KANHIAYA LAL SAIN,JAIPUR vs. JCIT RANGE-7 JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 1022 &1023/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2010-11 Shri Kanhiya Lal Sain cuke The JCIT Vs. 7, Purana Ramgarh Mode Range-7 Anand Colony,Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: BCYPS 6300 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Shrawan Kumar Gupta, Adv. jktLo dh vksj ls@Revenue by: Mrs. Monisha Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 04/09/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25 /09/2024 vkns'k@ORDER PER: SANDEEP GOSAIN, JM Both these appeals have been filed by the assessee against two different orders of the ld. CIT(A) dated 11-06-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2010-11 in the matter of Section 271D and 271E of the Act. The grounds raised by the assessee in respective appeals are as under:-

2 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR ITA No.1022/JP/2024 Section 271D 1.1 The impugned order u/s 271D of the I.T. Act, 1961 dated 28.05.2019 as well as the notices and proceedings by the Id. JCIT and Id. AO are illegal, bad in law, barred by limitation, without jurisdiction, without approval/satisfaction from the proper or competent authority, against the principle of natural justice and various other reasons or and further contrary to the real facts of the case hence the same may kindly be quashed. 1.2. The Id. CIT(A) has grossly erred in law as well as on the facts of the case in passing the Exparty order without providing adequate and reasonable opportunity of being heard in gross breach of law and not considering the material on record in the gross breach of natural justice. Hence the same entire penalty may kindly be deleted and the Penalty order may kindly be quashed. 2. Rs.1,00,000/-: The Id. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the penalty of Rs.1,00,000/- u/s 271D of the Act imposed by the Id. JCIT/AO. The Ld. CIT(A) and AO have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the penalty so imposed by the Id. JCIT/AO and confirmed by the Id. CIT(A) is also being contrary to the real facts of the case and not according to the provision of law, hence the same may kindly be deleted in full.’’

ITA No.1023/JP/2024 Section 271E 1.1 The impugned order u/s 271E of the I.T. Act, 1961 dated 28.05.2019 as well as the notices and proceedings by the Id. JCIT and Id. AO are illegal, bad in law, barred by limitation, without jurisdiction, without approval/satisfaction from the proper or competent authority, against the principle of natural justice and various other reasons or and further contrary to the real facts of the case hence the same may kindly be quashed. 1.2. The Id. CIT(A) has grossly erred in law as well as on the facts of the case in passing the ex parte order without providing adequate and reasonable opportunity of being heard in gross breach of law and not considering the material on record in the gross breach of natural justice. Hence the same entire penalty may kindly be deleted and the Penalty order may kindly be quashed.

3 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 2. Rs.60,000/-: The Id. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the penalty of Rs.60,000/- u/s 271E of the Act imposed by the Id. JCIT/AO. The Ld. CIT(A) and AO have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the penalty so imposed by the Id. JCIT/AO and confirmed by the Id. CIT(A) is also being contrary to the real facts of the case and not according to the provision of law, hence the same may kindly be deleted in full.’’ 2.1 It may be noted that both appeals in ITA No. 1022/JP/2024 and ITA No. 1023/JP/2024 are connected appeals. First of all, the Bench deals with ITA No. 1022/JP/2024. 3.1 Grounds number 1 to 2 raised by the appellant are interrelated and interconnected and relates to challenging the order of imposition of penalty and section 271 D of the Income Tax Act, therefore I have thought it fit to dispose off these Grounds through the present consolidated order. 3.2 LD AR in support of these Grounds relied upon in his written submissions and reiterated the same arguments as were raised by him before the lower authorities. The written submissions relied upon by the appellant is reproduced below. ‘’WRITTEN SUBMISSIONS GOA-1-4: Imposition of Rs.1,00,000/- u/s 271D and Rs.60,000/- u/s 271E and Exparty order by CIT(A). FACTS: The brief of the case are that the assessee work is lawyer and doing legal profession. The assessee has filed his return of income declaring the total income of Rs.1,48,000/- on dt. 15.07.2010. In this case the ld. AO has issued the notice u/s 148 on dt. 17.03.2017. In response to the notice u/s 148 and proceedings assessee has filed the reply and

4 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR details. During the course of assessment proceedings the ld. AO has asked to the assessee to furnish the evidence/documents/explanation and source of investment of in purchase of property. In response thereto the assessee has filed all the details and confirmations of the persons from who the unsecured loan was taken. The ld. AO has accepted the source of investment and not made any addition on this account and completed the assessment at the returned income of Rs. 1,48,000/- u/s 143(3)/147 on dt. 06.09.2017. However in the assessment order the ld. AO has not initiated the penalty proceedings u/s 271D & 271E nor made any observation that the amount taken in cash and repayment in cash of unsecured loan in contravention of provision of Sec. 269SS and 2769T . However the ld. Add. CIT in the penalty order has stated that on the basis of facts submitted by the AO a SCN dt. 11.12.2018 was issued to the assesse why the penalty u/s 271D and 271E shall not be imposed for default committed noted above. In response thereto the assessee filed the reply on dt. 21.01.2019(PB32-41) by stating also reproduced at page 2- 5 of the penalty order. However the ld. Add. CIT did not satisfied with the reply and imposed the penalty of Rs. 1,00,000/- u/s 271D on account of cash loan received from Smt. Vimla Devi Sharma and Rs.60,000/- u/s 271E on account of loan repayment in cash to Smt. Meena Sharma. Against the order of the assessee has filed the appeal before the ld. CIT(A). In First appeal the ld. CIT(A) has confirmed and supported the action of the Add. CIT(A) as ignoring the request of the assessee. Hence this appeal.

