SUBHASH PARWAL SON OF SHRI JAGDISH PRASAD PARWAL vs. DEPUTY COMMISSIONER OF INCOME TAX

Facts

The petitioner, Subhash Parwal, filed a writ petition before the Rajasthan High Court, Jaipur Bench, challenging notices dated July 31, 2024, and November 8, 2024, issued under Section 271D of the Income Tax Act, 1961. The petitioner's primary grievance was that the assessing authority had recorded satisfaction to initiate penal action under Section 271AAC, but the notices were issued under Section 271D. The petitioner contended that a connected matter, D.B. CWP No. 12783/2024, with other connected petitions, had been allowed by the same court on January 30, 2025, in the case of Sunil Agrawal vs. Assistant Commissioner Of Income Tax & Anr., which relied on a Supreme Court decision. The respondents were unable to distinguish the present case from the cited precedent.

Held

The High Court allowed the writ petition. The Court followed its earlier order dated January 30, 2025, passed in D.B. Civil Writ Petition No. 1102/2025 (Sunil Agrawal vs. Assistant Commissioner Of Income Tax & Anr.). This decision, in turn, relied on the Supreme Court's judgment in Commissioner of Income Tax vs. Jai Lakshmi Rice Mills [(2015) 379 ITR 521 (SC)]. The core reasoning, as applied from the Sunil Agrawal case, was that penalty proceedings under Section 271D cannot be initiated in the absence of specific satisfaction recorded by the Assessing Officer (AO) for initiating proceedings under that particular section. In the present case, the AO had recorded satisfaction for Section 271AAC, not Section 271D. The respondents could not provide any distinguishing arguments. Therefore, the notices issued under Section 271D were quashed, and the writ petition was allowed. No issue was expressly left undecided.

Key Issues

1. Whether notices issued under Section 271D of the Income Tax Act, 1961, are valid when the assessing authority recorded satisfaction to proceed for penal action under Section 271AAC, and not Section 271D. (Question of law and fact) Assessee's Contention: The petitioner argued that the notices under Section 271D were invalid because the assessing authority's satisfaction was recorded for action under Section 271AAC. They relied on the decision in D.B. Civil Writ Petition No. 1102/2025 (Sunil Agrawal vs. Assistant Commissioner Of Income Tax & Anr.), which in turn relied on the Supreme Court's decision in Commissioner of Income Tax vs. Jai Lakshmi Rice Mills [(2015) 379 ITR 521 (SC)]. The petitioner highlighted that in the Sunil Agrawal case, the DCIT had only recorded satisfaction for proceedings under Section 271(1)(c) and not Section 271D, leading to the quashing of the notice under Section 271E. Revenue's Contention: The respondents (Deputy Commissioner of Income Tax and Joint Commissioner of Income Tax) were unable to distinguish the present case from the precedent cited by the petitioner.