SILUVAIKANI CHELLIAH,CHENGALPATTU vs. ITO, NCW-22(6),, TAMBARAM

Subsequently, penalty proceedings u/s.271D of the Act were initiated by issuance of a show cause notice u/s.274 r.w.s 271D of the Act, dated 16.06.2022, by the Joint Commissioner of Income Tax, Non-Corporate Range-

Being aggrieved, the assessee preferred an appeal before the ld.CIT(A), who vide order dated 12.09.2024, confirmed the levy of penalty u/s.271D of the Act. The assessee, being further aggrieved, is now in appeal before this Tribunal.

We have carefully considered the submissions of both parties and examined the material available on record. The assessee has assailed the impugned order passed by the FAO levying penalty u/s.271D of the Act on multiple grounds. The principal contention urged by the assessee is that the AO, while framing the assessment u/s.143(3) of the Act vide order dated 25.09.2019, did not record any satisfaction regarding a violation of section 269SS of the Act, which is a sine qua non for initiation of penalty proceedings u/s.271D of the Act.

To fortify the above proposition, the Ld.AR placed reliance upon the judgment of the Hon’ble Supreme Court in CIT v. Jai Laxmi Rice Mills [2015] 379 ITR 521 (SC), as well as the decision of the Hon’ble Telangana High Court in Srinivasa Reddy Reddeppagari v. JCIT (W.P. No. 44285 of 2022). Further reliance was placed on various decisions rendered by coordinate benches of this Tribunal.

Per contra, the ld.DR for the revenue, strongly supported the orders of the authorities and prayed for confirming the order of the ld.CIT(A) as the entire amount of sale consideration has been received in cash.

In this regard, in similar case, we note that the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills [supra], wherein, the Hon’ble Apex Court while examining similar contention/legal issue of levy of penalty u/s.271E which is pari materia to sec.271D of the Act held as under:

Thereafter, the Hon’ble Telangana High Court in the case of Sirnivasa Reddy Reddeppagari (supra) while deciding similar legal issue regarding levy of penalty u/s 271D for violating section 269SS held as under:

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 nova. In the fresh assessment order, no satisfaction was recorded by the assessing officer regarding initiation of penalty proceedings under Section 271 E 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.

Reverting back to the facts of the present case, we find that petitioner had submitted reply to the show cause notice on :-6-: ITA. No.:2655 /Chny/2024 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 (I 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.I 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.

We are afraid respondent No. I 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 (2013) 3 5 2 ITR 1 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.”

Following the Hon’ble Courts decisions (supra), this Tribunal in several cases [T Shiju v. JCIT in dated 07.06.2019] has held that recording of satisfaction by the AO in the assessment order regarding the violation of the provisions of section 269SS is a mandatory requirement for valid initiation of penalty proceedings u/s.271D of the Act and no penalty could be levied if the AO failed to record such satisfaction in the assessment order. In the present case, on perusal of the assessment order u/s.143(3) of the Act dated 25.09.2019, it is seen that no such satisfaction has been recorded by the AO in :-7-: ITA. No.:2655 /Chny/2024 the said assessment order. Hence, having regard to the failure of the AO to record his satisfaction in the assessment order with regard to the violation of the provisions of Sec. 269SS, it is held that the penalty proceedings u/s.271D of the Act have not been validly initiated and consequently, the penalty order dated 20.12.2022 levying penalty of Rs.23,80,000/- by the FAO u/s.271D of the is held to be bad in Law.

Since the assessee succeeds on the legal issue as noted supra as held by the Hon’ble Supreme Court & High Courts as well as this Tribunal supra, we are inclined to allow the legal issue raised by the assessee and all other grounds raised by the assessee have become academic in nature and therefore not adjudicated.

In the result, appeal filed by the assessee is allowed.