proceedings. Accordingly, it was submitted that in the absence of any pending proceedings and

5 recording of satisfaction therein, the penalty levied under section 271E of the Act is bad in law and liable to be deleted. In support of the said contention, the Ld. AR placed reliance on the decision of this Tribunal in the case of Somireddy Sudhakar Reddy Vs. ITO in ITA No.1505/Hyd/2025 for Assessment Year 2017–18 dated 24.12.2025, wherein under identical facts, the Tribunal has held that in the absence of any pending proceedings and recording of satisfaction in the assessment order, the penalty levied under section 271D of the Act is liable to be deleted. The Ld. AR also relied upon the judgment of the Hon’ble Telangana High Court in the case of Meghana Avenues Pvt. Ltd. Vs. CIT (Appeals) in Writ Petition No.24403 of 2025 dated 05.03.2026, wherein it has been held that the provisions of section 271E and 271D of the Act are in pari materia. The Hon’ble High Court also held that levy of penalty under section 271D of the Act without recording satisfaction in the assessment order is not sustainable in law. Accordingly, the Ld. AR submitted that the judgement of this Tribunal (Supra) and Hon’ble Telangana High Court (Supra) on section 271D of the Act shall squarely apply to the case of the assessee which is on section 271E of the Act. 9. Per contra, the Learned Departmental Representative (“Ld. DR”) submitted that during the assessment proceedings in the case of Shri Bhaskara Siddaiah Chetty, it came to the notice of the Department that the assessee had repaid a loan of Rs.2 lakhs in cash in violation of the provisions of section 269T of the Act. It was contended that upon receipt of such information, the jurisdictional Ld. AO of the assessee duly intimated the violation of section 269T to the competent authority, i.e., the Ld. JCIT, who thereafter issued a

6 valid notice under section 274 read with section 271E of the Act within the prescribed time and levied the penalty. The Ld. DR further submitted that the said fact was also accepted by the assessee during the penalty proceedings before the Ld. AO. Accordingly, it was submitted that the penalty has been validly initiated and levied in accordance with law and does not require any interference. The Ld. DR thus prayed that the order of the Ld. CIT(A) be upheld. 10. We have heard the rival submissions and perused the material available on record. We have also gone through the decisions relied upon. On perusal of the record, it is an undisputed fact that the penalty under section 271E of the Act has been initiated based on information received from the assessment proceedings in the case of a third party, namely Shri Bhaskara Siddaiah Chetty. It is also not in dispute that no assessment or other proceedings were pending in the case of the assessee for the Assessment Year 2015–16 at the time of initiation of penalty proceedings. We find that the Ld. AR has specifically contended that no satisfaction was recorded by the Ld. AO in any proceedings in the case of the assessee prior to initiation of penalty proceedings. The Ld. DR has also not disputed this factual position that no proceedings were pending in the case of the assessee wherein such satisfaction could have been recorded. In this regard, we have gone through para nos.6 to 8 of the order of this Tribunal in the case of Somireddy Sudhakar Reddy vs. ITO (supra), which is to the following effect: “6. Thus, it is clear from the impugned order u/sec.271D that there was no Reference by the Assessing Officer and also there were no assessment proceedings or any other proceedings in the case of the assessee prior to issuing the show cause notice

7 u/sec.271D r.w.s.274 of the Act. An identical issue has been considered by the Indore Bench of the Tribunal and one of us is the Judicial Member/Vice ITA.No.1505/ Hyd./2025 President is party to the Order in the case of Shri Umakant Sharma vs. JCIT, Ratlam in ITA.No.364 to 366/Ind./2022 dated 19.07.2023 wherein the Tribunal has held in Para Nos.8 to 11 as under: "8. We have considered rival submissions and carefully perused the relevant material on record. There is no dispute that the assessee has not filed any return of income for the assessment year under consideration. The penalty u/s 271D of the Act has been levied on 23.01.2017 which is after 8 years from the end of the assessment year under consideration. The limitation for the penalty levied under chapter XXI has been provided in section 275 of the Act which reads as under: "275. Bar of limitation for imposing penalties (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject- matter of an appeal to the Deputy Commissioner (Appeals) or the Commissioner (Appeals) under section 246 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of 4 the Deputy Commissioner (Appeals) or] the Commissioner (Appeals) or, as the ITA.No.1505/Hyd./2025 case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later; [Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the "[Principal Chief Commissioner or] Chief Commissioner or "[Principal Commissioner or] Commissioner, whichever is later. (b) n a case where the relevant assessment or other order is the subject- matter of revision under section 263, after the expiry of six months from the end of the month in which such order of revision is passed; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated are completed, or six months from the end of the month in which action for imposition of penalty ITA.No.1505/Hyd./2025 is initiated, whichever period expires later.] (IA) In a case where the relevant assessment or other order is the subject- matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to