SUBMISSIONS: 1. No Satisfaction of the ld. AO and directly covered matter: At the very outset it is submitted that while passing the assessment order u/s 147 rws 143(3) vide PB 28-29. The ld. AO has not recorded any satisfaction regarding the initiation of penalty u/s 271D and 271E, which was mandatory on the part of the ld. AO. For the purpose of imposing penalty, satisfaction should be recorded by the assessing officer in the assessment order as to imposition of penalty. Non-recording of satisfaction is fatal. In this connection, reference was made to a decision of the Supreme Court in CIT v. Jaya Laxmi Rice Mills Ambala City, (2015) 64 Taxmann.com 75 (SC). It was further pointed out that in the aforesaid decision delivered by the Supreme Court in the context of initiation of penalty proceeding

5 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR under Section 271E of the Act, it was held that recording of satisfaction is mandatory for initiation of penalty proceedings under Section 271E of the Act. Section 271E of the Act is pari materia to Section 271D of the Act. Therefore, prayer was made to drop the proposal to impose penalty under Section 271D of the Act. And in the present case the ld. AO has not initiated the penalty in the assessment order what to talk of the satisfaction. Kindly also refer the decision of the Honble Telangana High Court in the case of Srinivasa Reddy Reddeppagari v/s JICT 332 CTR 614(Tel.) dt. 26.12.2022. In the case of K. S. CHAWLA & SONS (HUF) & ORS. vs. JCIT & ORS. (2019) 56 CCH 0447 DelTrib It has been held “34. On a perusal of the assessment order in the quantum proceedings, the order of the first appellate authority deciding the quantum additions and also the order of the JCIT levying penalty u/s 271D of the Act, we find that the assessment order as well as the order of the JCIT are devoid of any satisfaction regarding initiation of penalty proceedings u/s 271D of the Act. 35. The Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City [supra] has held that penalty u/s 271D is without any satisfaction and, therefore, no such penalty can be levied. The relevant findings of the Hon'ble Supreme Court read as under: “In these appeals, we are concerned with the question as to whether penalty proceeding under Section 271D of the Income Tax Act (hereinafter referred to as “the Act”) is independent of the assessment proceeding and this question arises for consideration in respect of Assessment Years 1991-1992 and 1992-1993 under the following circumstances: In respect of Assessment Year 1992-1993, assessment order was passed on 26.02.1996 on the basis of CIB information informing the Department that the assessee is engaged in large scale purchase and sale of wheat, but it is not filing income tax return. Ex-parte proceedings were initiated, which resulted in the aforesaid order, as per which net taxable income of the assessee was assessed at Rs. 18,34,584/-. While framing the assessment, the Assessing Officer also observed that the assessee had contravened the provisions of Section 269SS of the Act and because of this the Assessing Officer was satisfied that penalty proceedings under Section 271E of the Act were to be initiated.

6 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 3. The assessee carried out this order in appeal. The Commissioner of Income Tax (Appeals) allowed the appeal and set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. 4. After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive. 4. 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. 5. 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.” 36. The ld. DR had relied upon the decision of the Hon'ble Supreme Court in the case of Adinath Builders Pvt Ltd [supra]. We are of the considered opinion that the Hon'ble Supreme Court has dismissed the SLPs filed by the revenue and the ld. DR has relied upon the head notes, which cannot be considered as judgment of the Hon'ble Supreme Court as the Hon'ble Supreme Court has simply dismissed the SLPs without assigning any reason. 37. Considering the facts of the cases in hand from all possible angles, we do not find them to be fit cases for levy of penalty u/s 271D of the Act. We, accordingly, direct the Assessing Officer to delete the penalty levied in respect of the captioned appellants for all the assessment years under

