LAKKARAJU RAMPRASAD HUF,TIRUPATI vs. ACIT, CIRCLE -1(1), TIRUPATI

ITA 2401/HYD/2025Status: DisposedITAT Hyderabad30 September 2026AY 2016-20178 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that there was no dispute that the Assessing Officer (AO) had not recorded satisfaction as required by law in the assessment order dated 01.11.2018, before initiating penalty proceedings under Section 271D. The Tribunal relied on the Supreme Court's decision in CIT Vs. Jai Laxmi Rice Mills, Ambala City, which clearly held that a penalty order passed without recorded satisfaction deserves to be set aside. The Tribunal also referred to the Andhra Pradesh High Court's decision in Grandhi Sri Venkata Amarendra Vs. JCIT, which stated that penalty under Section 271D cannot be levied if the AO has not recorded any finding of violation of Section 269SS or satisfaction that the transaction attracts penal consequences. The Tribunal found that the CIT(A) had upheld the penalty without appreciating these facts. Consequently, the Tribunal set aside the order of the CIT(A) and deleted the penalty levied by the AO under Section 271D.

What were the facts?

The assessee, Lakkiraju Ramprasad HUF, filed its return for AY 2016-17 declaring an income of Rs. 38,54,010. The assessment was completed under Section 143(3) accepting the declared income. Subsequently, the Assessing Officer (AO) issued a show-cause notice under Section 274 r.w.s. 271D for contravention of Section 269SS, alleging the acceptance of Rs. 40,00,000 in cash for property sale. The assessee contended that the transaction was genuine and the entire consideration was declared. The AO levied a penalty of Rs. 40,00,000 under Section 271D. The CIT(A) upheld the penalty. The assessee appealed to the ITAT, challenging the penalty order's validity due to the AO's lack of recorded satisfaction in the assessment order.

What were the issues?

1. Whether the penalty order passed by the Assessing Officer under Section 271D of the Income-tax Act, 1961, is void ab initio for want of recorded satisfaction in the assessment order before initiating penalty proceedings, as argued by the assessee, relying on CIT Vs. Jai Laxmi Rice Mills and Grandhi Sri Venkata Amarendra Vs. JCIT? 2. Whether the penalty under Section 271D of the Act can be levied when the Assessing Officer has not recorded any satisfaction regarding the violation of Section 269SS, as argued by the assessee? Revenue's Contention: The revenue argued that the assessee's legal ground challenging the AO's order is without merit because the competent authority for initiating and levying penalty under Section 271D is the Joint Commissioner, not the AO. Therefore, the AO recording satisfaction in the assessment order is irrelevant. The revenue contended that the case laws relied upon by the assessee are not applicable.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269SS,Section 274,Section 143(3)

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Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad

PER MANJUNATHA G., A.M : The appeal filed by the assessee is against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 30.01.2026, for the Assessment Year 2016-17, arising out of the penalty order passed by the A.O.

The order continues below.

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