the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the "Principal Chief Commissioner or] Chief Commissioner or the "[Principal Commissioner or] Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the "[Principal Chief Commissioner or] Chief Commissioner or the "[Principal Commissioner or] Commissioner or the order of revision under section 263 or section 264 is passed; Provided further that the provisions of sub- section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub- section] 2. The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March,1989.] Explanation. - In computing the period of limitation for the purposes of this section, - (i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129. (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded. 9. The limitation for passing the order imposing penalty under chapter XXI has been provided by considering all possible situation where the assessment order or other order is subject matter of appeal of the order is revised under section 263 or assessment order or other orders are subject matter of appeal before the Hon'ble High Court or Hon'ble Supreme Court. Thus, it is clear that section 275, presupposes the existence of assessment proceedings/revision proceedings or appeal proceedings arising from the assessment order or revision order

and the limitation is provided as per outcome of these proceedings. In absence of assessment in the case of the assessee the initiation of penalty is not valid and further when the satisfaction for initiation of the penalty on the part of the AO is absent in the case of the assessee then the penalty levied u/s 271D is not valid. The Hon'ble Supreme Court in case of CIT vs. Jain Laxmi Rice Mills (supra) has held as under: "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 Sec. 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 ITA.No.1505/Hyd./2025 wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, In so far as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied." 10. Thus, the Hon'ble Supreme Court has affirmed the view of the Hon'ble High Court that in absence of satisfaction recorded regarding the penalty proceedings u/s 271E of the Act the order of levy of penalty is not valid. The Ahmedabad Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra) has considered an identical issue as under: "6. We have heard the respective parties and also perused the relevant materials available on record. 7. We find that on the identical set of facts the Punjab and Haryana High Court was pleased observe the following while upholding quashing of penalty by the Tribunal: "3. We have heard learned counsel for the appellant. 4. 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. 5. The Assessing Officer had levied the penalty amounting to Rs. 11,02,6107- 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 CIT v. Standard Brands Ltd. [20061 285 ITR 295/155 Taxman 383, 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 27IE were not justified. The findings recorded by the Tribunal read thus:-

10 "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(l)(a) of the Income-tax Act, on 31.12.2003. 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 intercompany 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. 8. We find substances in the submissions made by the Ld. A.R. particularly after considering the order passed by the Hon'ble Punjab and Haryana High Court as cited hereinabove. In fact, on the identical set of facts the penalty under Section 271E was deleted by the Tribunal and further upheld by the Hon'ble High Court. 9. Having regard to the facts and circumstances of the case and the ratio laid down in the order passed by the Punjab and Haryana High Court, we do not hesitate to hold that the impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed." 11. Therefore, it is pre-requisite condition that the initiation of penalty 271D/271E of the Act, there must be assessment proceedings or proceeding arising from assessment order are pending in the case of the assessee. Accordingly in the facts and circumstances of the case and following the judgment of Hon'ble Supreme Court as well as Coordinate Bench of the Tribunal in case of Vijayaben G. Zalavadia vs. JCIT (supra), we hold that the penalty levied u/s 271D of the Act without any assessment proceedings in the case of the assessee is not valid and liable to be quashed. We order accordingly." 7. Thus, it is a pre-requisite condition for initiation of the penalty u/sec.271D/271E of the Act that there must be

11 an assessment proceeding or proceedings arising from assessment order or any other proceedings under the Act. This aspect is also clarified by the CBDT vide Circular No.9/2016 dated 26.04.2016. We further note that recording of satisfaction by the Assessing Officer in the original assessment order for the purpose of initiation of proceedings u/sec.271D/271E is a mandatory condition as held by the Hon'ble Jurisdictional High Court in the case of Srinivas Reddy Reddappagari vs. JCIT (supra) in Para Nos.21 to 28 as under: "21. 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. Sub-section (2) clarifies that 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 ITA.No.1505/Hyd./2025 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. 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, ITA.No.1505/Hyd./2025 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. 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 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 (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 ITA.No.1505/Hyd./2025 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 (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."

