DCIT, CENTRALCIRCLE-2(2), CHENNAI vs. SURENDRA REDDY CHIRLA, CHENNAI

There was no requirement on the part of the assessee to take such deposits. The assessment was completed after due consideration of the entire transactions undertaken during the year. During the course of assessment itself, it was proved that the assessee did not accept any cash by way of loan or deposits or specified sum as alleged. The assessee also submitted that it had no connection with the cash payments and receipts as mentioned in the seized material and it was completely one-sided entries by other group. No documentary evidence was collected from assessee’s place pertaining to aforesaid cash entries. The assessee also filed confirmation of Chairman of M/s Vels group confirming that there were no cash transactions between the assessee and that group. In the said background, the assessee assailed proposed penalty. 3.4 However, Ld. Addl. CIT held that presumption raised u/s 132(4A) could be rebutted only with convincing evidences. Whether the assessee was in requirement of loan / deposit was not material. There was no necessity that evidence should be collected from assessee’s premises. The confirmatory letter as furnished by the assessee was dated 30.08.2022 i.e., much after the issuance of show-cause notice issued on 05.08.2022. This confirmation letter will not be corroborative evidence to rebut the contention narrated in the seized material. Finally, Ld. Addl. CIT imposed penalty of Rs.75 Lacs u/s 271D which was subjected to assessee’s further appeal before first appellate authority. Appellate proceedings 4.1 The assessee assailed penalty on merits as well as on legal grounds. The assessee reiterated that it had no connection with the cash payments and receipts as mentioned in the seized material of M/s Vels group and these entries were merely one-sided entries only. The submissions made during penalty proceedings were again reiterated during appellate proceedings. The assessee also submitted that the presumption u/s 132(4A) would apply only to the person from whom seizure was made and not against any other party. The penalty was imposed merely on the basis of a word file taken from the premises of M/s Vels group. There was no corroborative evidence found from the assessee to support these entries. 4.2 In support of legal grounds, the assessee submitted that penalty proceedings would necessarily be initiated in the quantum assessment order itself. In the present case, there was no such satisfaction of existence of cash receipts / payments recorded in the quantum assessment order. The assessment order was issued with the prior approval of Addl. CIT as per Sec.153D of the Act. Before granting the approve, the Addl. CIT should have been apprised of the entire facts with all records and materials seized and other evidences collected during the course of search and further enquiry / assessment should have been done before arriving at the satisfaction. Without this exercise, the impugned penalty could not be sustained in the eyes of law. To support the same, reliance was placed on 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. In the present case, the proposal was send vide letter dated 26.05.2022 whereas the assessment order was passed on 28.09.2021. Thus, the reference was not made during the course of assessment proceedings as directed in the said Circular. Since the aforesaid action was in gross violation of the Departmental Circular, the impugned penalty was liable to be deleted. 4.3 In support of its submissions, the assessee relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills (379 ITR 521) which specified that no penalty could be levied u/s 271E without recording the satisfaction. The assessee also referred to the decision of Hon’ble High Court of Andhra Pradesh and Telangana in Srinivasa Reddy Reddeppagiri vs. JCIT (332 CTR 0614 Telangana) which followed the aforesaid decision of Hon’ble Apex Court and deleted penalty u/s 271D. 4.4 The Ld. CIT(A) concurred with assessee’s submissions and held that the ratio of both the above decisions would apply to the fact of the present case. The relevant extract of both the decisions have been extracted in Paras 18 & 19 of the impugned order. It was further noted by Ld. CIT(A) that similar ratio was laid down by Chennai Tribunal in the case of T. Shiju vs. JCIT (ITA No.2829/Chny/2018) which, following the cited decision of Hon’ble Apex Court in CIT vs. Jai Laxmi Rice Mills (supra), deleted penalty u/s 271D due to non-recording of satisfaction. Similar ratio was laid down by Delhi Tribunal in the case of Anglican India Consultancy Pvt. Ltd. Vs. Addl. CIT (ITA No.121/Del/2016 dated 03.10.2017); Kolkata Tribunal in Binod Kumar Agarwal vs. JCIT (ITA No.238/Kol/2013 dated 04.02.2016); Bangalore Tribunal in Smt. S.B. Patil vs JCIT (ITA Nos.1053 & 1054/Bng/2014). 4.5 Concurring with all these decisions, Ld. CIT(A) held that recoding of satisfaction in the assessment order regarding the violation of provisions of Sec.269SS was mandatory requirement for valid initiation of penalty proceedings u/s 271D of the Act. No such penalty could be levied if AO failed to record such satisfaction in the assessment order. Since no such satisfaction was recorded in the present case, the penalty was not validly initiated and therefore penalty orders passed were bad-in-law. 4.6 The Ld. CIT(A) also concurred that the reference to Addl. CIT was made for initiation of penalty proceedings after nearly 8 months from the date of conclusion of concerned assessment proceedings. The same was in violation of CBDT circular which mandate that the penalty proceedings should be initiated during the course of assessment proceedings itself. The circulars issued by CBDT have force of law as held by Hon’ble Supreme Court in the case of Catholic Syrian Bank vs. CIT (343 ITR 270). Therefore, for this reason also, the penalty was not validly initiated and the penalty orders passed by Ld. Addl. CIT were bad-in-law. 4.7 Finally, the legal grounds urged by the assessee were allowed and consequently, the issue, on merits, was not dealt with. Similar adjudication was done in all the other appeals also. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 5. From the given facts, it emerges that an assessment was framed against the assessee u/s 153C on 28.09.2021 accepting the returned income filed by the assessee. In the assessment order, no penalty, whatsoever, has been initiated against the assessee. The assessment proceedings stem from search action by department u/s 132 in the case of M/s Vels Group of Education and ors. on 19.03.2019 wherein certain incriminating material was found. After recording requisite satisfaction u/s 153C, Ld. AO initiated proceedings u/s 153C and completed the assessment accepting the returned income filed by the assessee.