7 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR consideration. By this consolidated order, all the appeals are allowed and disposed off accordingly. 38. In the result, all the above captioned appeals are allowed” On this preposition also kindly refer a recent judgment of the Honble ITAT Chennai Bench in the case of The DCIT , Central Circle 2(2), Vs. Shri Subramaniam Thanu, in ITA No. s.785, 786, 787 & 788/Chny/2023 dt. 13.03.2024 where it has been held that “11.6 We have considered the judicial pronouncements and principles laid down by the Hon’ble Supreme Court and also the judgement of various Hon’ble High Courts and as per the above judicial pronouncements, the Assessing Officer has to record his satisfaction before initiating penalty under section 271D of the Act in respect of violation of the provisions of section 269SS of the Act. In this case, the assessment order was passed on 30.12.2017 and reference was made by the Assessing Officer to the Addl. CIT on 14.03.2021 to initiate penalty proceedings. There is a time gap of more than three years In the assessment order dated 30.12.2017, the Assessing Officer has noted that penalty proceedings under section 271(1)(c) of the Act has to be initiated separately. However, the Assessing Officer has made a reference to the Addl. CIT to initiate the proceedings under section 271D of the Act for violation of section 269SS of the Act. Once the Assessing Officer decided to initiate penalty under section 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings under section 271D of the Act, the Assessing Officer ought to have been recorded his satisfaction. However, Ld. AO has failed to do so. The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of Ld. AO was in gross violation of departmental circular. By considering the above facts and circumstances of the case and respectfully following the judgement of the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills (supra), the judgement of the Hon’ble Telangana High Court in the case of Srinivasa Reddy Reddeppagari v. JCIT (supra), the decisions of Chennai Benches of ITAT in the case of T. Shiju v. JCIT (supra), in the case of Smt. S.B. Patil v. JCIT (supra), the decision of the Delhi Benches of ITAT in the case of Anglican India Consultancy Pvt. Ltd. v. Addl. CIT (supra), the ground raised by the Department is liable to be dismissed. 12. In so far as another legal ground raised by the assesse 15. Since the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City (supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act, no separate adjudication for levy of penalty under section 271E of the Act is warranted. Accordingly, all the appeals filed by the Revenue are dismissed.” Also refer ACIT (INTERNATIONAL TAXATION) & ANR. vs. Kanchumarthi Venkata Sita Ramchandra Rao & ANR. ITA No. 245 & 246/Viz/2020 (C.O. No. 12 & 13/Viz/2021) August 30, 2022 (2022) 65 CCH 0549 Visakhapatnam Trib

8 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 2. Reasonable cause : The seller had denied to take the cheque of the other known person of the assessee, as the assessee was not having balance in his bank account and there was also no cheque book issued to the assessee by the bank . Hence it was the difficult to the assessee to take the laon through the bank account and he was under impression that in this urgency for purchase the property cash amount may be taken. On the last date of hearing the assessee had sought the adjournment on dt. 25.06.2028 as the date of hearing was 28.06.2024 and the ld. CIT(A) has wrongly stated that no compliance has been made. Miss Meena Sharma is Dharma Ki sister of the assessee, he had given the loan to assessee and asked to the assessee to repay Rs.5,000/- par month installment. On perusal of the loan confirmation (PB 8-9) of Smt. Meena Sharma it is noted that the assessee has repaid to her till April 2012 i.e in the A.Y. 2011-12 and 2012-13 repayment of Rs.60,000/- in each A.Y. was in cash and the revenue has accepted the same and no penalty has been initiated. Further the assessee is also under impression that if the repayment is done below to Rs.20,000/- per month and once is permissible. In case of Haresh kumar Becharbhai Patel vs. JCIT (2019) 55 CCH 0224 Ahd Trib it has been held that Penalty—Penalty for failure to comply with the provisions of section 269SS—Loan or deposit—Assessee filed return of income—During assessment proceeding, AO noted that assessee had received cash on different dates from his father—Assessee claimed that cash was received from his father representing gift—Assessee in support of his claim filed a Gift Deed prepared on Stamp Paper however, AO observed that gift was received by assessee in FY 2007-08 whereas Gift Deed was prepared on Stamp Paper purchased on 16/05/2011– Accordingly, AO held that cash received from father representing unsecured loan which was accepted by assessee in contravention to provision of s. 299SS—Therefore, AO levied penalty u/s 271D for violation of provision of s. 269SS—CIT(A) dismissed assessee’s appeal—Held, AO did not doubt genuineness of transaction—Otherwise same should have been treated as unexplained cash credit u/s 68—Transaction was carried out with father of assessee—Provision of s. 269SS was brought under statue to discourage assessee to justify their unaccounted money—However, in case on hand, there was no allegation that assessee had introduced unaccounted money in his business—Thus, keeping in view object of provision of s. 269SS, cash transaction which was genuine could not be brought under net of tax under provision of s.269SS—Such transactions

9 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR between relatives and sister concern were not subject to provisions of s. 269SS—Genuineness of cash transaction was not doubted between son and father—Therefore, penalty levied u/s 271D was not sustainable—Gift Deed was not prepared at relevant time—Controversy arises merely delay in preparation of Gift Deed could cause prejudice to assessee by holding that cash transaction was not in nature of gift—A Gift Deed was nothing but an understanding in writing which proves/establishes nature of transaction carried out between parties—Once donor had agreed/confirmed that he had given a gift to assessee, then same could not be denied merely on ground that Gift Deed was not prepared at relevant time—Even if it was given a loan at that relevant time and later on parties agreed to treat same as a gift, then matter ends here as transaction was between son and father who were substantiated with gift deed and confirmation—There was basic difference between gift and loan/Deposit—A gift was never paid back/return to donor while it was not so in case of loan—However, there was nothing on record which shows that money was paid back to father by assessee directly or indirectly— Thus, AO was directed to delete penalty u/s 271D—Assessee’s appeal allowed. Also refer Gourang Chandra Nayak vs. JCIT (2020) 77 ITR (Trib) 0192 (Cuttack) it has been held that Penalty—Penalty for failure to comply with the provisions of section 269SS—Assessee filed return of income—During assessment proceedings, AO noticed that assessee had accepted cash in contravention of provisions of s. 269SS—Assessee submitted that neither any of transactions were doubtful nor any transaction was made to evade tax and hence, no penalty was leviable—It was also submitted that receipts of cash by assessee were neither loan or deposit—However, rejecting assessee’s submissions, AO levied penalty u/s 271D which was also confirmed by CIT(A)—Held, assessee, an individual derives pension income from Bank—This was not a case of AO that assessee was engaged in business activity or entrepreneur, who received impugned amounts under commercial transaction in contravention of s. 269SS—First transaction was pertaining to cash received by assessee from his father— It was observed that amount of Rs.3,03,000/- was withdrawn on 27.9.2012 by assessee and assessee had deposited Rs.3 lakhs on 21.9.2012 in his bank account—Assessee gave this amount to his father after withdrawing same from his bank account towards purchase of land and due to cancellation of land deal, it was returned to assessee by his father and same was deposited by assessee to his bank account—As land deal was under process and for acquisition of land and assessee’s intention was to

