2023 (10) TMI 707 - HC - Income Tax

Penalty u/s 271D - notice u/s. 158 BC was issued requesting assessee to file Block return of income for the taxable income including the undisclosed income for the block period - HELD THAT - A Block Assessment Order would indicate that there was no mention in the said order regarding initiation of penalty proceedings under Section 271D of the Act. As decided in M/S JAI LAXMI RICE MILLS 2015 (11) TMI 1453 - SUPREME COURT when the original assessment order itself was set aside, the satisfaction recorded therein for the purpose of initiation of the penalty proceedings under Section 271E would also not survive. This according to us is the correct proposition of law stated by the High Court in the impugned order. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding u/s 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated u/s 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.

Summary

Issues involved:
- Challenge to order passed by Income Tax Appellate Tribunal under Section 260-A of the Income Tax Act, 1961 for the Block Period 01.04.1995 to 19.12.2001.

Issue 1: Penalty under Section 271D
- The Tribunal deleted the penalty relying on a previous case, questioning the similarity of facts.
- The Tribunal did not uphold the findings of the CIT(A) regarding the penalty.
- The Tribunal based its decision on the absence of satisfaction recorded in the assessment order.

Issue 2: Initiation of Penalty Proceedings
- A search operation was conducted under Section 132 of the Income Tax Act in December 2001 and January 2002.
- A notice under Section 158 BC was issued to file a Block return of income for the block period.
- The Block Assessment Order did not mention the initiation of penalty proceedings under Section 271D.

Details of the Judgment:
- The Tribunal restored the file to the CIT(A) for penalty proceedings after the assessment order was passed without initiating any penalty.
- The Tribunal noted the absence of reference to penalty proceedings in the assessment order.
- The Supreme Court precedent in a similar case emphasized the need for recording satisfaction for initiating penalty proceedings.
- The Tribunal quashed the penalty order under Section 271D due to the lack of satisfaction recorded by the Assessing Officer.
- The Supreme Court decision highlighted the importance of satisfaction for initiating penalty proceedings under Section 271E.
- The High Court dismissed the appeal as no substantial question of law was involved in the case.