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2017 (12) TMI 1518 - AT - Income TaxPenalty u/s 271D - the company has accepted cash loan / cash deposits from Director - repayment of the same was also made in cash, which is in violation of the provisions of section 269SS as well as section 269T of the I. T. Act, 1961 - Held that - the penalty is not leviable in the matter - Hon ble Supreme Court in the case of CIT Vs. Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT has held that in the fresh assessment order there was no satisfaction recorded regarding penalty proceedings under section 271D 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, the penalty under section 271D was without any satisfaction and, therefore, no such penalty could be levied. The Assessing Officer did not record any satisfaction regarding penalty proceedings under section 271D of the I. T. Act in the assessment order. Though in that order the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income Tax Act. Thus, the penalty under section 271D was without any satisfaction and, therefore, no such penalty could be levied - appeal allowed - decided in favor of assessee.
Issues:
1. Challenge against the levy of penalty under section 271D of the Income Tax Act, 1961. Analysis: The case involved an appeal by the assessee against the order of the CIT (Appeals)-I, New Delhi, challenging the penalty imposed under section 271D of the Income Tax Act, 1961 for the assessment year 2011-12. The Assessing Officer observed cash deposits and withdrawals from the assessee's bank account, with explanations provided regarding the source of funds. The company accepted cash loan/deposits from a director, which was considered a violation of sections 269SS and 269T of the IT Act. Regarding the issue of violation of sections 269SS and 269T, the assessee argued that current account transactions between related parties did not amount to a violation of these sections, citing relevant case law. The Assessing Officer, however, considered the funds received as loans, leading to a penalty under section 271D. The penalty order was challenged before the CIT (Appeals) but was dismissed. In a detailed analysis, the Tribunal found that the penalty was not leviable based on the Supreme Court judgment in CIT Vs. Jai Laxmi Rice Mills. The Court held that for a penalty under section 271D to be valid, there must be a recorded satisfaction regarding the violation in the assessment order. Since no such satisfaction was recorded in the present case, the penalty under section 271D was deemed invalid. The Tribunal set aside the penalty order, citing the lack of recorded satisfaction as per the Supreme Court judgment. Ultimately, the appeal of the assessee was allowed, and the penalty under section 271D was canceled. The Tribunal's decision was based on the legal requirement of a recorded satisfaction for imposing penalties under the Income Tax Act. The judgment highlighted the importance of adherence to legal procedures for penalty imposition under the Act. This comprehensive analysis covered the issues raised in the case, the arguments presented by the parties, the legal provisions involved, and the judicial precedents considered in arriving at the final decision to cancel the penalty under section 271D.
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