10 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR contribute and support his family—Therefore, on cancellation of land deal, amount was returned to assessee and such transaction could not be tagged as loan or advance in contravention of s. 269SS—Hence, penalty u/s 271D could not be imposed—Assessee was a senior citizen having heart ailment, who also underwent open-heart surgery—Assessee submitted confirmations from four relatives alongwith their address and PAN nos., wherein, it was stated by them that they had impugned amounts to assessee for his treatment under medical emergency, then such transaction could not be held as transaction of loan or advance— Alleged cash was a simply transaction of transfer of money from one family members to another family members to support him during medical emergency period and such transaction could not be treated as loan or advance and transaction falling under ambit of s. 269SS attracting penalty u/s 271D—Therefore, penalty imposed by AO and confirmed by CIT(A) needs to be deleted—Assessee’s appeal allowed. 3.1 Covered by CBDT Cir. Please Ref. CBDT Cir. 387 dt. 06-07-1984 146 ITR 162 (Statute) and No. 345 dated 28.6.82 (Chaturvedi & Pithisariya Vol. 5- Pg.5732 & 5735), which provides that these provisions were intended only to discourage transactions of black money. The said circular has been discussed in detail and relied upon in various cases. Kindly refer Veer Sales Corporation 50 TTJ 130, Chandra Cement Ltd. v/s DCIT 23 TW 160 (JP), Kalyan Mal Harakchand v/s DCIT, Sh. Jagdish Sharan Agrawal v/s Ad.CIT 30 TW 185 (JP) and Choudhary Co. Bhujiyawala 89 TTTJ 357. Otherwise, a provision should be interpreted keeping in view the intent and object the enactment. Admittedly here in the present admittedly the person is identified and assessee shown or explained the amount. No addition u/s 68/69 has been by the ld. AO itself. Thus, the money involved in the transactions was recorded money and the transaction was a genuine one as admitted by the AO himself. Therefore, keeping a strict view with this amendment, as brought and explained in the said CBDT circular, there is no reason why it should be treated as a transaction in contravention of Sec.269T &26SS and here the lower authority failed to establish that there was black money involved. On this preposition also refer In the case of Shailesh Gopalbhai Akbari vs. Add. CIT (2019) 57 CCH 0411 Rajkot Trib it has been held that Penalty— Failure to comply with the provisions of section 269SS—Assessee filed return of income—During assessment proceeding, AO noted that assessee had

11 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR received loan in cash on different dates from seven different persons—AO initiated penalty proceedings u/s 271D—AO held that unsecured cash loan received by assessee was in contravention to provisions of s. 269SS and accordingly, levied penalty u/s 271D—CIT(A) confirmed AO’s action—Held, CBDT Circular bearing No.387 dated 06/07/1984 clearly states that provision of s. 269SS was brought under statue to discourage assessee to justify their unaccounted money—However, in case on hand, there was no allegation that assessee had introduced unaccounted money in his business thus, cash transaction which was genuine could not be brought under net of tax under provision of s. 269SS—Assessee’s appeal allowed. In the case of CIT vs. Panchsheel Owners Associations (2017) 395 ITR 0380 (Guj), It has been held that Levy of Penalty u/s.271D—Penalty for failure to comply with the provisions of section 269ss—Deletion of Penalty—AO noticed that assessee, borrowed loan from main promoter of AOP, in cash for expeditious acquisition of land, in violation of section 269SS of the I.T. Act— Therefore, penalty was levied under section 271D of the I.T. Act— Commissioner of Income-tax (Appeals) deleted penalty imposed on assessee—Tribunal also upheld order of CIT(A)—Held, genuineness of transaction had not been disputed by lower authorities, so also importance and urgency of raising cash loan, its payment to farmers for acquiring regranted land from “GHB" and conveyance of same land by these farmers in favour of assessee on the same day, had also not been disputed—There were compelling circumstances for assessee to raise cash loan as raising funds by way of demand draft would have delayed realization of payment, defeating purpose of AOP in acquiring land— Assessee had reasonable cause in raising cash loan—In this case Non- Trading Corporation itself was dubious formation as members of AOP were not based at Valsad—Transaction was found to be genuine—AO had not doubted transaction, in that view of matter, both Commissioner (Appeals) and Tribunal rightly deleted penalty—High Court did not find any infirmity in orders passed by Tribunal— In this case the transaction was found to be genuine—AO had not doubted transaction—Both Commissioner (Appeals) and Tribunal rightly deleted penalty—High Court did not find any infirmity in orders passed by Tribunal—Revenue’s Appeal dismissed. 4. Ignorance of law is a reasonable cause u/s 273B: In any case, it is clear that the assessee proceeded in this transaction only under a bonafide belief that a transaction otherwise than a crossed cheque in a case with

