2019 (1) TMI 285 - AT - Income Tax

Penalty u/s 271D - assessee had received loan / deposit from 08 persons - violating the provisions of section 269SS - non recording of satisfaction - Held that - Assessing officer had not recorded any satisfaction regarding the penalty proceedings u/s 271D of the Act in the assessment order passed u/s 143(3) of the Act. Therefore, keeping in view the ratio laid down in case of CIT v Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT delete the impugned penalty levied by the AO and sustained by the CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Sustenance of penalty of ?12,05,000/- levied under section 271D of the Income-tax Act, 1961.

Analysis:
The appeal pertains to the imposition of a penalty under section 271D of the Income-tax Act, 1961. The assessee contested the penalty levied by the Assessing Officer, arguing that the penalty proceedings were not initiated during the assessment proceedings under section 143(3) of the Act. The Assessing Officer had imposed the penalty after finding that the assessee had received loans/deposits exceeding ?20,000 from multiple sources. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the current appeal.

The Assessing Officer, in the assessment order, did not record any satisfaction regarding the initiation of penalty proceedings under section 271D of the Act, even though penalty proceedings under section 271(1)(c) were initiated separately. The absence of recorded satisfaction raised a critical procedural issue. Citing relevant case law, including 'CIT v Jai Laxmi Rice Mills,' the tribunal emphasized the necessity of recording satisfaction for levying penalties under specific sections of the Act.

The tribunal noted that the Hon'ble Supreme Court's decision in 'CIT v Jai Laxmi Rice Mills' highlighted the significance of recording satisfaction for imposing penalties under section 271D. Since the Assessing Officer failed to record satisfaction regarding penalty proceedings under section 271D during the assessment, the tribunal deemed the penalty unjustified. Relying on legal precedents and the absence of recorded satisfaction, the tribunal allowed the appeal, thereby deleting the penalty levied by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals).

In conclusion, the tribunal's decision focused on the procedural aspect of recording satisfaction for initiating penalty proceedings under section 271D of the Income-tax Act, 1961. The absence of such recorded satisfaction during the assessment process led to the tribunal deeming the penalty unjustified and subsequently allowing the assessee's appeal against the penalty imposition.