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2017 (2) TMI 1494 - AT - Income TaxPenalty u/s 271D - addition invoking the provisions of section 269SS on alleged acceptance of cash deposits - CIT (Appeals) who deleted the penalty levied by holding that the assessee had not accepted any loan or deposit and therefore provisions of section 269SS of the Act were not applicable - HELD THAT - The ratio laid down by the Hon ble Apex Court in the case of Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT squarely applies and with the annulling of the initial assessment order passed in the case of the assessee by the I.T.A.T. the penalty initiated therein u/s 271D also did not survive. Further in the absence of any further satisfaction for levy of penalty the said order levying penalty u/s 271D could not have been passed - Decided against revenue.
Issues:
- Appeal against order of Commissioner of Income Tax (Appeals) deleting penalty u/s 271D - Validity of penalty initiated under section 271D - Application of legal principles from previous judgments Analysis: 1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) relating to the assessment year 2007-08, specifically challenging the deletion of penalty under section 271D of the Income Tax Act, 1961. The grounds of appeal raised by the Revenue included contentions regarding the alleged cash payments made by the assessee, raising loans to meet expenditures, and the applicability of provisions under section 269SS of the Act. The case originated from a search and seizure operation at the assessee's premises, leading to the initiation of penalty proceedings by the Assessing Officer. 2. During the appeal hearing, the counsel for the assessee highlighted that the original assessment order, which initiated the penalty under section 271D, was declared invalid by the ITAT, Chandigarh Bench in a separate order. The counsel argued that without a valid assessment order or recorded satisfaction by the Assessing Officer, the penalty could not have been levied. The counsel relied on a judgment by the Hon'ble Apex Court in a similar context to support the contention that without proper satisfaction, the penalty could not be imposed. 3. The arguments presented by both parties were considered by the Tribunal. The Tribunal reviewed the legal principles established by the Hon'ble Apex Court in a previous judgment regarding the independence of penalty proceedings under section 271D from assessment proceedings. The Tribunal noted that in cases where the original assessment order was set aside, the satisfaction recorded for initiating penalty proceedings would not survive. In the present case, the initial assessment order was declared invalid, rendering the penalty initiated therein unsustainable without further satisfaction by the Assessing Officer. 4. The Tribunal found that the facts of the present case aligned with the legal principles set forth by the Hon'ble Apex Court, despite some distinctions in the circumstances. The ultimate effect of the invalid assessment order was the same – the lack of valid satisfaction for the penalty levy under section 271D. Therefore, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals) deleting the penalty amounting to &8377; 6,95,60,000. The appeal of the Revenue was dismissed based on the application of legal principles and the specific facts of the case. 5. In conclusion, the Tribunal's decision was based on the legal precedent established by the Hon'ble Apex Court, emphasizing the necessity of valid satisfaction for the imposition of penalties under the Income Tax Act. The judgment highlighted the importance of proper assessment procedures and the implications of invalid assessment orders on penalty proceedings, ultimately leading to the dismissal of the Revenue's appeal.
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