12 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR his father as gift (the ld. AO has wrongly taken the unsecured loan) between the son and father also not covered u/s 269T & 269SS. Hence under the facts and circumstances of the case there was no contravention at all. In the case of CIT v/s Lokhpat Film Exchange (Cinema) 212 CTR 371 (Raj.) assessee firm acting under bonafide belief that transaction with the partner did not attract the provisions of S. 269 SS & 269TT such bonafide belief constitute reasonable cause, Thus, there did exist a reasonable cause in terms of S. 273 B. Ld. Add. CIT confined herself to S.269T only and has not at all adverted to this Section. The Honble ITAT followed in Kamal Kumar Jain in ITA No. 808/Jp/2008 dt. 31.10.2008 also Kindly refer Motilal Padampat Singhania 118 ITR 326(SC) followed in Veer Sales Corporation 50 TTJ 130 at 153, Dillu Cine Enterprises Ltd. v/s Ad. CIT 80 ITD 484 (Hyd.) also Chandra Cement Ltd. Vs. DCIT 23 TW 160 (JP) and Hissariya Brothers v/s JCIT 73 TTJ 1 (JD). 4.1 Covered matter: The Honble Raj. High Court in the case of CIT V/s Raj Kumar Sharma 294 ITR 131 (Raj.) It has been held that reasonable cause for the purpose of penalty u/s 271D- Tribunal having accepted that bonafide belief of the assessee that cash transaction below of Rs. 20,000/- did not attract penalty u/s 271D constituted reasonable cause even though total cash loan obtained by the assessee from his brother on various dates aggregate to Rs. 90,000/- the finding of the Tribunal could not be grossly perverse. Also refer CIT v/s Maheshwari Nirman Udyog 302 ITR 201(Raj.) This ratio is also applicable for repaid i.e 271E 4.2 In CIT v/s Bombay Conductors & Electrical Ltd. 301 ITR 328 (Guj) it has been held that there is no evidence on record to show that infraction of the provision was with the knowledge or in defiance of the provisions that there is nothing on record to indicate that the assessee had indulged in any tax planning or tax evasion, that by making the book entries by converting outstanding purchases price in to loan the assessee has made the adjustment bonafide without having the knowledge that such book entries may render the assessee liable to penalty u/s 271D on account of violation of provision of S. 269SS and that there was a reasonable cause. Breach, if any was merely technical or venial not attracting penalty.

13 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 5. View favorable to assessee must be adopted in assessment as also in penalty proceeding Refer Vegetable Products 88 ITR 192 (SC), ACIT & ors. V/s Velliappa textiles Ltd. & ors.184 CTR 193 (SC). 6. Technical breach only : Alternatively and without prejudice to our other submission, even assuming some default was there, the same at the best was a merely technical and venial breach of law and the conduct of the assessee has not been shown to be contumacious. No deliberate defiance of law is established. It has been held that levy of penalty shall not be justified simply because it is law full for the officer to levy of penalty unless it is shown that conduct of the assessee was contumacious there was a deliberate defiance of law, in the case of Hindustan Steels v/s State of Orisa 83 ITR 26 (SC). The assessee in any case entertained a bonafide belief that the nature of receipt/loan/gift from father not being a “loan”, there was no contravention of Sec.269SS/T. It was only on a difference of opinion. This way a reasonable cause did exist u/s 273B and hence also the penalty imposed may kindly be quashed. Also refer CIT v/s Speedways Rubber (P) Ltd. 326 ITR 131(P&H), DCIT v/s Ramesh Chandra Sharma 90 TTJ 1061(Jp). 7.1 Genuine Transactions not intended to be covered u/s 269SS/269T : There is absolutely not disputed or doubted by the lower authority that the money involved was black money. Further, absolutely no addition u/s 68 has been made. Kindly refer Jagdish Sharan Agarwal vs. Addl. CIT (Supra). 7.2 In Omec Engineering V/s CIT (2007) 2 DTR 312(Jarkhand) it has been held that there being no finding of AO, CIT(A) or Tribunal that the transactions in violation of S. 269SS were not genuine, assessee;s return having been accepted u/s 143(3) after scrutiny, there being also no finding that transactions were malafide aimed at disclosing concealed money, imposition of penalty u/s 271D for technical mistake could not be sustained. Also refer CIT v/s Bombay Conductors & Electrical Ltd. (Supra) 7.3 As the transaction between the assessee and family members or relatives or customers are in the nature of current account. The source of amount is not in dispute or doubt and transactions were bona-fide and in normal course of business kindly refer ACIT Vs. Alfa Hydrome Pvt. Ltd. ITAT Jodhpur Bench in ITA No. 191/Jd/1999 DT. 01.07.2004.

