RADHA MOHAN MAHESHWARI S/O BADRI NARAIN TOTLA vs. ASSISTANT COMMISSIONER OF INCOME TAX

Facts

The petitioners, including Sunil Agrawal and others, filed writ petitions challenging notices issued under Section 271E of the Income Tax Act, 1961, for Assessment Year 2012-2013. These notices were issued following search operations and reassessment orders that resulted in additions to income under Sections 69A and 69C. The reassessment orders were passed by the Deputy Commissioner of Income Tax (DCIT) or Assistant Commissioner of Income Tax (ACIT). The petitioners argued that no satisfaction was recorded in the reassessment order for initiating penalty proceedings under Section 271E, relying on the Supreme Court's decision in Commissioner of Income Tax Vs. Jai Laxmi Rice Mills. The revenue contended that a reference was made for penalty imposition and satisfaction was recorded by the ACIT, and that Section 271E does not mandate the AO to record satisfaction.

Held

The Tribunal held that the issue is squarely covered by the Supreme Court's decision in Commissioner of Income Tax Vs. Jai Laxmi Rice Mills (supra). The Supreme Court in that case had quashed penalty proceedings under Section 271D on the ground that in the absence of satisfaction recorded by the AO, the penalty could not be imposed. The Tribunal noted that in the present case, the reassessment order was passed on 12.03.2024, and no satisfaction was recorded for initiating penalty proceedings under Section 271E. The Tribunal further observed that the reference made by the DCIT to the ACIT on 01.08.2024, which was after the conclusion of reassessment proceedings, did not aid the department's case. Similarly, the satisfaction dated 24.09.2024 recorded by the ACIT could not be equated with the satisfaction required to be recorded in the reassessment proceedings by the concerned AO. The Tribunal also noted that in the case of the petitioners, the DCIT had only recorded satisfaction for proceedings under Section 271(1)(c) and not for initiating penalty proceedings under Section 271D. Consequently, the notices issued under Section 271E and the proceedings pursuant thereto were quashed.

Key Issues

1. Whether penalty under Section 271E of the Income Tax Act, 1961, can be imposed in the absence of satisfaction recorded by the Assessing Officer (AO) in the reassessment order for initiating such proceedings? (Question of law) 2. Whether the satisfaction recorded by the Additional Commissioner of Income Tax (ACIT) subsequent to the reassessment proceedings, or a reference made by the DCIT to the ACIT, can substitute for the satisfaction required to be recorded by the AO in the reassessment order for initiating penalty proceedings under Section 271E? (Question of mixed law and fact) Assessee's Contentions: The petitioners argued that the issue is covered by the Supreme Court's decision in Commissioner of Income Tax Vs. Jai Laxmi Rice Mills (supra), which held that penalty proceedings under Section 271E cannot be initiated without the AO recording satisfaction in the assessment or reassessment order. They contended that no such satisfaction was recorded in their reassessment orders. Revenue's Contentions: The revenue argued that the Deputy Commissioner of Income Tax (DCIT) referred the matter to the ACIT for penalty imposition under Section 271E, and the ACIT recorded satisfaction on 24.09.2024. They also submitted that there is no requirement under Section 271E for the AO to record satisfaction. The revenue's counsel was unable to distinguish the citation relied upon by the petitioners.