13 8. We have specifically given an opportunity to the learned DR to produce relevant record if any, to show that some proceedings were initiated in the case of assessee and satisfaction was recorded by the Assessing Officer. However, ITA.No.1505/ Hyd./2025 the learned DR has submitted that no record was made available by the Assessing Officer. Accordingly, in the facts and circumstances of the case and in the interest of justice and by following the decision of Hon'ble Jurisdictional High Court as well as the decisions of various Coordinate Benches of the Tribunal including the decision of ITAT, Indore Bench in the case of Shri Umakant Sharma vs., JCIT, Ratlam (supra), we hold that the penalty levied by JCIT u/sec.271D without recording the satisfaction in assessment proceedings or any other proceedings under the Act, is not valid and liable to be quashed. We Order accordingly.” 11. On perusal of the above, we find that under similar facts, the Tribunal has held that in the absence of any pending proceedings and recording of satisfaction therein, initiation of penalty proceedings under section 271D of the Act is not valid in law. We have also gone through para no. 15 of the order of the Hon’ble Telangana High Court in the case of Meghana Avenues Pvt. Ltd. Vs. CIT (Appeals) (Supra), which is to the following effect:

“15. From the discussion made hereinabove, it is apparent that the CBDT Circular, dated 26.04.2016 issued on the basis of the observations in Grihalakshmi Vision (supra) by the Kerala High Court is on the subject of limitation for initiation of penalty proceedings under Section 271D and 271E of the Act, wherein it has been held that the competent authority to levy penalty is Joint Commissioner and not the assessing officer. On the other hand, in the case of Srinivasa Reddy Reddeppagari (supra), a coordinate Bench of this Court has referred to the case of Jaya Laxmi Rice Mills (supra) and categorically recorded that the 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. Sections 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. The very issue involved in the

14 present writ petition, whether without satisfaction being recorded in the assessment order, penalty can be levied by the Joint Commissioner under Section 271D of the Act was in question in the case of Srinivasa Reddy Reddeppagari (supra). As such, we do not find any grounds made out by the Revenue to take a different view in the instant case.” 12. On perusal of the above, we find that the Hon’ble Telangana High Court has held that recording of satisfaction in the assessment order or in the course of proceedings is a sine qua non for initiation of penalty proceedings under section 271D of the Act, and in the absence thereof, the penalty is liable to be deleted. We also find that the Hon’ble High Court has held that the provisions of section 271E and 271D of the Act are in pari materia. Therefore, in our considered view, the order of this Tribunal (Supra) and Hon’ble Telangana High Court (Supra) on section 271D of the Act shall squarely apply to the case of the assessee which is on section 271E of the Act. In the present case, since admittedly no proceedings were pending in the case of the assessee and no satisfaction has been recorded by the Ld. AO in any order prior to initiation of penalty proceedings, the very initiation of penalty under section 271E of the Act is vitiated. Therefore, respectfully following the judicial precedents cited above, we hold that the penalty levied under section 271E of the Act is not sustainable in law. Accordingly, the penalty of Rs.2 lakhs levied under section 271E of the Act is hereby deleted.

15 14. In the result, the appeal of the assessee in ITA No.1850/Hyd/2025 for the A.Y 2015-16 is allowed. ITA No 1851/Hyd/2025 for A.Y 2016-17:

16 18. In the result, appeal filed by the assessee in ITA No. 1851/Hyd/2025 for the A.Y 2016-17 is allowed for statistical purposes.

TIRUPATI Digitally signed by TIRUPATI YAMINI NAGA YAMINI NAGA MALLESWARI Date: 2026.05.07 MALLESWARI 14:30:05 +05'30'