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Facts
The assessee challenged penalties levied under section 271D of the Income-tax Act, 1961, amounting to Rs. 93,80,000/- for A.Y. 2016-17 and Rs. 44,00,000/- for A.Y. 2017-18, following a survey under section 133A where books of accounts could not be produced. The JCIT imposed the penalties, which were subsequently sustained by the CIT(A), despite the assessment order under section 147/143(3) not recording satisfaction for initiating penalty proceedings under section 271D.
Held
The Tribunal held that a penalty under section 271D cannot be levied without the Assessing Officer recording explicit satisfaction for initiating such proceedings in the assessment order under section 143(3). Relying on the Supreme Court's decision in Jai Laxmi Rice Mills, the Tribunal noted that the AO had only recorded satisfaction for initiating penalty under section 271(1)(c) but not for section 271D. Consequently, the Tribunal deleted the penalties, finding them to be without authority of law.
Key Issues
Whether the levy of penalty under section 271D is valid if the Assessing Officer fails to record specific satisfaction for initiating such penalty proceedings in the assessment order under section 143(3).
Sections Cited
271D, 1961, 147, 143(3), 269SS, 133A, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
Both the above captioned appeals by the assessee are directed towards two separate orders of the CIT(A) - 3, Noida dated 13.12.2023 pertaining to A.Ys. 2016-17 and 2017-18.
These appeals pertaining to same assessee were heard together and are disposed of by this common order for the sake of convenience and brevity.
The sum and substance of the grievance of the assessee is against the levy of penalty u/s 271D of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] amounting to Rs. 93,80,000/- in A.Y 2016-17 and Rs. 44,00,000/- in A.Y 2017-18 which is without authority of law as no valid satisfaction was recorded in the order passed u/s 147/143(3) of the Act qua the alleged violation u/s 269SS of the Act.
Briefly stated, the facts of the case are that a survey u/s 133A of the Act was conducted at the business premises of the partners of the assessee firm on 26.09.2018. During the course of survey, the partners of the assessee firm were required to produce books of accounts for the current and previous years with supporting documents to verify the sale of flats/turnover declared and expenses claimed in the previous years,
The assessee could not produce any books of account and therefore, the trading results for A.Y 2015-16 remained unverified.
Since no books of account could be produced nor the investment made could be completely verified, the case for A.Y 2015-16 to 2017- 18 was taken up under scrutiny assessment u/s 147 of the Act to verify the surrendered income, investment made and expenses claimed regarding construction of 24 flats.
Assessment u/s 147/143(3) of the Act was completed on 27.12.2019 at Rs. 34,69,500/- for A.Y 2016-17 and Rs. 23,72,400 for A.Y 2017-18. Notice u/s 271D was issued to the assessee for both the A.Ys on 30.03.2022 to show cause why an order imposing penalty on him should not be made u/s 271D of the Act.
In response, the assessee filed reply which was not found tenable by the JCIT who imposed penalty of Rs. 93,80,000/- in A.Y 2016-17 and Rs. 44,00,000/- in A.Y 2017-18 u/s 271D of the Act.
Aggrieved, the assessee went in appeal before the ld. CIT(A) who sustained the penalty levied by the Assessing Officer.
Aggrieved further, the assessee is in appeal before the Tribunal.
Before us, at the very outset, the ld. counsel for the assessee vehemently relied upon the decision of the Hon'ble Apex Court in the case of Jai Laxmi Rice Mills 379 ITR 521 [SC] and the decision of the Hon'ble High Court of Gujarat in the case of PCIT Vs. Parivar Television Pvt Ltd Tax Appeal No. 674/2023 order dated 09.10.2023.
The ld. counsel for the assessee argued that there was no valid satisfaction recorded by the Assessing Officer in his order u/s 143(3) for initiating penalty u/s 271D of the Act. The ld. counsel for the assessee submitted that unless the Assessing Officer initiates proceedings and records satisfaction in the body of the assessment order u/s 143(3), no penalty u/s 271D of the Act can be levied.
Per contra, the ld. DR fairly admitted that there was no satisfaction recorded in the assessment order.
We have heard the rival submissions and have perused the relevant material on record. On careful perusal of the assessment order, we find no satisfaction recorded by the Assessing Officer in his assessment order for initiating penalty u/s 271D of the Act. The Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills [supra] has held as under:
“In the fresh assessment order, there was no satisfaction recorded regarding penalty proceeding under Section 271D 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 271D is concerned, it was without any satisfaction and, therefore, no such penalty could be levied.”
A similar issue came up before the ITAT, Raipur Bench in the case of Shri Bhowmick Raj Singh in dated 02.01.2024 wherein it was held as under:
“Considering the fact that the issue before us is no more res integra in light of the judgment of the Hon’ble Supreme Court in the. Jai Laxmi Rice Mills Ambala City (supra), therefore, in the backdrop of our aforesaid deliberations, the penalty imposed by the Jt.CIT u/s. 271D of the Act cannot be sustained and is liable to be struck down for want of valid assumption of jurisdiction.”
Similar decision was taken by the ITAT Chennai Bench in the case of Subramanium Thanu dated 13.03.2024.
We have considered the judicial pronouncement and the legal dictum established by the Hon'ble Supreme Court from which it emerges that the Assessing Officer has to record his satisfaction in the assessment order u/s 143(3) of the Act for initiating penalty proceedings u/s 271D of the Act for violation of provisions of section 269SS of the Act. In this case, assessment order u/s 143(3) r.w.s 147 of the Act was passed on 27.12.2019 for A.Y 2016-17 and on 18.12.2019 for A.Y 2017-18. The JCIT issued notice u/s 271D of the Act on 30.03.2022 for both the A.Ys and levied penalty u/s 271D of the Act on 31.03.2022.
The Assessing Officer, in his order u/s 143(3)/147 of the Act for both the A.Ys has recorded penalty proceedings u/s 271(1)(c) of the Act to be initiated separately. The Assessing Officer, however, has not recorded any satisfaction to initiate penalty u/s 271D of the Act for either of the A.Ys and thereby failed to adhere to the mandate of law as laid down by the Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills [supra].
Considering the facts of the case in totality and respectfully following the ratio laid down by the Hon'ble Supreme Court [supra], we do not find these to be fit case for levy of penalty u/s 271D of the Act. We accordingly, delete the penalty so levied u/s 271D of the Act in both the A.Ys and allow both the appeals.
In the result, both the appeals of the assessee in ITA Nos.
615/DEL/2024 and 616/DEL/2024 are allowed.
The order is pronounced in the open court on 31.05.2024.