14 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 7.4 In the case of CIT v/s Sunil Kumar Goyal 315 ITR 163(P&H) held that The income –tax Appellate Tribunal was right in recording its conclusion that a ‘reasonable cause’ had been shown by the respondent – assessee. The income-tax Appellate Tribunal relied on the fact that the respondent –assessee had produced his cash books, depicting loans taken by him unilaterally before the Revenue. Another fact taken into consideration was that no prejudice was caused to the Revenue in the instant action of the respondent-assessee inasmuch as the respondent –assessee did not attempt by the impugned act to avoid any tax liability. Furthermore, there is no dispute about the fact that the instant cash transactions of the respondent-assessee were with the sister concern and that these transactions were between the family and due to business exigency. A family transaction, between two independent assessee, based on an act of casualness, especially in a case where the disclosure thereof is contained in the compilation of accounts and which has no tax effect, in our view establishes “reasonable cause” u/s 273B of the Act. Since the respondent-assessee had satisfactorily established “reasonable cause” u/s 273B of the Act he must be deemed to have established sufficient cause for not invoking the penal provisions (section 271D and 271E of the Act) against him. Here is the same position. As per above facts the provisions of section 273B of the Income-Tax Act, 1961 has mitigated the provisions of section 271D and section 271E of the I.T. Act., 1961 by providing that where assessee is able to establish that there was reasonable cause for failure to comply with the provisions of section 269SS and 269T of the I.T. Act., no penalty is leviable Held in CIT Vs. Lokhpat Film Exchange (Cinema) High Court of Rajasthan in IT Appeal No. 32 & 61 of 2002 DT. 23.01.2007 (2007) 212 CTR (Raj.) : (2008) 304 ITR 172. It is well settled principal of law that penalty proceedings are quasi criminal in nature, the concept of mens-rea or guilty mind must be considered and the assessee should not be penalized for genuine transaction which was admitted by lower authority itself. The appellant had acted without mens rea. The levy of penalty being a penal action, lenient view and all sort of care has to be taken before levy of such penalty. The ld. AO accepted the affidavit and not made any addition.

15 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR He also accepted the genuiness of the transaction, identity and capacity of the lenders. The appellant was not having much knowledge of the I.T. laws. Refer CIT v/s Balaji Traders 167 Taxman 27 (Mad). 8. Also covered by the decision of this Honble Bench : Further the Honble ITAT in the case of Smt. Kusum Dhamani v/s Add. CIT Range3 Jaipur in ITA No. 847/Jp/2011 dt. 13.06.2014 152 ITD 481 (Jp) held that from the record there is no shred of doubt about the genuineness of the transaction and their disclosure in the books of account and returns of both the assessee who happen to be husband and wife, carrying on the business as sister concerns. Section 271D read with Section 269SS was introduced by the legislature to discourage the menace of black money. Since these transactions are genuine, this element of black money is totally ruled out. The assessee has given an explanation in our view is not unreasonable and is based on business exigencies also for payments to laborers and lenders. Under these circumstances, we are of the view that the transactions being genuine and the assessee having offered reasonable explanation justifying these cash transactions, the Impugned penalty u/s 271D is not leviable. Our view is fortified by the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs . Raj Kumar Sharma (supra) and the judgment of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Saini Medical Store (supra) which is followed by Hon’ble P&H High Court in the case of CIT vs. Sunil Kumar Goel (supra). Thus in view of the facts and circumstance of the case and the decisions relied on above the penalty is deleted. 8.2 In the case of CIT vs. Saini Medical Store 277 ITR 420 (P & H) where Hon’ble High Court in the nearly similar facts and circumstances and relying on Hon’ble Supreme Court judgment in the case of Hindustan steel Ltd. Vs. State of Orissa (supra) deleted the penalty after following observation . ‘6.2 As pointed out earlier , there is no doubt about the genuineness of the transactions which have been fully accepted in the assessment made for the year under consideration. Even if, there is any ignorance , which resulted in the infraction of law, the default is technical or venial which did not prejudice the interests of the Revenue as no tax avoidance or tax evasion was involved . to many mind , bona fide belief coupled with the genuineness of the transactions would constitute reasonable cause u/s 273B for not invoking the provisions of Section 271E of the Act. The impugned order of penalty is cancelled..”

