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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आयकर अपीलीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री दुव्िूरु आर एल रेड्डी, न्याययक सदस्य एिं श्री एस बालाकृष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ (निर्धारण वर्ा / Assessment Year : 2017-18) M/s. Sree Constructions, Vs. The Joint Commissioner of G-3, Anjali Apartments, Income Tax, Sitarama Nagar, Patamata Lanka, Range-2, Vijayawada-520010. Vijayawada. PAN: ABVFS 5848 N (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थी की ओर से/ Appellant by : Sri M.V. Prasad, AR प्रत्यधर्थी की ओर से / Respondent by : Dr. Aparna Villuri, Sr. AR सुिवधई की तधरीख / Date of Hearing : 06/05/2024 घोर्णध की तधरीख/Date of : 28/05/2024 Pronouncement O R D E R PER DUVVURU RL REDDY, Judicial Member :
This appeal filed by the assessee is against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/NFAC/S/250/2022-23/1048410483(1), dated 03/01/2023 2 arising out of the order passed U/s. 271D of the Income Tax Act, 1961 [“the Act”] for the AY 2017-18.
Briefly stated the facts of the case are that the assessee, a firm, e-filed its return of income for the AY 2017-18 on 28/10/2017 declaring a total income of Rs. 19,60,770/-. Initially, the return was processed by the CPC on 3/3/2018. Thereafter, the case was selected for scrutiny through CASS and accordingly notice U/s. 143(2) dated 9/8/2018 was sent to the assessee through email and also served manually upon the assessee. Further, notices U/s. 142(1) of the Act were issued on 28/01/2019 and 13/08/2019 and called for certain information in connection with scrutiny proceedings. Since there was no response from the assessee, the Ld. AO issued summons U/s. 131 of the Act and called for the information as sought in the notice issued U/s. 142(1) of the Act. In response, the assessee furnished the information and on verification of the information submitted / furnished during the assessment proceedings as well as on examining the return filed by the assessee, the Ld. AO accepted the return filed by the assessee and assessed the total income at Rs. 19,60,767/- and passed the assessment order U/s. 143(3) of the Act on 17/12/2019. Subsequently, the Ld. Joint Commissioner 3 of Income Tax, Range-2, Vijayawada vide notice dated 23/03/2021 initiated the penalty proceedings U/s. 271D of the Act by holding that in contravention to the provisions of section 269SS of the Act, the assessee has received Rs. 82,62,000/- in cash towards sale consideration of immovable property vide different sale deeds. Further, the Ld. JCIT also issued a show cause notice U/s. 274 r.w.s 271D of the Act on 23/03/2021 and served upon the assessee through ITBA portal. In response, the assessee submitted its reply on 5/1/2022. The Ld. JCIT did not consider the submissions made by the assessee and observed that since the assessee has not made out a reasonable cause for the failure as required U/s. 273B of the Act, the violation of provisions of section 269SS of the Act will be attracted. Accordingly, the Ld. JCIT levied a penalty of Rs. 82,62,000/- U/s. 271D of the Act and passed the order U/s. 271D of the Act on 12/02/2022. Aggrieved by the penalty order of the Ld. Additional / Joint / Deputy / Assistant Commissioner of Income Tax, National Faceless Assessment Centre, Delhi, the assessee filed an appeal before the Ld. CIT(A)-NFAC. On appeal, the Ld. CIT(A)-NFAC dismissed the appeal of the assessee by holding as under:
………………it is observed that the appellant has received cash only after 01/06/2015. Hence, the AO has rightly 4 imposed penalty of Rs. 82,62,000/- vide passed penalty order U/s. 271D of the Income Tax Act, 1961 ie correct and the same is upheld. Thus, the appeal of the appellant is dismissed.
3. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:
“1. The order passed by the Ld. CIT(A) is against the law as well as on the facts of the case.
2. On the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the levy of imposition of penalty U/s. 271D amounting to Rs. 82,62,000/- by the AO.
On the facts and circumstances of the case, the notice issued for levy of penalty U/s. 271D of the Act without proper satisfaction is invalid before the eyes of law.
On the facts and circumstances of the case, the penalty order passed U/s. 271D of the Act for the AY 2017-18 consequent upon the invalid notice is also to be treated as invalid before eyes of law.
