2023 (5) TMI 1254 - AT - Income Tax

Levy of penalty u/s 271D - assessee has violated the provisions of section 269SS by accepting cash of Rs. 40.00 lakhs being his share for sale of the immovable property - Whether no satisfaction recorded by AO in the original assessment order? - HELD THAT - Since admittedly there is no recording of satisfaction by the Assessing Officer in the body of the assessment order for initiating penalty proceedings u/s 271D of the I.T.Act, therefore, respectfully following the decision of Srinivas Reddy Reddeppagari 2022 (12) TMI 1446 - TELANGANA HIGH COURT the penalty levied by the AO and sustained by the CIT (A) is liable to be quashed. We hold accordingly and direct the AO to cancel the penalty levied u/s 271D - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of penalty u/s 271D for accepting cash in violation of Section 269SS.
2. Whether the Assessing Officer recorded satisfaction for initiating penalty proceedings u/s 271D.

Summary:

Issue 1: Legality of Penalty u/s 271D

The assessee was subject to a search and seizure operation u/s 132, revealing that he received Rs. 40,00,000 in cash as part of the sale of immovable property, violating Section 269SS which prohibits accepting cash above Rs. 20,000. Consequently, penalty proceedings u/s 271D were initiated, and a penalty of Rs. 40,00,000 was levied. The CIT (A) confirmed the penalty, stating that the assessee admitted to receiving the cash and that ignorance of law is not an excuse. The CIT (A) emphasized that the transaction was unearthed during the search, and the cash portion was not disclosed in the sale deed, indicating an intent to evade the law.

Issue 2: Recording of Satisfaction by Assessing Officer

The assessee raised an additional ground, arguing that the penalty u/s 271D is unsustainable as the Assessing Officer did not record satisfaction for initiating penalty proceedings in the assessment order. The Tribunal admitted this ground, noting that it was purely legal and all material facts were on record. The Tribunal referred to the jurisdictional High Court's decision in Srinivasa Reddy Reddeppagari vs. Jt. CIT, which held that recording satisfaction in the assessment order is mandatory for penalty proceedings u/s 271D. The Tribunal found no such satisfaction recorded in the assessee's case and thus quashed the penalty. Consequently, the grounds challenging the penalty on merits were deemed academic and not adjudicated.

Conclusion:

The appeals filed by the assessee were allowed, and the penalty u/s 271D was directed to be canceled due to the absence of recorded satisfaction by the Assessing Officer in the assessment order.