2016 (2) TMI 1206 - AT - Income Tax

Levy of penalty u/s 271E and 271D - non recording of satisfaction - Held that - It is imperative for satisfaction to be recorded in the assessment order for initiation of penalty u/s 271E of the Act. Proceedings u/s 271D of the IT Act, also in our opinion will stand on the very same footing. If satisfaction has to be recorded with respect to proceedings u/s 271E of the IT Act, similar satisfaction has to be recorded for the proceedings u/s 271D of the IT Act, 1961 also. These have not been done in the case before us. Accordingly, by virtue of judgment of the Hon ble Apex Court in the case of CIT Vs Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT we are of the opinion, that the levy of penalty u/s 271D & 271E of the IT Act, 1961 cannot survive. Such orders are set aside and the appeals of the assessee are allowed

Summary

Issues:
Appeal against penalty u/s 271E and 271D of the IT Act, 1961.

Analysis:
The appeals were filed by the assessee challenging the penalties imposed under sections 271E and 271D of the IT Act, 1961. The assessee also submitted additional grounds, arguing that the penalty proceedings should have been initiated during the assessment. The learned counsel for the assessee relied on the judgment of the Hon'ble Apex Court in the case of CIT Vs Jai Laxmi Rice Mills to support their contention that the penalties were not justified. The assessee's representative argued that the failure to raise these grounds earlier was not deliberate and that all necessary material was on record for deciding the additional grounds.

The Departmental Representative (DR) contended that the grounds raised by the assessee were not presented before the lower authorities. The penalties imposed by the Assessing Officer (AO) under sections 271E and 271D were reduced on appeal by the CIT(A). The penalties were related to the acceptance and repayment of unsecured loans in cash, violating Sec. 269SS and 269T of the IT Act. The loans in question were taken from and repaid to the assessee's husband, who was assisting in her dairy farming business. The assessment order did not mention anything about the initiation of penalty proceedings for these violations.

The Tribunal considered the arguments presented by both sides. Referring to the judgment in the case of Jai Laxmi Rice Mills, the Tribunal concluded that for the initiation of penalties under sections 271E and 271D, satisfaction must be recorded in the assessment order. As the assessment order in this case did not contain any such satisfaction, the penalties imposed could not be upheld. The Tribunal held that similar satisfaction must be recorded for both sections 271E and 271D of the IT Act, and since this was not done in the present case, the penalties could not be sustained. Therefore, based on the precedent set by the Hon'ble Apex Court, the penalties under sections 271D and 271E were set aside, and the appeals of the assessee were allowed.

In conclusion, the Tribunal found that the penalties imposed on the assessee under sections 271D and 271E of the IT Act, 1961 were not valid due to the lack of recorded satisfaction in the assessment order. The appeals filed by the assessee were allowed, and the penalties were set aside.