GAYATRI VILLA ,NEW DELHI vs. JCIT CENTRAL RANGE, MEERUT
Facts
The assessee challenged penalties levied under Section 271D of the Income-tax Act for A.Y. 2016-17 and 2017-18, totaling Rs. 93,80,000/- and Rs. 44,00,000/- respectively. The penalties arose from an alleged violation of Section 269SS, following a survey where the assessee failed to produce books of account, leading to unverified trading results and scrutiny assessment. The CIT(A) sustained the penalties originally imposed by the JCIT.
Held
The Tribunal observed that while the Assessing Officer's assessment order recorded satisfaction for initiating penalty proceedings under Section 271(1)(c), there was no explicit satisfaction recorded for initiating penalty under Section 271D of the Act. Citing the Supreme Court's decision in Jai Laxmi Rice Mills, the Tribunal held that a penalty under Section 271D cannot be sustained without a valid satisfaction recorded in the assessment order itself. Consequently, the Tribunal deleted the penalties for both assessment years.
Key Issues
Whether the penalty levied under Section 271D is valid when the Assessing Officer failed to record explicit satisfaction for initiating such penalty proceedings in the assessment order.
Sections Cited
271D, 269SS, 147, 143(3), 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 ITA No. 128/RPR/2016 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 ITA No. 785/Chny/2023 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.
Sd/- Sd/-
[SAKTIJIT DEY] [NAVEEN CHANDRA] VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 31st MAY, 2024.
VL/