On the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated that the transactions are purely business transactions whereby the provisions of section 269SS are not applicable.
6. On the facts and circumstances of the case, the Ld. CIT(A) ought to have appreciated that the appellant firm is in the business of construction and sale of apartments and the amounts received represent sale proceeds upon which profit was offered to tax and as such disguisable from the transactions as mentioned in section 269SS of the Act.
7. The appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal.”
4. At the outset, the Ld. Authorized Representative [AR] submitted that the assessee-firm is in the business of construction 5 and sale of apartments and the amounts received, as alleged by the Ld. JCIT in the penalty order, represents sale proceeds upon which profit was offered to tax. This fact was verified by the Ld. AO and accepted the return of income filed by the assessee. Further, the Ld. AR drew our attention to the assessment order passed by the Ld. AO and submitted that while passing the assessment order, the Ld. AO has not even mentioned anything about the initiation penalty proceedings. The Ld. AR further submitted that for the purpose of imposing penalty, satisfaction should be recorded by the Ld. Assessing Officer in the assessment order. Therefore, the Ld. AR pleaded that the penalty levied U/s. 271D of the Act in the case of the assessee is totally against the law laid down by the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills Ambala City [2015] 64 taxmann.com 75 (SC). The Ld. AR also relied on various decisions of the Tribunal in support of his argument and prayed that the penalty levied U/s. 271D may be deleted.
5. On the other hand, the Ld. Departmental Representative [DR] heavily relied on the orders of the Ld. Revenue Authorities and argued in support of the same. Further, the Ld. DR submitted that the penalty-imposed U/s. 271D of the Act is independent of 6 assessment proceedings completed U/s. 143(3) of the Act as the penalty U/s. 271D was imposed for violation of the provisions of section 269SS of the Act. Therefore, the Ld. DR pleaded that decision of the Ld. Revenue Authorities may be upheld.
We have heard both sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. In the instant case, the assessment was completed U/s. 143(3) of the Act by the Ld. AO after examining the information submitted / furnished by the assessee during the assessment proceedings and accepted the return of income filed by the assessee and assessed the total income at Rs. 19,60,767/-. On careful perusal of the assessment order, we find that the Ld. AO has not given any finding or observation that the assessee has contravened the provisions of section 269SS of the Act. Moreover, the Ld. AO has not mentioned anything about the initiation of penalty proceedings in the case of the assessee while passing the assessment order. Thus, it is apparent that the Ld. AO has not recorded any satisfaction regarding the initiation of penalty proceedings U/s. 271D of the Act. It is a trait law that for the purpose of imposing penalty, satisfaction should be recorded by the Ld. AO in the assessment order as to imposition of penalty. Non-recording of 7 satisfaction is fatal. In this connection, it is pertinent to make a reference to the decision of the Hon’ble Supreme Court in the case of CIT vs. Jaya Laxmi Rice Mills Ambala City (supra) wherein the Hon’ble Apex Court in the context of initiation of penalty proceedings U/s. 271E of the Act, it was held that recording of satisfaction is mandatory for initiation of penalty proceedings U/s. 271E of the Act. Section 271E of the Act is pari materia to section 271D of the Act. We hereby reproduce the relevant paragraph of the judgment of the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills (supra) for immediate reference:
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.
Therefore, considering the above facts and circumstances of the instant case as well as respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Jai Laxmi Rice Mills (supra), we are of the considered opinion that the penalty order of the Ld. Additional / Joint / Deputy / Assistant 8 Commissioner of Income Tax, National Faceless Assessment Centre, Delhi, dated 12/02/2022 deserves to be quashed as the Ld.AO has neither recorded satisfaction nor mentioned anything regarding the initiation of penalty proceedings while passing the assessment order in the case of the assessee. Accordingly, we hereby set-aside the order of the Ld. CIT(A)-NFAC and delete the penalty levied U/s. 271D of the Act in the case of the assessee. Further, we are also of the considered view that the penalty- imposed U/s. 271D of the Act is not independent of the assessment proceedings as the penalty order was issued following the assessment order as observed by the Hon’ble Supreme Court in the case of CIT vs. Jai Laxmi Rice Mills (supra). Thus, all the grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.