16 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR 9. Compulsion or genuine hardship of cash amount : Further in the para 2 of this submissions we have mentioned the reason the lower authority has ignored the very vital facts that father of assessee i.e Sh. Goruram was an old and illiterate person and suffering from low eye sight and essential tremors due to old age . Banks generally does not provide the cheque book or net banking facility to such persons and Sh. Goruram is not having any bank account so there was a geneuine hardship with them and the lower authority has ignored the same. The assessee has also rely upon on the judgments of Honble Madras High Court in the case of CIT-1 v/s Smt. M. Yesodha dt. 05.02.2013 (2013) 351 ITR 0265 it has been held that Penalty u/s 271D—Penalty for failure to comply with provisions of section 269SS—Genuineness of transaction—Leviability—Assessee had purchased a property for which cash loan in nature of gift was taken from her father- in-law—Penalty was levied thereof by AO on ground that amount in cash taken by assessee from her father-in-law was not a gift but only a loan— CIT(A) upheld decision of AO—ITAT upholding transaction between assessee and his father-in-law as genuine, deleted penalty thereof—Held, tribunal had correctly considered ratio in case of CIT V. Lakshmi Trust (2008) 303 ITR 99 (Mad) wherein it was held that once finding as to genuineness of transactions is arrived at by the Tribunal on facts, finding recorded by Tribunal in this regard is a finding of fact and no question of law much less a substantial question of law would arise—Amount was paid by the father-in-law for purchase of property and source was disclosed during assessment proceedings—Tribunal had found that transaction between daughter-in-law and father-in-law was a reasonable transaction and a genuine one owing to urgent necessity of money to be paid to seller—Also, on reasonable cause being shown by assessee, no penalty shall be imposable irrespective of fact whether reasonable cause is specifically pleaded or not—Correctness of reasons/basis given by assessee was clearly dealt by Tribunal—Thus, if there was a genuine and bonafide transaction and tax payer could not get a loan or deposit by account payee cheque or demand draft for some bona fide reason, authority vested with power to impose penalty has a discretion not to levy penalty—Order of Tribunal did not suffer from mistake apparent from record—No interference with order of ITAT was warranted—Revenue’s appeal dismissed 10. On exparty order: At the very outset it is submitted that the assessee is an advocate doing legal practice in the District Court. He had engaged the some CA for the appeal matter, hence he was under impression that

17 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR the counsel is taking care. However unfortunately the father of the counsel was suffer from some diseases and had expired just in June 2024 as stated by the assessee. However the last hearing notice dated 22.06.2024 where the date of hearing was given 28.06.2024 the assessee submitted the reply by asking 15 days time. Despite this the ld. CIT(A) has ignored and passed the Ex-party order and wrongly stated that no compliance or reply filled. Copy of reply is enclosed and marked as Annexure-A. Thus due to communication gapes between the assessee and his counsel the matter could not be attended earlier. And there was no melafide intention of the assessee. When he has incurred the expenses for appeal filling fees counsel expenses etc. And the ld. CIT(A) has also not considered the material available on the assessment or penalty record. Hence in the interest of natural justice your honor is requested to consider the same by taking a sympathetic view toward a poor illiterate assessee, who is not having the knowledge of the income tax laws. 10. Prayer: In view of the above submissions and settled legal position the penalty u/s 271D & 271E so imposed may kindly be deleted in full and oblige.’’

3.3 On the contrary ld. DR relied upon the orders passed by the revenue authorities and submitted that since the assessee was ex parte therefore, the matter be restored back. 3.4 I have heard the counsel for both the parties and I have also perused the material placed on record , documents relied upon by the parties, judgements cited by the respective parties as well as order passed by the authorities. After having gone through the submissions as well as written arguments, I found from the records that appellant has raised a legal question to the effect that no satisfaction was recorded by the AO before initiating the penalty proceedings. And in this

18 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR regard I have perused the order of assessment dated. 6.9.17. I found that while passing the order of assessment under section 147 read with section 143 (3), the AO has not recorded any satisfaction regarding the initiation of penalty under section 271 E or 271 D of the Income Tax Act, which is mandatory on the part of the AO and non recording of such mandatory satisfaction is fatal. In this regard reference was made to a decision of Hon'ble Supreme Court in the case of CIT versus Jaya Lakshmi Rice Mills Ambala city 2015 64 taxman. Com 75 Supreme Court where in it was held that the recording of satisfaction by the AO before initiating penalty is mandatory and non recording of such satisfaction is fatal. Further I also reply up on the decision in the case of KS Chawla and Sons (HUF) and Ors. versus JCIT (2019) 56 CCH Delhi Tribunal where in it was held as under

“34. On a perusal of the assessment order in the quantum proceedings, the order of the first appellate authority deciding the quantum additions and also the order of the JCIT levying penalty u/s 271D of the Act, we find that the assessment order as well as the order of the JCIT are devoid of any satisfaction regarding initiation of penalty proceedings u/s 271D of the Act. 35. The Hon'ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City [supra] has held that penalty u/s 271D is without any satisfaction and, therefore, no such penalty can be levied. The relevant findings of the Hon'ble Supreme Court read as under: “In these appeals, we are concerned with the question as to whether penalty proceeding under Section 271D of the Income Tax Act (hereinafter referred to as “the Act”) is independent of the assessment proceeding and this question arises for consideration in respect of Assessment Years 1991-1992 and 1992-1993 under the following circumstances:

19 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR In respect of Assessment Year 1992-1993, assessment order was passed on 26.02.1996 on the basis of CIB information informing the Department that the assessee is engaged in large scale purchase and sale of wheat, but it is not filing income tax return. Ex-parte proceedings were initiated, which resulted in the aforesaid order, as per which net taxable income of the assessee was assessed at Rs. 18,34,584/-. While framing the assessment, the Assessing Officer also observed that the assessee had contravened the provisions of Section 269SS of the Act and because of this the Assessing Officer was satisfied that penalty proceedings under Section 271E of the Act were to be initiated. 3. The assessee carried out this order in appeal. The Commissioner of Income Tax (Appeals) allowed the appeal and set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. 4. After remand, the Assessing Officer passed fresh assessment order. In this assessment order, however, no satisfaction regarding initiation of penalty proceedings under Section 271E of the Act was recorded. It so happened that on the basis of the original assessment order dated 26.02.1996, show cause notice was given to the assessee and it resulted in passing the penalty order dated 23.09.1996. Thus, this penalty order was passed before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. It is in this backdrop, a question has arisen as to whether the penalty order, which was passed on the basis of original assessment order and when that assessment order had been set aside, could still survive. 4. 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. 5. 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.

20 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR These appeals are, accordingly, dismissed.” 36. The ld. DR had relied upon the decision of the Hon'ble Supreme Court in the case of Adinath Builders Pvt Ltd [supra]. We are of the considered opinion that the Hon'ble Supreme Court has dismissed the SLPs filed by the revenue and the ld. DR has relied upon the head notes, which cannot be considered as judgment of the Hon'ble Supreme Court as the Hon'ble Supreme Court has simply dismissed the SLPs without assigning any reason. 37. Considering the facts of the cases in hand from all possible angles, we do not find them to be fit cases for levy of penalty u/s 271D of the Act. We, accordingly, direct the Assessing Officer to delete the penalty levied in respect of the captioned appellants for all the assessment years under consideration. By this consolidated order, all the appeals are allowed and disposed off accordingly. 38. In the result, all the above captioned appeals are allowed”

On this preposition, I also refer a recent judgment of the Honble ITAT Chennai Bench in the case of DCIT , Central Circle 2(2), Vs. Shri Subramaniam Thanu, in ITA No. s.785, 786, 787 & 788/Chny/2023 dt. 13.03.2024 wherein it has been held that

“11.6 We have considered the judicial pronouncements and principles laid down by the Hon’ble Supreme Court and also the judgement of various Hon’ble High Courts and as per the above judicial pronouncements, the Assessing Officer has to record his satisfaction before initiating penalty under section 271D of the Act in respect of violation of the provisions of section 269SS of the Act. In this case, the assessment order was passed on 30.12.2017 and reference was made by the Assessing Officer to the Addl. CIT on 14.03.2021 to initiate penalty proceedings. There is a time gap of more than three years In the assessment order dated 30.12.2017, the Assessing Officer has noted that penalty proceedings under section 271(1)(c) of the Act has to be initiated separately. However, the Assessing Officer has made a reference to the Addl. CIT to initiate the proceedings under section 271D of the Act for violation of section 269SS of the Act. Once the Assessing Officer decided to initiate penalty under section 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings under section 271D of the Act, the Assessing Officer ought to have been recorded his satisfaction. However, Ld. AO has failed to do so. The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of

21 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of Ld. AO was in gross violation of departmental circular. By considering the above facts and circumstances of the case and respectfully following the judgement of the Hon’ble Supreme Court in the case of CIT v. Jai Laxmi Rice Mills (supra), the judgement of the Hon’ble Telangana High Court in the case of Srinivasa Reddy Reddeppagari v. JCIT (supra), the decisions of Chennai Benches of ITAT in the case of T. Shiju v. JCIT (supra), in the case of Smt. S.B. Patil v. JCIT (supra), the decision of the Delhi Benches of ITAT in the case of Anglican India Consultancy Pvt. Ltd. v. Addl. CIT (supra), the ground raised by the Department is liable to be dismissed. 12. In so far as another legal ground raised by the assesse 15. Since the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills Ambala City (supra) wherein it was clarified that provisions of Section 271E are in pari materia with the provisions of Section 271D of the Act, no separate adjudication for levy of penalty under section 271E of the Act is warranted. Accordingly, all the appeals filed by the Revenue are dismissed.”

3.5 After having gone through the facts as well as the arguments put forth by the parties, and keeping in view of above discussion and also legal preposition I am of the view that satisfaction must be recorded in the original assessment order for the purpose of initiation of penalty proceedings under section 271 E or under section 271 D of the Act. As discussed by Hon'ble Supreme Court that provisions of section 271 E and section 271 D of the Act are in Pari materia. Therefore l am also of the view that when there is a decision of Honorable Supreme Court it is then the bounded 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 Hon'ble supreme court. I also refer to article 141 of the Constitution of India which makes it clear that law declared by the Hon’ble Supreme Court shall be binding on all Courts within the territory of India. This is further clarified in article 144 which says that all authorities , Civil and judicial , in

22 ITA NO. 1022 & 1023/JP/2024 KANHIYA LAL SAIN VS JCIT, RANGE-7, JAIPUR the territory of India shall act in aid of the Supreme Court. I am therefore of the unhesitant view that respondent overlooked the relevant considerations while passing the impugned order. Therefore I set aside the order of imposition of penalty and consequently the penalty imposed is here by dropped. The grounds of appeal raised by the appellant stands allowed. Consequently, both the appeals filed by the appellant stands allowed with no orders to costs. 4.0 In the result, the Appeals of the appellant stands allowed with no orders as to costs. Order pronounced in the open court on 25 /09/2024. Sd/- (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 25/09/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Kanhaiya Lal Sain, Jaipur 2. izR;FkhZ@ The Respondent- The JCIT, Range-7, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 1022 & 1203/JP/2024) vkns'kkuqlkj@ By order,

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